The proposal for a 31,000-square-foot bio industry business incubator narrowly survived a Board of Estimates review Monday night, bringing the project one step closer to fruition.
Mayor Dave Cieslewicz cast the tie-breaking vote to support a resolution removing a 50 percent pre-lease requirement from the tax-incremental financing agreement between the city and the project’s developer, Madison Development Corp.
A contingency, which the Common Council last year approved when it agreed to provide $2 million in TIF assistance to the project, threatens to derail the project. The city needs to make its TIF contribution available to the developer by the end of the month for the federal money to come through.
The U.S. Economic Development Association last month provided a $4.5 million grant for the project, which the development team Monday said is vital to the building the project.
“It’s the definition of a chicken-egg situation,” MDC President Frank Staniszewski told the board. “We don’t have a product to sell unless we’ve done the design work, which need the money to do.”
The Common Council last year approved the $2 million TIF on the condition that the money would not be made available until the developer pre-leased 50 percent of BioLink space.
MDC is a non-profit developer and does not have the same financial resources or assets as other major developers that seek TIF money, said Joe Gromacki, Madison’s TIF coordinator. The pre-lease agreement, he said, is one way to guarantee some money to repay the city’s $2 million investment.
But Staniszewski said the project is supposed to be a place for companies to start and grow, and many of its potential tenants may not yet exist.
Alderwoman Satya Rhodes-Conway, who voted against removing the 50 percent condition, questioned MDC’s backup plan if the developer failed to attract businesses to the incubator.
MDC is confident it can get bioindustry start-up businesses into the incubator, Staniszewski said, but if the company fails to attract enough tenants to pay back its debt, management positions in the incubator will be terminated to cover the cash shortage.
Rhodes-Conway said that could exacerbate the problem.
“If you fire the manager, doesn’t that impede your ability to get the tenants you want?” she said. “If you’re not able to attract the tenants the building’s being built for, I don’t know what else you could use this for. So we should just hope you can do it?”
Alderman Mark Clear said the board’s vote was about more than the city taking on more risk by untying the 50 percent string attached to the TIF.
“If we don’t remove the condition,” he said, “we’re done.”
The Common Council is scheduled to vote June 15 on the resolution.