TiVo’d . . . and a little brief. Downtown Library and TIF are the main attractions. Verveer does a good job setting expectations for better process in the future. And the city tries to figure out what to do when a developer won’t make the increment payments that they promised.
PUBLIC TESTIMONY
A member of the Downtown Community Gardens Group reminded them of the budget amendment regarding the promise to look into a rooftop garden.
The Mayor assured her that the language from the budget will remain there and they will comply with that language.
Tripp Widder appeared in support and urged them to move quickly to take advantage of the low costs with construction.
BRIEFER AGENDA ITEMS
1 – 4 passes – personnel issues.
Item 5 labor agreement with Fire Supervisors – passes.
Item 6 Confirmation of George Hank for Building Inspection position – passes.
Item 7 New software for Assessors Office. A brief explanation from IT and Assessor.
Right now they use a market analysis, but they don’t do an income approach or cost analysis. This software would help them with the second two. They hope to keep the staff as they are, instead of increasing them due to growth of the city and it will keep staff in the field more often. May also save on clerical staff as the staff enters information in the field. It will cost more in the future for field devices. We could also perhaps make money by providing data to entities that would purchase it. The system may or may not be the same as the county’s but they did work together to pick out the system, but the county has not made a final decision.
Item 8 New software for Public Works agencies. The police department got this softeware in 2004, its for workforce management. It helps with things like calling in a crew to deal with a water main break, and automatically calls them according to union rules until the crew is filled. Helps supervisory staff. Can also reduce amount of overtime. IT staff have used it and can easily help maintain it. It will also help with payroll functions. Police are now using it for vacation picking and saved staff time.
Item 9 Police office at Wexford Ridge – passes.
Item 10 Tank program with Department of Commerce – passes.
Item 11 Funding from Homeland Security – passes.
Item 12 Increase to contingency fund from encumbrances from 2009. These are items not yet paid for and there was a $400,000 placeholder and they saved some money. Housekeeping issues saves about $50K. Contingent reserve was $1.2M and they are back to $1.2 plus some change.
Item 13 Tenney Park shelter architects – passes.
Item 14 Facade improvement grants – passes.
Item 15 Housing Initiatives grant to purchase housing – passes.
Item 16 Emerging Neighborhood Funds – passes.
Item 17 Transfer of funds form sidewalk to Senior Center – passes.
Item 18 Arts grants – passes.
Item 19 A grant – passes. (Sorry, wasn’t clear what that was.)
DOWNTOWN LIBRARY
As an aside, this is what Verveer and Rummel had to say about the library on March 31st, when there was still more disappointment over the project.
The full show is here.
[Note: This was my first show, be kind. I’m still working on the best way to upload the best quality video and a better set design and by the second show, I got rid of the nervous giggles! It also includes School Board President talking about the budget, discussion with Verveer and Rummel on the Edgewater and Scott McDonell talking about the County Board]
No questions of the public.
Mark Clear says that there is a lot of angst around this, that some want to still move forward with the original plan. Discussed it as recently as today with Kunkler. He says that one of the ways we got here was original Fiore proposal was in response to T Wall proposal. They thought they could do something better. Many people agreed Fiore was better and best option at the time. Went through negotiations, they were not productive and ended up where we are with a proposal to rehab or rebuild the library on the current site. It’s important to remember the goal is to have a great central library, it has been promised to users, staff and public for years and other projects have not succeeded. He is keeping his eyes on the prize – to have a great library. Location is important by secondary to fixing it. The potential for economic development is secondary to to the library. [Whoa! did he just say the economic development is not the number on priority!!! You don’t hear that often. Perhaps we will start to hear that more. Could historic preservation be just as important as a new library and not be trumped economic development too? Blasphemy!!] He says he wanted to make sure council and others had opportunity to weigh in on the issue before the administration moved forward. He says even with today’s discussions, given the reluctance of the Executive Branch and Fiore to move forward and the risk of negotiations not panning out, he thinks this is the best option.
Mike Verveer has questions for staff. Verveer asks Dean Brasser, the Comptroller, about the resolution. Is it a budget amendment?
Brasser says it is an interesting question, staff has discussed it. In general in the past they had 15 vote items that increase appropriation for a department and a minor change in language is not an amendment to the budget. The appropriation is what requires a 15 vote item.
Michael May, City Attorney says that he forwarded Michael Schumacher’s email and his response that says the same thing Brasser just said. [You know, if the council lets this go, they might as well no even bother with budget amendments that require certain things to be done before the money is spent, because they will just be ignored. This sets a dangerous precedent, but the council seems determined to just give their power to the executive branch and they don’t seem to care.]
Verveer asks about the word “new” and says that it came from the amendments he and Schumacher made at budget time. Deb Simon, Comptroller Staff, says “new” was in the title to begin with. There is confusion, staff and alders think they need to double check this.
Verveer asks Jeanne Hoffman, Facilities staff from Engineering about what the timeline is?
Hoffman says there was a slide that showed timeline, but they are slipping from that. Council will meet on the 4th and if it passes they will review the RFQ for architecture and engineering firm, there will be negotiations. Council will have to approve that. The contract will allow us to have an owner’s agent, the budget for this library will allow us to hire that person during the construction administration, so they will move quickly on that. They have a 6 month design window which is really aggressive. She says that is an invitation to the community to move aggressively and quickly. That is the quickest timeline. Then it will take 3 months to finish up the plans and specifications.
Verveer asks about Council involvement.
Hoffman says there was an RFQ for the interior, they got the documentation, then change in direction and it became a public works project, Attorney May said they could send out an addendum to find out their experience on doing high rise projects. They got 10 or 11 responses and Barb Dimmick, Library Director, Tripp Widder, Library Board President and staff reviewed them and picked the top 5. Then, there was a second addendum for experience with major rehab and remodel and they have the information but the internal team has not scored the RFQs. Waiting for council to set direction. Had discussions to figure out how to involve the council and they want to meet with the surplus committee to walk them through the process. [There’s only three alders on that, Verveer, Rummel and Palm] Then they could make a decision about how to move forward.
Verveer says they got an invitation, but wants to make sure other alders are involved. He asks about the 6 month process to design. Does that include land use approval process? UDC and Plan commission? What will public participation be, how will neighbors be involved? You asked that of the applicants and can you speak to that.
Hoffman says that this is the Central Library and it will be critical. Yes, they did score them based on experience with in depth public processes. In interview process they stressed that they familiarize themselves with Madison public process. Initially there will be a large participation meeting to solicit input. They will also have to meet with staff to look at operations. Also need to look at sustainability, reusing building is green but want natural light and sustainability. 6 months is very tight, but perhaps it can help us focus and work hard on a deadline.
Verveer asks about sustainability and green issues, can you tell us the commitment to the community garden issue. What will you and your staff be doing for a green roof or community garden.
Hoffman says that they are looking closely at the 3rd floor and a green roof and gardens, there could be a lovely way to to work that in. Green roof would save on heating and cooling loads and would protect the roof. There is a potential for an education component with gardens. They will direct architecture and engineering first to study the issue.
Verveer asks what happens in the year of construction.
Barbara Dimmick, Library Director says they have been studying it for the last few weeks. There will be some square footage of 15K – 20K square feet downtown. That leaves back of house operations that need to function, they have been working on a memo that need 50 – 60K feet elsewhere, but keeping people together would be important. The books from downstairs could all be in one place. Jeanne says they have had preliminary discussions about taking some books off-line and store them permanently. They will work with real estate to find a warehouse.
Verveer asks if staff has ideas about where the retail space will be.
Hoffman says not yet, tossed around ideas, there is space close.
Verveer asks if we have many options.
Staff says there are several opportunities.
Satya Rhodes-Conway asks about the cost of where they will go for a year. Understands rehab is different than new construction. Allegedly we will save money with rehab, but do we have costs for moving twice and renting several spaces.
Hoffman says that budgeted for 2 moves, hopes there is city space that we can store the books in and it won’t cost us. They have funding for a lease for the year for retail and back of house space.
Rhodes-Conway asks if they can do it within the budget for the year.
Hoffman says yes, they can.
Rhodes-Conway asks if it will be LEED certified.
Hoffman says there is a resolution that it will be certified. She says that they will go beyond LEED, no reason why it can’t be state of the art and beyond LEED silver standards. It’s easier with rehab.
Marsha Rummel asks about the New Market Tax Credits, presumption is that we would have $6M and if the city does the project will we still qualify.
Tripp Widder says that the fact that the city does the project, says no different than change in direction to a public works project and they have not been told it can’t happen. The credits are a function of the project costs and since the project costs are going down and so will the need for New Market Tax Credits.
Rummel asks where they are getting their information that “this is ok”?
Widder says that Brasser and he met with US Bank and outside advisors and another bank and they don’t have any information that they are not eligible and in fact have info that they are.
Clear asks about fundraising modified goals.
Widder says that the fundraising was $10M and now it is between $5M and $8M. It depends upon if they do a full 3rd floor. It will be easier to raise and with the LEED certification and he is hopeful that the community will be excited about it and they will treat it as a new building and exceed the goals.
Clear says that floor plates and columns will be left. Clear asks how they decide if there will be a full or half 3rd floor.
Widder says that the Foundation will be meeting to determine what they can raise, hope to know in 60 days. They will also work with design firm to get more solid numbers and evaluate that as well.
Hoffman says that they will be looking at programming and it is inefficient and if it is all open it will be more efficient. That design work will determine if there is a need for a full 3rd floor.
Clear asks if that decision will come back to the council. Even if it doesn’t require budget changes.
Hoffman says they will see the design in the land use approvals.
Widder says that if they can design and fund the 3rd floor, why not do it. He says that he has gotten positive feedback from fundraising community about a rebuild option.
Verveer has the language in front of him and asks about deleting language about the it being contingent on a $4M sale of the land.
Clear says that there may be and likely will be monetary budget changes at some point, he thinks that they will deal with it once they have more solid numbers. [He seems to be contradicting Brasser and May about the need for a budget amendment. Sounds like they are trying to get an 11 vote item passed so when the 15 vote item comes up, its essentially a done deal.]
Verveer asks about the limits like the sale of the land?
Clear says yes, lets do it all at once, this just changes the direction.
Mayor Dave Cieslewicz says that he found himself with extra time in Amsterdam, so he went to the library. They had a brand new library, not much bigger than ours, 160,000 to 170,000 square feet, they were there early afternoon and it was packed. Checking out cd’s and books and sitting reading and using the internet. Heavily used building. Some ask if we even need libraries any more and if people in Amsterdam are any indication, yes we do. It was a beautiful building. A lot of us were disappointed the original did not work. It is the greenest of buildings, since they can use the floor plates and pillars, but it will be a new building. Saving the plates and pillars save energy and materials. There will be less pressure on private fundraising. It will be easier to administer, won’t be as expensive to run and we can get it done sooner. We hope to get it done and open early to mid 2012, about a year or more earlier than the original proposal. There is a lot to like about it. To a lot of people it seemed like an abrupt change, wasn’t to him. Now that they have had time to absorb it, there is growing excitement. This will be a beautiful building worthy of a city that values education. Understands some are concerned about the abruptness of the change in direciton.
Verveer says that he appreciates that people have asked his thoughts, it is in his district, obviously the older plan was also in his district, thought long and hard about this. He says he supports the resolution, appreciates Mayor’s vision for the rebuild. He does think it could have been handled better. Not only was it abrupt to community, but also for us on the council, and himself. What’s done is done, but we could have had more discussions and we could have had a closed session discussion at Board of Estimates. He says that would have been the best way to proceed in retrospect. However, he represents a lot of downtown stakeholders that are disappointed, including Downtown Coordinating Committee that want a one month cooling off period. There have been recent discussion and he agrees that he agrees with Clear’s analysis of where Kunkler is at. This resolution does not preclude anyone from approaching us with some wonderful new proposal. We can change gears again, but putting a halt to the process would be a mistake. He appreciates that downtown stakeholders disagree, he says they need to move forward so he joins Clear and Mayor in asking for support. But, he wants to say loudly and clearly that he is encouraging constituent to see why it is exciting, to move from disappointment to excitement, and he thinks they will have a full third floor. We need a full third story for so many reasons and if we don’t get it we will have disappointment all over again. Hopes we make it work, there may be a need for more G.O. Borrowing or fundraising, but we can’t compromise long term needs of the operations. Meeting space alone is important, its hard to get space there, a full third story would be heavily utilized. He thinks that those who were enthusiastic about the Fiore project are getting excited again. Reminds them the Library Board unanimously supports it and that gives him comfort.
TIF FOR MONROE COMMONS/TRADER JOE’S
David Keller, the developer, appears to plead his case. He has a written statement. His testimony boils down to they have a revised request to extend repayment from 7 to 9 years. He says that there was a design and construction problem that shut down the project for 2 years, they needed sound separation between the floors. The document explains further. They were off the market for 18 years where they could not show or sell units. They had slower sales, 2 years of carrying costs and reduced assessments. That is why they couldn’t meet the 7 year repayment. The TIF agreement required a 10 year lease with a grocery store, sell 30 units to owner occupants by a date certain and repay TIF over 7 years. 2 of 3 have been met. Came up short on the TIF, not trying to avoid obligation. Trying to come up with an agreement. They originally were supposed to be open in 1006, didn’t contemplate being shut down for 18 months. Their proposal would pay the city back $2.3M with interest in 9 years and the city could receive $400,000 per year until the district closes or $5.5M. The city got $10,000 previously but will get $8M. [I’m not sure the district wouldn’t have to be closed earlier.]
Rhodes-Conway asks Keller for his written comments and asks about impact of project on surrounding retail.
Keller says that they think it stabilized the neighborhood dramatically, Ken Kopps was vacant for a year or longer and retailers were concerned about if they would make it, in the worst retail downturn in decades, Monroe Street has fewer vacancies that State St, Westowne or Eastowner or Hilldale. Noticed today that 2 places are closing, but even with those, the area has been successful in a tough retail market.
Tim Bruer thanks him for meeting with him and staff, he says he’s going to ask for referral to get them to meet with assessors office to challenge up the assessments. He wants them to argue for their taxes to be increased.
Keller says that assessments should be at or near 100% of value. He says that they have two sales pending and sale in the last two weeks of condos at $350K that were assessed at $160K. They think the grocery is under assessed and they will meet with the assessor and show them that units for sale at $279K and assessed at $160K. He says that is just on the units they own.
Bruer asks if they can pay those taxes.
Keller says that they can.
Bruer asks if they will cooperate and give the staff the documents to staff that they need.
Keller says that bank couldn’t release documents without his permission and never asked, they have been trying to meet with staff and hopefully they can come to a resolution.
Mayor asks them to run through their report.
Anne Zellhofer, City Attorney’s Office, says the agreement had a schedule of increment guarantees for the loan agreements. She says that there was some excess increment in the early years, but in tax year 2007 there was a payment due, they sent a request to pay $6700 and that was paid. They all thought at that time in looking at assessments and sales, they thought there would be insufficient increment. In 2008 there was an shortfall of $182K and they have been trying to negotiate and seek payment. Sent notice it was due in August, no payments have been made. The anticipated shortfall in 2009 is $140K due in August. The grocery store has a decrease in assessment of $173M. [What? Or perhaps what is the assessors office smoking? No wonder the city is going to be in trouble at budget time.] She says the tax situation is not helping any. She says Gromacki can speak to the TIF negotiations.
Joe Gromacki says that this is one of those “I told you so” moments, staff sat down with them, used a conservative projection of increment based on market capture of a certain number of units per year. They were encouraged to think outside the box in terms of the numbers under the idea that this was fully guaranteed by the developer. Now today, we’re being asked to think outside the box on the assessed values. He says that in terms of the TIF policies and the efficacy of the agreement is that they are questioning the enforceability. He asks them to keep in mind that there will be other projects in the future and projects that are in already funded that will be looking to get the same deal. We have had increment payments made in the past, but up until now, never had a developer come forward and say they can’t or won’t pay it.
Clear asks about mitigating circumstances of 18 month delay. How does that affect the value of the project and the increment that would have occurred.
Zellhofer says that delay in project delays sales, and that impacts values.
Gromacki says that the city’s original timing was more conservative, but they were convinced to use % of completion, that if 76% of the project is done then we should assume 76% of the value. He says if they are going to open that door, they are going to have to live with it. Now they want to come back and say no, its sales. That is very ironic.
Clear asks about asking to extend to 9 instead of 7 years, are we made whole if they pay interest.
Gromacki says taxpayers already made up for the shortfall. We have already paid. We are looking for repayment, not changing a value. The 140K for 2009 will be the same thing. This is a single purpose TID, the only project in a 3 parcel district, there no other tax increment to recover the cost. So that being the case, the taxpayer is on the hook to do that. He doesn’t know how to recover costs except to enforce the guarantee.
Zellhofer says that if extending the guarantee, you should be as liberal as possible and maybe include an extra year to make sure they can meet the goal.
Verveer asks staff to provide specifics about how responsive they have been to their requests for information and for meetings. Have they been responsive? Or is it stalled.
Brasser says that discussions with Keller, Zellhofer and himself looking at number and recalculations, the communication has been good. In terms of the bill, they issued it and no other discussions about that besides identifying an alternative. Brasser says that Keller would meet with alders to present his proposal and this is the first time this has come to the body.
Zellhofer says that they still need the dollar amount of the outstanding mortgage.
Verveer says bank staff was not responsive, did they request it from Keller. Zellhoefer says the bank needs Keller’s permission to release it, and it has not been provided.
Verveer asks if absent the mortgage information have they been responsive?
Zellhofer says they have been responsive, meeting with alders took some time, then touched base and then there was a stalemate and then we decided to come to Board of Estimates.
Verveer asks if Keller will provide the info.
Zellhofer says that she thought she heard that.
Bruer asks them to speak to precedent setting as it relates to other TIFs and real estate issues. We have other non-compliance issues with sales and the impact of renegotiating.
Gromacki says several outstanding loans, most recent that come to mind are Capitol West ($4.4) and University Square ($3M) and Capitol Pointe ($2.7 or $2.8M). There are a number out there that we hope are recoverable. To the extent that we set a precedent. Behavior in the market place is that once one person negotiates a deal, others want it too. They have had negotiations with Terrence Wall [Yes, the Dude running against Russ Feingold for Senate] about the CIC property and he wants to renegotiate the sales prices. Calls to mind where a developer where someone asked about equity participation and personal guarantee and developer said that’s ok we’ll renegotiate in 10 years. He thinks it is important that as the council sets policy, that they are enforceable. Think carefully about precedent because it will result in a mass re-interpretation of our increment guarantees.
Bruer asks if we don’t hold this developer accountable, do the taxpayers eat the difference.
Gromacki says we borrowed fund to make the loan to the developer. We made the payments even if not paid by the developer, and then we have to recover, that is why we have the guarantee so that the taxpayer is not on the hook. That is why we have the 50% rule so we have a cushion. But in this case, with this being the only project in the district there is no cushion.
Bruer asks about the valuation.
Gromacki says they were concerned, they did a conservative estimate to have sales in 4 years, the result of that was a supportable TIF of $1.9M, the request was $2.6 which got winnowed down to $2.3 and that was beyond the 50% rule and they asked them to rethink the value. They wanted the timing of the value to be more immediate. If you place more value sooner, then it creates more increment so there is more supportable TIF. They advised that it was aggressive, there was an absorption rate of about 40 units per year for the whole city. And they were concerned because of all the other units coming on the market. The argument they pressed upon us, they wanted them to look at the value of the project and base it on the construction completion and although that was ok for assessment, it wasn’t a good calculation for market capture. They tried to dissuade them, but it was a popular project, it was all about the grocery store, the condos were needed to make the project work, the grocery alone could not be supported, the gap was entirely generated by the grocery store, the condos could stand on their own. They tried to do the conservative thing but were convinced elsewise.
Bruer asks about staff thought on assessing up the value of the property.
Gromacki says it doesn’t affect money due, it won’t erase the $187K already owed. They have been unequivocal that they can’t pay it. So he doesn’t know what increasing the taxes will do?
Bruer asks what the developer fee was?
Gromacki says $1.16M, but we have no idea if that has all been taken, once project is done we will audit.
Bruer asks for that information when they come back.
Gromacki says that there are 10 or 12 units left to sell. Two have accepted offers. Once they are sold they will audit.
Bruer says that with cooperation they could get those numbers.
Gromacki says that its hard to say cuz if they are including building out as an expenditure, unless we know what improvements were made by buyer unless buyer cooperates.
Bruer says that if they can get financials from the bank will that clear things up.
Zellhofer says that will help the council decide if foreclosure is an option.
Rhodes-Conway asks about suggestions about future actions, setting aside the precedent setting issues. Is it common for us to do a single purpose TIF?
Gromacki says that they have only done a few since he has been there. They have done two – one at Amoth Court and this one. To be quite frank, not a fan of them, cuz there is no cushion, but difficult as a staff member to make the argument when the alder really wants it and talks to enough of the colleagues and you get the arm, so that is what we do, we respond to those requests and create the district. You might take a hard look at that. He says that the guarantee structure is sound and this is why we have it. The 50% rule is sound as well.
Rhodes-Conway says we should learn from the process.
Bruer asks about personal guarantees? Why do we have them if we can’t collect on them.
Zellhofer says they are collectable as long as they don’t file bankruptcy and can pay.
Bruer asks if they can look at other properties they own.
Zellhofer says yes if they are in their name and not encumbered by another mortgage. [Note, that is why everyone uses LLC’s or limited liability corporations – to limit their liability.]
Bruer asks for referral and to look at the assessment issue. We should look at real value of project and the obligations to the city. Are we providing an artificially low value on properties. Why should tax payer pick up paper and see that they are not paying their fair share and they are picking up the short value. It hard for people to understand a developer claiming poverty. He’d like them to come back with specific recommendations. Bruer says that he’d like to see a report back, sensitive to challenges of developers and taxpayers, but we have a legal and moral responsibility to the taxpayer to protect the financial integrity of the community. We have seen the sensitivity of other bodies on TIF and we need to look at this on a annual basis. [ Ok – he keeps talking, but he lost me . . .I’m not sure he is saying anything new . . . ]
Gromacki asks if the Assessor is supposed to report.
Bruer says Assessor, attorney and TIF offices.
They didn’t vote on that, and moved on.
CAPITOL WEST/RANDY ALEXANDER TIF
Gromacki goes over history, in 2006 $4.2M TIF loan for condos, as part of the agreement the personal gurantee that guarantees the public purpose of the project, owner-occupied units downtown, stipulated that the developer had to sell 71 units by July 15, 2008 and another 53 units by March 15 2009. In 2007 council extended the deadlines to 2010, because the market had slowed. Exact opposite situation as the one they just discussed. The project and district had enough increment, the district has been closed, however, the personal guarantee of the public purpose of the project remains with the project until the units are sold. In 2009 the council amended the agreement to credit them for the 42 units of the 71 that they were supposed to sell and extension to sell 29 units by Dec 31, 2011. They credited the units against the money owed to the city. They will pay either $1.8 minus sales that are closed or if not, they would sell an additional 52 units by 2013. At that point $1M less any sales. Developer agreed not to seek any other modification or sue the city. To date the project has sold 56 units, 43 before the amendment, 11 since then and 4 accepted offers and they have 16 months left and 18 units to sell. Assuming none of pending sales will close, they are on track, but in this market it might be optimistic. They are monitoring the situation. You will hear from staff at or around 2011 deadline and ask them what they want to do. In this case it is clear what happens, they pay if they miss.
No other questions.
Adjourn.
