David Michael Miller
Madison is about to go down a very bad road.
The wasted taxpayer dollars, wrong-headed public policy and temptation toward corruption apparent at Gov. Scott Walker’s Wisconsin Economic Development Corp. may soon be replicated in the city of Madison.
For the first time in city history Madison could make an outright grant to a for-profit business to lure them to locate downtown. Under a proposal backed by the mayor and the city’s finance committee, the city would make a $12 million “TIF-Jobs” grant to Exact Sciences. In exchange for keeping 400 jobs for eight years at the Judge Doyle Square development across from the City-County Building, Exact Sciences would get the $12 million free and clear.
This is a dramatic departure from the way tax incremental financing (TIF) is supposed to work under state law and has worked in Madison since the law was created in the 1970s. In fact, alders who are raising legitimate and important questions about this provision and other parts of the deal should ask if it is legal.
TIF law requires that public investments be paid back through increased tax revenue that resulted from those investments. But city staff report that the money-for-jobs provision will take almost 500% of the increased tax revenues and will not be paid back. In fact, the city TIF coordinator has suggested that this really isn’t TIF at all and should require the creation of a whole new program.
He’s right. Even if it turns out that this is legal, it’s highly questionable public policy and deserves a long and full review by policymakers as a major new city program. If we pay Exact Sciences $30,000 per job, as this proposal would, well, what’s to prevent every potential new downtown employer from demanding $30,000 for every job they create? I like to go to the Slide cart on the Square for lunch. From what I can tell there are two jobs there. Should the Slide cart owner get $60,000?
What is being proposed under this “TIF-Jobs” provision is exactly what has gotten WEDC and so many other state and local economic development agencies into trouble. The Wisconsin State Journal has reported that since 2011 the WEDC has given out $124 million in taxpayer largess without sufficient staff review. Those awards produced guarantees of over 6,000 jobs, yet only about 2,000 have actually been created. For example, Kohls department stores was given $62.5 million to create 3,000 jobs. They’ve actually produced 473.
In at least one case there was apparent political meddling as a Walker cabinet secretary intervened to get a $500,000 grant to Building Committee Inc., owned by a campaign contributor. That money has been lost.
This kind of thing isn’t unique to Wisconsin. Public grants in exchange for job guarantees have a dismal record nationally. As I’ve written before on this topic, in 2012 The New York Times did a major study of economic development programs in America and found that more than $80 billion is spent each year by states, counties and local governments on tax breaks, low- or no-interest loans and outright grants in the name of job creation. Yet, success stories are hard to come by, and accountability ranges from weak to nonexistent. Even where new jobs have actually been counted, nobody can say for sure how many of them would been created anyway without the handouts.
In this case provisions for careful auditing of the jobs numbers were inserted at the insistence of Common Council members. But is it a good idea to start giving grants to for-profit business in the first place? Doesn’t this start us down a slippery slope toward a place that evidence suggests is a murky place?
There is plenty in the Judge Doyle Square deal that deserves much deeper scrutiny. The Common Council should not rush to approve it. Instead, the council should take all the time it needs, ask the tough questions, insist on complete answers, weigh the long-term implications and make its decisions only when it is ready.
