A Conservative Economic Analysis

One of the important factors that weighed in Mayor Cieslewicz's decision to support the new Central Library is the impact analysis performed by Andrew Statz, his Fiscal Efficiency Auditor. He described this analysis in a powerpoint presentation to the Common Council on August 27, 2009.

Everyone acknowledges that significant new tax revenues will flow to the City from redevelopment of the existing library site. Indeed, our team estimated that these new revenues could exceed $100 million over a 50-year horizon, including just the City portion of property taxes and room taxes. However, before putting this project in his 2010 capital budget request, Mayor Cieslewicz wanted to take a look at this from a very cautious and conservative perspective.

Statz did this in his comparison of the costs and benefits of the proposed project with those of the remodeling alternative. His conclusion was that in a worst case scenario the net cost to taxpayers over a 15-year horizon would be no greater for the new library than the remodel. Under expected conditions, the new library will actually be $8 millions less.

What makes his assumptions conservative?

1. A 15-year analysis period was used. This timeframe covers repayment of all City debt and results in four years where the tax revenues exceed the debt service costs. However, tax base created by the Phase II development will generate revenues to the City for decades thereafter.

2. Debt service costs were estimated assuming a 5% interest rate. Current ten year rates for municipal bonds are 3.3% - and federal "recovery zone" subsidies could reduce this rate even further.

3. Property tax rates and assessments are projected to decline every year during the analysis period. In contrast, Fiore-Irgens projections reflected a 2.5% average increase in property taxes.

4. The "status quo" value of Block 66 is escalated by 4% annually to determine the increased property taxes. On the other hand, the value of the fully-improved Block 66 is assumed to increase by only 2%.

We are cautious investors ourselves, and generally approve this approach. After all, if a project still makes sense when the assumptions are stacked against it, you know you have a good one!

Access: City HallA New Central Library

Stu Levitan hosts an hour-long program that takes an in-depth look at issues facing Madisonians. The current episode looks at the New Central Library.

Click the image above to watch this episode.

News: Mayor Cieslewicz Proposes New Library in 2010 Capital Budget

Mayor Dave Cieslewicz has thrown his support behind construction of a new library. This was a very important move forward for this project. Next step: Common Council approval of the capital budget.

We are also pleased to have received strong backing for the new Madison Central Library from Capitol Neighborhoods, Inc., Downtown Madison, Inc. and the City of Madison "Downtown Coordinating Committee."

Wisconsin State Journal, Sunday August 30, 2009:
Madison Mayor Wants to Move Ahead with $37 Million Library

Briefing Memorandum

At the request of the Madison Common Council, we prepared a brief that addresses many "frequently asked questions." Topics covered include:

• Public Library Role
• Central Library Role / Issues
• New Library Development
• Design Questions
• Economic Benefits
• Timing / Funding Concerns
• Rehab of Existing Building Alternative

If you are interested, you can download a copy here.

21st Century Central Libraries

Here are some links so you can see what other communities have recently built:

Minneapolis, with a cost of $139 million

Des Moines, $33 million

Austin, Texas, $90 million (under design development)

Seattle, $165 million

NEWS FLASH: June 5, 2009

Last night, the Madison Public Library Board unanimously approved the selection of the Fiore-Irgens proposal for a new free-standing library. This was an important hurdle!

Our next step will be to engage in discussion with the Common Council about the costs and benefits of this project. We know that this mixed-use development - new free-standing library, new hotel with lobby at Mifflin/Fairchild, new structured parking for 400+ vehicles, new retail - will provide very significant economic benefits to the greater Madison area. Now we must begin to share this understanding with the community at large!

We are quite grateful for the recommendation by the Central Library Disposal Surplus Property Criteria and Selection Committee. This group spent six months deeply considering the options before the community. It also made great efforts to include public input.

A public hearing was held, including full presentations by Terrance Wall and the Fiore team, which was taped by Madison City Channel and is available online. We also participated in a Public Forum sponsored by Capitol Neighborhoods Inc.

We greatly appreciate the public service provided by the committee members!

Links of interest
Madison Library Board Backs Plan With Total Support,
Proposal for New Facility, Location OK'd.

What is a Library Worth?

At the last meeting of the Central Library Disposal Surplus Property Criteria Selection Committee, City Comptroller Dean Brasser mentioned that the City of Madison currently subsidizes the operating budget for the Madison Public Library System by $11 million annually. This translates into an annual cost to the city's taxpayers of $50 per capita.

If the City issues 20-year municipal bonds to finance $16 million of new library construction, this budget subsidy is estimated to increase by $1.2 million (or $5 per capita).

However, this modest increase in the library budget need not be borne by the taxpayer. If the investment creates new private development, the taxable property generates new tax revenues that will offset this cost.

Under our proposal, the new hotel, retail and parking facility is expected to generate an average of $2 million per year of property and room taxes (and more than $1.2 million in year one.) This represents a net benefit to the taxpayers.

In contrast, if the existing library is simply repaired for $16 million, no new tax base is created and the remodeled library will represent a new net cost to the taxpayers.

I've read a number of reports about the economic return from public libraries suggesting a return of $4 - $5 for every dollar spent... So libraries may well be one of the most productive investments that the public can make!

Curious for more? Here are some links you may appreciate:

Public Libraries - A Wise Investment - a return on investment study by the Colorado Public Library. I would guess that our community's relationship with the library may be consistent with these interesting survey results.

The Economic Contribution of Wisconsin Public Libraries to the Economy of Wisconsin by Northstar Economics. The title says it all.

Background: RFP and Competing Proposals

The Madison Public Library has updated its website to include links to the Request for Proposals, and full copies of the responses by both teams - including floor plans and qualifications.

Planning for the Future: Central Library

The site also addresses the reasons that a new library is needed, and describes the functional obsolescence of the existing library building.

Both development teams presented their proposals and vision for a new Central Library at a joint public hearing of the Library Board and the Central Library Surplus Property Criteria and Selection Committee (yes, that is truly its name... otherwise known as "the Disposal Committee") on January 8, 2009. It was filmed for broadcast by Madison City Channel - and you can watch it stream online here.
(Note: RealPlayer plug-in is required. This is a free download if you don't yet have it.)

Online Discussion - The Daily Page Forum

The public library is an important civic institution, so our community needs to discuss the goals for improving the library, seek a consensus around the vision, and fully understand the investment needed in a new Central Library.

There has been thoughtful and articulate community discussion begun online at The Daily Page Forum - Central Library Proposal.
Check it out.