The “Facts” About Judge Doyle Square

This s the mayor’s propaganda piece. I hesitate to believe his “facts” given recent experiences with him. (here’s just one)

How much public money is being provided for the private development?

• $46.7 million
o $20.8 million for private accessory parking
o $12.0 million to support job creation by Exact Sciences
o $13.9 million to return equity from the land sale to the development

[$10 million of short-term borrowing may be authorized for cash flow purposes. Only the interest cost on this debt, estimated at $350,000, is an additional cost to the TID.]

• The City’s investment represents about 25% of the total development cost of $180 million for the private development, the balance of which will be paid for with private funds.

What is the City receiving from this investment?

• At least $100 million of new tax base upon the project’s completion by returning two City-owned, tax-exempt parcels to the tax rolls.

• Retention of the Exact Sciences Corporation’s headquarters and research facility in the City of Madison and bringing at least 400 living wage jobs to the facility by January 1, 2019.

• A new hotel of at least 216 rooms within two blocks of the Monona Terrace Community and Convention Center to support future convention business.

• 30,000 square feet of new retail and restaurant uses along South Pinckney, East Doty and East Wilson Streets.

How much of this is money is from TID 25 property tax increment revenues?

• $42.5 million

Can the TID 25 money be used for other purposes in the City’s capital budget?

• No. State law is very clear — these funds are for economic development and public infrastructure projects within the boundaries of this TID and cannot be redirected to other purposes in the capital budget.

Are there any guarantees on this subsidy?

• Yes.

1. Parking Ramp Guarantee:

• The developer is required to guarantee the $20.8 million for the parking ramp.

• The verification of that guarantee is the increment schedule attached to the Development Agreement. It is tested in 2032 and again in 2044, prior to the sale of the ramp.

• If development proceeds as planned and the value and mill rates are at least at the level assumed in calculating the increments, then the developer could fulfill the guarantee requirement as early as 2028.

• Under the Development Agreement, all of the property tax revenues from the entire development are counted toward the $20.8 million guarantee.

• The first $10 million of that amount is guaranteed through an assignment to the CDA of all of the parking revenues from the private accessory parking. This guarantee is exercised, if in 2032, the cumulative property taxes collected are less than the amount listed in the increment schedule and that cumulative amount is less than $20.8 million.

• After 27 years, if the cumulative property taxes from the development are less than $10.8 million, then the developer guarantees it will pay up to $6.8 million from the net worth of JDS, LLC to make up the shortfall.

• The developer can also remedy any shortfall in those specific years (2032 and 2044) through a cash payment.
2. Jobs Guarantee:

• Exact Sciences is required to guarantee the $12 million grant through a commitment to create and retain jobs.

• That guarantee is exercised if Exact Sciences vacates the building and terminates its lease. Exact Science’s guarantee phases down by $1.5 million annually.

• Therefore, its guarantee is fulfilled after 8 years.

• Exact Sciences must also guarantee at least 300 jobs in Madison when the office building opens and at least 400 jobs located in the office building on January 1, 2019. It has 6 months to remedy any shortfall or it must pay $30,000 for each job that falls short of these requirements.

• These are job guarantees and are not a guarantee of property taxes collected.

How do these guarantees compare to the City’s usual TIF guarantees?

• Both of these guarantee structures are unique to this development and reflect the amount of debt, risk and equity committed by the developer to the project balanced with the risk to the City.

• These guarantees have been developed through negotiations under the policy guidance of the Board of Estimates and Common Council.
What about the remaining subsidy?

• There is no increment guarantee on the $9.7 million of TIF funds that is provided as a return of the equity commitment made through the land sale and “like-kind” property investment that the developer is utilizing under section 1031 of the Internal Revenue Code.

• Taken together, of the $42.5 million of TID 25 funds provided to the private development, $20.8 million is covered by a property tax guarantee, $12 million is covered by a jobs guarantee and the $9.7 million of the equity return grant from TID 25 is not covered by any guarantee.

Is the developer required to build the hotel?

• Yes. It must have at least 216 rooms.

• If construction of the hotel does not begin within 18 months of May 2017, then the City may engage another developer, and if certain conditions are met, reacquire the property from JDS for construction of a hotel by that second developer.

• The City will reacquire the part of the development for the hotel for the same net price paid by the developer — $232,000.

Is the developer required to build the second office tower?

• No — there is no penalty, guarantee or reacquisition requirement related to the development of the second office tower on Block 105.

What happens if TID 25 were closed now?

• Any unspent balances are distributed to the taxing jurisdictions at closure of a TID.

• There are limits on the use of these one-time revenues by the taxing jurisdictions. For example, the school district may receive less state aid depending on the type and pace of expenditures made from the one-time revenues.

Why not close TID 25?

• TID 25 has remained open as an option to finance a development project on Blocks 88 and 105, as well as due to the fact that there are outstanding lease revenue bonds that are being repaid by TID 25 incremental revenues.

• If the Judge Doyle Square project had not been contemplated and proceeded through the various steps as directed by the Common Council over the past several years, and if the leases were amended, then TID 25 could have been closed without any balance.

• TID 25 provides an opportunity, if approved by the Council, to avoid interest costs associated with issuance of long-term debt – these are costs that would have to be recovered by additional TIF increment.

• Using TID 25 also brings the project onto the tax rolls in 2023 – expanding the tax base of the taxing jurisdictions much sooner than if a new TID were created for the project.

Will the project pay for itself?

• The subsidy to the JDS project will be provided through tax increments generated by the total mill rate (city, county, school district, technical college) applied to all of the property value in TID 25 between now and 2023.

• While after 2023 there will no longer be a TID to collect the property taxes from the project, the project will nonetheless generate property taxes based on that total mill rate.

• If there were a TID in place, those property taxes would offset the subsidy provided within approximately 20 to 25 years. The City doesn’t have to recover the amount of the subsidy – it will have already been paid from the incremental revenues generated by all of the property in TID 25 between 2015 its closure in 2023.

Are the private tenants receiving free parking?

• No – tenants in the buildings, including Exact Sciences, must pay market rates for parking.

o Exact Sciences will lease 370 stalls at a rate of $140 per stall per month. (1.85 stalls per 1,000 s.f.)

o Other office users will lease 85 stalls at a rate of $140 per stall per month (1.7 stalls per 1,000 s.f.)

o Non-commercial tenants will lease 80 spaces at $175 per stall per month. These spaces will serve the Exact Sciences Phase 2 office building.

o 50 stalls will be reserved for daytime hotel users with hotel users paying a commercially reasonable rate.

o Hourly rates will be set by the Parking Utility for all 1,250 spaces in the ramp.

• As with many tenants in office buildings with attached parking, it is up the tenant as an employer as to the amount of parking costs that will be paid by individual employees.

Is the City giving away a parking ramp to a developer?

• No – the developer will pay the Community Development Authority $115,000 annually to lease 650 stalls of private accessory parking.

• After 27 years, assuming the developer guarantee described above for the parking ramp is fulfilled, the developer will pay $4 million for the ramp. The combination of the lease payments and the final payment total $7 million and represent a fair market value for the ramp after 27 years.

• Net parking revenues from the private accessory parking will be used to make the annual lease payment to the CDA, pay for a portion of the cost of the office building on Block 88 (the Exact Sciences Headquarters) and pay a reasonable return on the developer’s equity.

What other commitments are the developer and Exact Sciences making to the City?

• Targeted business participation goal of 10% and workforce utilization goals of 6% for racial and ethnic and 4% for women participation for the construction phase as recommended by the City.

• A commitment from Exact Sciences to support diverse hiring through their relationship with the Urban League of Greater Madison to develop future training, recruiting and hiring programs.

• A Project Labor Agreement will be executed with local building trades for the construction of the project and a Labor Peace Agreement will be entered into for the operation of the hotel.

What job opportunities will be created in the Exact Sciences Headquarters?

• Exact Sciences currently employs 200 people in its headquarters.

o By 2017, they expect to grow to 400 employees in its headquarters location.

o By 2023 (7 years), they expect to employ 650 people at its headquarters in downtown Madison.

• Headquarters jobs include:

o Research and Development including entry level research associates through senior scientists, software and systems development, engineering and clinical affairs with salaries of $30,000 to $140,000 per year.

o Operations including facilities and equipment maintenance, logistics, manufacturing, operations scientists, quality control and quality assurance with salaries of $30,000 to $105,000.

o Corporate Functions including finance, billing, administrative, human resources, legal, marketing and IT with salaries of $28,000 to $145,000 per year.

o Benefits Package–In addition to base salary employees are eligible for annual team based bonus plan of 5-20% of base salary, health, vision, dental, disability and life insurance, and 401 K with company match of 100% up to 6% of salary. All new hires receive an initial equity grant.

Questions I didn’t hear him ask or answer, off the top of my head, in 15 minutes or less:

• Where is the equity analysis?
• How much have we spent in city staff time and paying George Austin?
• Will we be investing 25% of the costs in other downtown development? Under what circumstances?
• How much will the $100M in new tax base result in new services to address equity issues and how much will be paid to police or infrastructure for this project?
• How many NEW jobs are we getting for $12M?
• Why are we settling for a smaller hotel than what they say is needed?
• If TID 25 were closed, how much money could we get for affordable housing?
• What happened to the loan deal with the school district?
• What could we do with $20.8M in taxes if it weren’t designated to pay back the TIF?
• Where’s the TIF analysis?
• Does the mayot think that shredding the TIF policies with a kazillion exceptions is acceptable? What happens to the TIF policy in the future? Does it mean anything?
• Explain what he means about these “unique” guarantees. Are they greater or perhaps less than we would expect from other developers? Will all developers be able to “negotiate” their own guarantees in the future?
• Why doesn’t he mention the sweetheart deal on purchasing the $11- 13M city property for less than $2M
• Will other developers get free parking ramps paid for over time through taxes that won’t be going elsewhere?
• What impact does this parking ramp have on the parking utility?
• If they don’t build the second office tower, how does that affect the finances of the deal?
• How will 50 parking spaces be enough for 216 hotel rooms?
• How much money is the developer making a=on the parking after the pay $115,000 per year for 650 parking spaces. They are paying $14.70 cents per month per space but renting it for $140/month. (I want that deal!)
• How many management jobs will go to people of color? Are the targets just for the lowest paying jobs?
• With our current housing crisis and low vacancy rates, where are people going to live and what impact will that have on the market?
• Where is everyone going to park for the 17 months when there is no Government East ramp or replacement?

What questions would you add?