MADISON, Wis. -- As design issues get worked out on the Edgewater Hotel expansion project, some local school board members are raising concerns about city tax money being used on the redevelopment.

Much of the focus on the Edgewater development so far has been on the design of the building. But what might affect residents more is the city financing for the project, WISC-TV reported.

"The bottom line is we need a public discussion about how these districts benefit us and how they might hurt us," said Lucy Mathiak, vice president of the Madison Metropolitan School District's Board of Education.

Mathiak has some concerns about a $16 million loan from the city to the Edgewater developer.

"There are things we need to do as a (school) district and do differently with our budget, but this takes revenue away from us," said Mathiak.

The issue is over tax incremental financing, or TIF, where city funds are loaned to a project that could positively benefit the city.

"It increases the property value, creates that development and that economic development that wouldn't otherwise occur," said Alderman Mark Clear.

In the years that loan is paid back through increased value, tax revenue stays flat to entities like the school district.

In the case of the Edgewater, the city plans to pay back $2.4 million over seven years. More than half the loan payment, though, will not come from the hotel but from the rest of the downtown taxing district and high-value properties like University Square, WISC-TV reported.

Typically TIF projects are self-funding, but because the project is considered a public benefit because of new access to the lake.

Also, this new project would keep the TIF district open for seven years while the new loan is paid back, keeping taxes flat for schools.

"We can raise property taxes for the school district to make up for what we're not getting for these properties, but that doesn't seem very fair to people during a recession," said Mathiak.

But some say the long-term tax benefit to the city is more important.

"We need to keep feeding that pipeline and keep growing that tax base so we continue to reap those investments for years to come," said Clear. "If we had had this same conversation 20 years ago and not done some of the TIFs we did then, we couldn't have the benefits of those now."

The city's TIF Coordinator said that without the Edgewater included, the TIF district would still not close for seven to eight years because of debt for State Street redevelopment. But it would close with a surplus of funds that would be distributed to the school district and others who collect taxes. If the Edgewater is included, the extra tax revenue would almost entirely go toward the Edgewater debt, the TIF coordinator said.

But the property value could ultimately increase substantially. As originally proposed, value would go from $5 million to an estimated $60 million on the hotel. But because of design changes, the TIF application will have to be re-submitted and many of the numbers could change.