The Madison Common Council on Tuesday lifted a 50 percent pre-lease requirement to provide a construction loan for a proposed business incubator.
The council’s action allows planning to proceed for BioLink, a 31,000-square-foot project that will hold a greenhouse, office and research space for new businesses in the city. The project will be developed by the non-profit Madison Development Corp., and last month received a $4.5 million grant from the U.S. Economic Development Association.
However, the federal money would have been unattainable unless the city freed up a $2 million tax incremental financing loan it approved last year for the project.? TIF districts let municipalities borrow money to subsidize developments and pay for utility and street work that serves projects. Communities then use new taxes generated by the developments in the district to pay off the debt.
When the council approved the TIF loan, it did so with a provision that the business incubator be at least 50 percent pre-leased. Project supporters said that was impossible since many of the companies that will one day work in the office and research space likely do not yet exist.
Tim Cooley, the city’s economic development director, said the council made the right call Tuesday in freeing up the money.
“I think the council saw what was put together and saw that the worst-case scenario was as likely as the best-case scenario,” he said of occupancy issues. “Our team tried to present the most realistic scenario.”
A projection by city staff projects 25-percent occupancy in the first year and 80-percent occupancy by the third. Only one Madison-based company, Orbital Technologies Corp., currently has a pre-lease agreement, and Cooley said no one can be certain whether the projections will work out as planned.
“You never know for sure,” he said.
If BioLink fails to maintain or establish at least 50-percent occupancy, some city officials, including TIF Coordinator Joe Gromacki, said Madison would lose its guarantee that taxpayer money would eventually be returned.
Alderwoman Marsha Rummel said Tuesday she was concerned about losing that protection. She also said she was worried about MDC’s plan to terminate management positions in the incubator if the company fails to attract enough businesses to pay off its debt.
“It’s an unsecure loan,” she said, “and if something goes wrong we lose the person that can steer us through the crisis.”
The city’s Board of Estimates last week narrowly approved removing the 50 percent pre-lease agreement.
Cooley said Tuesday’s vote was a show of faith that the incubator can generate new opportunities for the city.
“They aired their concerns and we answered them the best we could,” he said. “With this project, we have an entire district to help, and this is something that can provide new jobs and new business.”