Last vote before it goes to council in 8 days, on September 1 – is it a go, or no?
Honestly, this is too complex and happening too fast and too much has been done in closed session for this to make any sense to me. I’ll do my best, but I haven’t had time since Friday to read it all and there are so many questions and issues I can’t wrap my head around this. I don’t understand why we are doing this for so much money. And I thought this was about a hotel for Monona Terrace and replacing /government East parking ramp – but I feel like that has gotten completely lost.
A HUGE report came out on Friday, and Board of Estimates is going to decide if they want to move forward or not. Every meeting they had has been in closed session, but they do allow public input – but there has only been 2 or 3 people from the public that have given input beyond Exact Sciences and the Developer. Most people I talk to have no clue what is going on, and yet this is the biggest project the city has ever done with $23,000,000 in giveaways to the developer, but for what? A hotel and replacement parking for Government East parking ramp? That is where this all started, but it those things seem to have gotten lost. And if you don’t pay attention today, it’ll all be over!
The report is 52 pages, the fiscal note takes 6 pages to explain it, and the legal agreement is another 41 pages. And then there is the resolution.
WHAT ARE THE COUNCIL AND BOARD OF ESTIMATES VOTING ON/DECIDING TO DO?
This is all from the resolution.
The Board of Estimates will be voting on and authorizing the following and the council will vote on Sept 1st – in 8 days:
A. Accept the Report of the Board of Estimates and the August 20, 2015 Report of the Judge Doyle Square Negotiating Team
B. Authorizes the Mayor and City Clerk to execute the Amended and Restated Development Agreement with JDS Development LLC for the Judge Doyle Square Project to include the terms set forth in the Report of the Judge Doyle Square Negotiating Team and subject to final approval of the City Attorney
C. Directs follow-up actions by the City as described and agreed to in the Amended and Restated Development Agreement.
D. Mayor and City Clerk are authorized to enter into other agreements as described in the Amended and Restated Development Agreement, including
1. the Purchase Agreement,
2. the TIF Agreements,
3. the Disbursing Agreement,
4. Construction Administration Agreement,
5. Parking Lease,
6. any necessary deeds,
7. leases or options to carry out the terms of the real estate transactions, or
8. other necessary agreements.
E. Receive a payment of $15 million for the value of City owned property on Blocks 88 and 105, with the funds to be deposited in the City’s General, Capital Projects and Parking Utility Enterprise Funds, as determined by the City Finance Director.
F. Finds and determines that the Project is consistent with the public purposes of Tax Increment Finance Law and the plans and objectives set forth in City of Madison TIF Policy
G. Finds the City’s loan to Developer demonstrates the potential to
1. eliminate blighting conditions,
2. attract and retain businesses and employment in the Capitol Square area that would stimulate planned commercial redevelopment in TID #25, thereby making more likely the accomplishment of the public purpose objectives set forth in the Project Plan,
H. Finds the TIF Law and City TIF Policy, and that TIF agreements entered into with the Developer and Exact Science shall conform to the terms in the Report.
I. Common Council hereby makes the following exceptions to TIF Policy:
Exceptions to the “City of Madison TIF Loan Underwriting Policy”
1. Section 1 Sub 7 – 55% Gateway (Reference section 3.1(7) of the TIF Goals, Objectives and Process exceptions below.)
2. Section 1 Sub 8 – C – 3 – A (p. 3) – “……. shall not exceed 60% of the net present value of tax increments generated by the Employer’s project.” (The project will use 499% of the net present value of tax increments.)
3. Section 1 Sub 8 – C – 3 – c – “Developer shall guaranty that tax increments are sufficient to recover the Jobs Project TIF Loan from the date of loan disbursal to Employer “ (Developer will not provide an increment guarantee on the Jobs Project TIF.)
4. Section 1 Sub 8 – C – 4 – Gap Analysis Waiver (The City is aware that Exact Sciences is exploring options outside of the City of Madison, which would justify a Gap Analysis Waiver; however, the City has not received documented evidence to this effect.)
5. Section 1 Sub 9 – TIF Underwriting Criteria – TIF Staff has not reviewed the proposal in order to make a recommendation on the project due to accelerated timeframe.
6. Section 1 Sub 11 – No Rent or Sale Price Write-Down – “TIF assistance will be limited to the amount necessary to make a project competitive with other similar projects in the Madison metropolitan market area.” (Based on information provided from developer, it has been suggested that Exact Sciences would pay a lease rate that is higher than what the company would need to pay in a suburban location, but lower than a comparable downtown space.)
7. Section 1 Sub 14 – Guaranty – “The City will require a personal guaranty of increment, sufficient to recover the City’s debt service on City-financed TIF loans.” (Developer will not provide a personal guarantee, but will provide a corporate guarantee. Policy permits a corporate guarantee if the guarantee provides adequate security. Developer’s corporate guarantee would come from a single purpose LLC and its liability for increment deficit would be capped at $10.8 million instead of the full increment value of $20.8 million on the Block 105 portion of the project. In exchange, Developer proposes to guarantee $10.8 million of increment above the City’s projections.)
Exceptions to the “City of Madison TIF Goals, Objectives, and Process
8. Section 2.4 Tenant-Shifting Office Development – “The City may consider providing TIF to retain an employer within the City or to accommodate an employer’s expansion. The City will seek to avoid providing TIF to relocate an employer within the City.” (Exact Sciences is already located in the City of Madison, but plans a significant expansion which would likely require City assistance regardless of location.)
9. Section 3.1 Sub 3 (p. 3) – “The TIF application shall be submitted to the TIF Coordinator. The TIF Coordinator, in consultation with appropriate City staff, shall make an initial review of the TIF application based upon the City’s adopted TIF Underwriting Policy and the adopted TIF Goals, Objectives, and Process” (Due in part to the accelerated time frame for negotiations, no TIF application was submitted and the developer has not provided sufficient information to constitute a TIF application. – The application was received on July 31st and was incomplete.)
10. Section 3.1 Sub 4 (p.3) – Application Documents – As noted above, the standard TIF application documents were not used. Rather, the Negotiating Team requested the information that they needed to advance discussions regarding TIF assistance.
11. Section 3.1 Sub 5 (p. 3) – TIF Team – As noted above, the Negotiating Team led the discussion regarding TIF assistance due to the nature of the negotiation timeline and the role of the Negotiating Team in carrying out the Common Council’s directive.
12. Section 3.1 Sub 6 (p. 4) – Application Fee – No application has been submitted, and, as a result, no application fee has been submitted in accordance with MGO 4.28. – Note, however, that the developer did not request TIF assistance specifically in the RFP. The use of TIF was determined to be the appropriate funding source by the Negotiating Team. Under the circumstances, the fee could be waived.
13. Section 3.1 Sub 7 (p. 4) – Term Sheet – “Requests for TIF assistance that request more than 55% of the Net Present Value of the increment generated by that project will require approval from the Board of Estimates prior the completion of a term sheet.” (The project will require more than 55% of the Net Present Value of the increment generated and has additional exceptions to policy.)
J. Finds that the following conditions stated in RES-15-00598 have been satisfied:
1. Completed TIF application
2. TIF Gap Analysis with the Financial Term Sheet
3. Analysis of potential impacts on the parking utility of 650 additional parking stalls if public parking is allowed in leased area during “off hours.”
4. Analysis of impact on parking utility and city budget from 17-month loss of revenue from Government East parking structure
5. Evidence of the viability of a 1:4 or 1:5 car/room ratio for the proposed hotel as used in other “shared parking” environments;
6. Clarification of the type of financial instrument and terms of the city’s $12M investment in jobs TIF
7. Clarification of the type of financial instrument for the $12M/12 year jobs guarantee offered by Exact Science
8. Clarification of reporting and oversight mechanism for ensuring compliance with jobs TIF terms
9. Clarification on whether or not Exact Sciences will guarantee the lease of the entire space, and if so, what type of financial instrument will be used for the guarantee.
10. Report by real estate attorney consulting with the city on how optimal protections of the city’s interests in the 1031 tax credit land swap.
K. Accepts that the hotel room count will be, at minimum, 216 rooms.
WHAT THE COUNCIL IS NOT VOTING ON
– BUDGET: All future expenditures associated with the project will require further Council approval other than the costs associated with the review and developer selection and negotiations with the selected developer.
– DEVELOPMENT PLANS: Development details (have to go through Landmarks, Plan Commission and Urban Design Commission then – > Council), including demolition of part of the building (recommended approval at Landmarks last week – > still has to go to plan commission)
– TIF: District plan amendments (also need to be approved by the Joint Review Board
– LANDMARKS: The municipal building is a landmark . . . but I’m not clear how that plays into all this.
THIS ALL HAPPENED FAST!
May 19, 2015
– the Common Council accepted the Report of the Board of Estimates and directed the Judge Doyle Square Negotiating Team to immediately engage JDS Development LLC/Exact Sciences in an exclusive negotiation of a preliminary development agreement and report back to the Board of Estimates with a report and draft preliminary agreement by its June 29th meeting
– the Common Council further directed that, if directed by the Board of Estimates at its June 29, 2015 meeting and concurred on by the Common Council, the Judge Doyle Square Negotiating Team continue the exclusive negotiation with JDS Development/Exact Sciences over a final development agreement and report back with a report and final development agreement at its August 24, 2015 meeting, to be followed by Common Council action; and
July 7, 2015
– the Common Council
(1) accepted the June 29, 2015 Report of the Board of Estimates and the June 25, 2015 Report of the Judge Doyle Square Negotiating Team,
(2) authorized the Mayor and City Clerk to execute the Development Agreement with JDS Development LLC, and
(3) directed the Judge Doyle Square Negotiating Team to continue the exclusive negotiation with JDS Development/Exact Sciences over an Amended and Restated Development Agreement and to report back with a report and the Amended and Restated Development Agreement to the August 24, 2015 meeting of the Board of Estimates; and
Everything else was done at Board of Estimates, almost exclusively in closed session.
URGE THE ALDERS TO STOP THIS NOW! SLOW DOWN, DO DUE DILIGENCE! INFORM THE PUBLIC!
1. Risk is too high
– No one knows if this business, Exact Sciences, will be successful or if a new method will be developed and the company fails – and then we are stuck with a HUGE building specifically designed for their lab needs.
– The CEO of this company makes his living by building and selling off companies, who will we be dealing with through this process, until 2022 or 2023 when this deal concludes?
– The stock price of Exact Sciences has fallen by 1/3 in one month.
– If this deal falls apart, there is no personal guarantee. The guarantee is from a LLC with a single purpose, so the city will be left holding this development if the developer fails.
– This developer has a bad track record and hasn’t paid bills on his last development, the Edgewater.
– The developer is required to bring $43,000,000 in equity to the table, but we have no proof of that equity.
2. Process/accelerated timeline
– This accelerated time line has made it impossible for alders to do their ordinary due diligence – I wonder how many read every word of the 100 pages they are being asked to vote on and understand the complexity of this project, cuz I’m pretty sure I don’t given what I’ve seen.
– Key city staff seems to have been cut out of the process. There are particular concerns about the parking utility and TIF.
– The public has been kept almost entirely in the dark – there has been no concerted efforts to inform the public or get their input. Almost every meeting on this has been held in closed session.
3. What’s the point of having a TIF policy?
– I know I voted to allow exceptions at one point when I was on the TIF Policy Committee but I thought there would be one, or two, or three, not thirteen. I never anticipated it would include not letting the staff do their job or not requiring information from the developer. Or what might even be an illegal TIF for jobs – not capital expenses.
4. Is this our priority? Where is the Equity Lens?
– If we were going to give away $12M for jobs, is this what we would do? Seems like we’re getting a guarantee of less than 100 new jobs.
– What about that capital budget and the dragon chart? I thought everyone was panicked about capital funding, but apparently TIF is free play money?
– Why can’t we use these same herculean efforts to build neighborhood centers, a homeless day center, parks, rebuilding our water infrastructure, fixing roads and figuring out our bus barn issues? (others I’m not thinking about?)
– If we closed the TIF District, we’d have 4.4M for affordable housing – instead we wait til 2022, or 2023 if we’re going to get affordable housing money from the new state law . . . which seems like a big if . . .
– What happened with the $7 or $9M for the school district?
5. Are you willing to pay $480 for this? What are you getting for your $480?
– Do you think we should give them $12M for less than 100 jobs?
– Do you think we should give them our $11 million city building? (where is our staff going to go and what will that cost us?)
– Should we be building $20M in parking – if they will ultimately be competing with our parking utility and it isn’t being built to its maximum capacity and has a substandard design due to the time line.
– Some will say that we will get property taxes to pay for programs we all want . . . but when does that ever happen? We get more cops . . . and pay for new development, but there is rarely anything left over for anything else.
ASK THE ALDERS TO ASK QUESTIONS, IN OPEN SESSION!
Email your alders (allalder@cityofmadison.com) and the mayor (mayor@cityofmadison.com). Make sure to include your address.
Ask them to tell you how this reflects the priorities the mayor ran on, where is the equity lens they talk about? What is the point of a TIF policy? What happens if the developer or Exact Sciences aren’t successful? Wasn’t this about a hotel? Why are we building this parking to compete with our own parking utility? Do they care what the public thinks about this? I’m not going to list them all . . . ask them your own questions. If I have time, I’ll make a longer list before the Board of Estimates, but I’m not sure that I will have time to finish reading everything.
