Developers poke holes in Madison land bank

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Paul Snyder
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Madison developers worry that favoritism and municipal profits will trump private business plans if the city tightens its grip on land use by buying up vacant property.

“I worry when municipalities get involved in private development matters,” said Randy Whitson, a principal in the Madison office of Lee & Associates Commercial Real Estate Services. “The people making the vote are going to be the ones deciding how to turn profit. And who’s to say one property is more deserving than another?”

It’s a question that will be open to debate if an amendment by Alderman Mark Clear gets into the city’s 2010 budget. Clear and other aldermen are proposing the city set aside $5 million in 2010 borrowing authority to buy undeveloped land owners have struggled to build upon or sell.

Two prime examples, Clear said, are the vacant Union Corners site and the Royster-Clark property on the city’s east side. He said the city has not discussed a sale with either property owner.

“I think if the city can take an opportunity to get a below-market deal on the land because of the economy,” Clear said, “we can do it to the advantage of the taxpayers.”

According to the proposal, the city would provide basic maintenance on the land until a developer buys the site and builds on it. Clear said the city then could control land use and avoid scattershot development.

On one hand, that’s good news because it would help developers avoid early redesign work mandated by the city’s Urban Design Commission or Plan Commission, said Mike Hershberger, the president of Madison-based Urban Land Solutions Inc.

On the other hand, he said, the proposal would give the city a lot of control over the market. Under the proposal, if the city takes over a property, it would have no holding cost, Hershberger said, so it could be difficult to determine the property’s fair market value.

Clear said the primary goal in selling the land would be recouping taxpayer money used to buy the property.

But he acknowledged there could be strong debate among Common Council members over turning a profit on the sale, particularly if the building market rebounds.

Madison Mayor Dave Cieslewicz said he thinks the amendment could work, but any debates over profits or specific land use would still play out case by case.

“This is simply budget authority,” he said. “The purchase still has to be approved by the council or be part of a project that they approved.”

A $5 million set-aside is the most manageable amount, Clear said, but it might not be enough to buy, for example, both the Union Corners and Royster-Clark properties.

And if the city bails out one landowner while others struggle, Hershberger said, developers might cry foul.

“Is it an interesting concept?” he said. “Sure. It’s worth discussion. But it’ll be hard to know where to draw the line.

“A better idea would be to use the money to provide lower cost loans to developers.”

Whitson said Lee & Associates still owns 2.6 acres on John Nolen Drive after a prospective hotel developer, unable to get financing, backed off. If the city has money to help some, but not all, developers, the plan could backfire, he said.

“It’s a slippery slope,” he said, “whenever the government tries to take control of capitalism.”