If given the chance to invest $550,000 and make $400,000 a year for 20 years, then $160,000 for every year thereafter, would you jump at the chance?

That was exactly the situation in 1998 when the city of Madison invested $550,000 in the form of a tax incremental financing (TIF) loan to help develop the Union Transfer condominium project in Downtown Madison.

This project was a pioneering effort. The city wanted to encourage this type of development so it stepped in to help, investing $550,000. The project proceeded, and the city continues to make a handsome profit.

Here is how that worked: Before development, the project site was assessed at $695,000, which produced $15,300 annually in tax revenue. After development, the new project was assessed at $18 million, producing $400,000 in taxes each year. The TIF program empowers the city to keep it all, not just the $160,000 available under non-TIF regulation. The balance would normally go to the county, schools, Madison Area Technical College and forestry.

This focus on TIF is prompted by an April 5 editorial in the State Journal, "Keep TIF focus on taxpayers, " that questioned the propriety of how TIF is used. It cited criticism by those who look at TIF as a subsidy for the "well to do " at the expense of beleaguered taxpayers, financially assisting the development of expensive, high-end condos, affordable only to the wealthy.

Magnifying this criticism is the impression often heard in a city that is cynical of the profit motive, that TIF produces unwarranted excess profits for the developers.

The editorial proposed that TIF be prioritized for blighted areas and to encourage job creation and the re-use of old or vacant industrial sites. While well-intended and mindful of the welfare of the taxpayer, the suggestion to limit TIF is ill-advised.

TIF is first an investment, which can leverage modest municipal investments into significant returns. That profit can then be used to accomplish worthwhile goals for the benefit of the entire community. To maximize the potential of TIF, the city should encourage and support development of projects that produce the largest difference between pre- and post-development assessed value.

A large, expensive project will produce a much larger "profit " for the city than will a low-cost social welfare project. The benefit is apparent. The community has gained a very attractive, high quality project while generating significant money to address the social welfare agenda.

The multi-dimensional attribute of TIF is well illustrated by the Union Transfer example above. Unfortunately, the State Journal editorial ignored this very productive aspect of TIF.

Limiting TIF is the wrong response. It would be a disservice to the entire community.

The best way to serve the "beleaguered taxpayer " is to create a comprehensive plan of the vision for the future of our city. Then integrate TIF into the implementation process. Use TIF creatively and liberally in the unified effort to achieve the common vision, to make Madison the most livable, most beautiful, most appealing city in America.

Peters is a Madison architect who designed and built the Union Transfer condos.