Capital Budget Live Blog, of sorts

If I don’t live blog it, it won’t happen, so this is what you are getting, a lazy live blog of sorts, sorry . . . my job sucks and is sucking it all out of me. (When I say my job sucks, I’m just worn out by hearing all the people with so many needs, and so little services. I still love the Tenant Resource Center and wouldn’t work any place else, because my job is more important now than ever – 60 hours a week is making it so that I can’t do a lot of things I would rather be doing, but for a while I can take it.)

NOTE: The media seats were all designated staff and when we got here there were several of us wondering where we were going to sit, it all worked itself out by us taking seats of people who didn’t show up. I’m the Overture Center President and CEO. 🙂

LOGISTICS
The started off the meeting with everyone here (I thought, but Maniaci isn’t in the room.) They spent about 7 minutes referring other items on the agenda, announcing their process (without debate) and talking about food. Then they recessed until 5:45 to have their public hearing.

WOW, AM I CONFUSED
When I turned in my registration slip, I was told by council staff that they would be NOT taking all the testimony first, that they would take testimony, then vote on the item, then take more testimony. I offered to go last, but then I thought what I had to say would not be considered for the earlier items on the agenda, so they put me in the list and I ended up third, when in fact, I should have just gone last if I hadn’t been misdirected by council staff.

PUBLIC TESTIMONY
Firestation 2
A couple people showed up to speak for the Firestation 2 project.

Spraypark
One person spoke against the spray park in their neighborhood.

Edgewater
I spoke about values – Edgewater ($1.4M in debt service for 10 years) and Overture ($2M) equaling the entire community services purchase of services contract amount in the Community Services budget, does that really reflect our values?

Edgewater – we’ve heard it all before, if something of interest comes up, I’ll let you know. But, I’m suspecting this to take will take another hour or so.

Interesting seeing the business folks argue this one out. Some points of interest
– Other hotels arguing that the numbers are not right.
– Developers are worried that this is what it will take to get all projects through (tons of lobbying dollars and sophisticated marketing efforts) and that nothing will be predictable
– What are we spending $96M for a project that will be worth $45M in the end.
– Apparently, Mansion Hill is a fragile neighborhood. (Wow – that’s an odd perspective, I’d like to show that person some fragile neighborhoods.)
– Speaker wondering why we are funding a project that directly competes with our own city projects.
– Suggestion, the use of this TIF money should go to referendum.
– Letter from John Matthews is read, he thinks majority of MTI and the School Board opposes, should not sue TIF funds for this. He says Jim Cavanaugh at the Fed (South Central Federation of Labor) is nuetral, members are split. PHil Ball says that TIF could be used by other projects, there is nothing special about this project.

Protest!
When Bob Dunn got up to speak a bunch of people started shouting. Our check, our taxes are not for sale, at least I think that was the gist of what they were saying – perhaps 3 – 4 of them. The police chief jumped up, they settled down and that was that. The Mayor asked them to “join our democracy and fill out a registration slip” before they leave so that we know who they are.

Back to the Edgewater
– Bob Dunn . . . you’ve decided this all before. His obligations are all done or will be by the end of the week. Has submitted financing info and will hand over the construction contracts. He will help city meet their obligatiosn that they promises. Talks about info he sent that (at the 11th hour) today (or yesterday).
– Mullenhoff says that the council is being told to do this for the integrity of the development process or it will send a chilling message to developers. He reviews all the rules the council revoked or overrode to get this project passed – 25 instances of violations, revocations, etc. What project deserves this? Developers can no longer count on the rules, will have to spend 100s of 1000s of dollars to get their projects passed, that is chilling. This is a city defining decision.
– Chamber, Smart Growth and DMI and other lobbyists here in full force – so many suits, I think some of them might pay a half month to one month rent for some of my clients/customers at TRC.
– Average Madison white guy speaking . . . zoinks!
– 7:15, Maniaci still not here, missing all the testimony on the Edgewater.
– Protester speaking now, talks about how got involved in Edgewater issue.

END OF PUBLIC TESTIMONY AND BREAK
7:18 – last of the speakers. Mayor reads the registrants. Mayor says 15 minute recess after this. Questions will be up after the break.

RECONVENE
8:40 – Maniaci is back, so I think they are all here now.

QUESTIONS
Maniaci asks Bob Dunn about what the City needs to get done. Could everything be completed by 2011 and have shovels in the ground January 1, 2012.

Bob Dunn says he can’t speak to what the city does. He says it is a tall order, a nearly impossible task. Says the TIF shouldn’t take as long, they have spent time on the TIF loan agreement. He says it is his opinion that it is not realistic based on his work he does all over.

Maniaci asks what they have been doing?

Dunn says that escrow agreement, proof of financing and construction contract are all that is left. From March to now they were working on financing, lawsuit was an impediment but it is now cleared. Construction planning was continuing. They also were dealing with logistical planning to get to a closing. TIF agreement did not advance since March, it was at a point where a lot of work had been done, but in March 2011 the effort stopped. In May met with the Mayor, over the summer tried to complete the TIF agreement, in August was clear city would not engage to complete the TIF agreement. He says they have been doing what they need to do, but the city has been doing nothing, fortunately a lot of work done prior to that, not realistic that it gets done. They are expecting that they would not close until the end of the first quarter fo 2012.

Maniaci asks if the city had engaged in the tIF, would we have an agreement in front of us.

Dunn says it was well within their reach. He says the escrow agreement was set up, they can’t release anything until all the obligations are fulfilled, they can’t even change the zoning and can’t get money until everything is done.

Marsha Rummel asks about hotelier questions about the HMI study and his response and the market and how things have changed.

Dunn says he won’t comment on the study because it is not his, it was done by people opposed to the project. Says the city study says all the projections were reasonable. He has done his own studies and that the market will support this. The lenders consider that his due diligence is done based on the information he has. He says their forecasting is not the projections they have for rate and occupancy.

Rummel asks what is the worst case scenario if Dunn is wrong, how do we protect our investment?

Dunn says that he would not characterize this as a luxury hotel, his rates are consistent with the Hilton. That is their benchmark for rate and occupancy. He says if they are wrong on the projections only he is impacted, they are making a significant investment and their return on investment would go down.

Rummel sasy you wouldn’t ask for reappraisal or other methods that others have tried.

Dunn says he would not expect that they would do that. He says they promise to pay their taxes. Talks about a table on page 9 that has info on assessed values of hotels, the assessed values are way below the replacement costs. He says they have to guarantee they will pay their taxes. $5,000 per room.

Rummel asks about the TIF documents, will you be itemizing the costs of the public access, will we see what we will really get.

Dunn says sure. Fair question. He says there was a comprehensive cost analysis on the public space. Findorff reps can speak to the costs. Staff analysis said public access portion is in line.

Rummel asks if the detailed documents would become part of the public record?

Dunn says that one of the steps to get to closing is the cost based appraisal on the public portion of the project, that will be done prior to closing and that will give you clear validation on the cosst.

Rummel asks if you will release the Project Labor Agreement (PLA) if this goes forward.

Dunn says will submit in escrow tomorrow morning, the whole community benefits agreement that includes the PLA.

Lauren Cnare asks what happens if he doesn’t get the full amount of the money.

Dunn says look at page 8, look at the gap. Hotel cost (per room) is 293K per key, public access is 34.7M, 182K per key. No way for any hotel to shoulder that much cost burden and remain solvent. It makes sense if you think about it. Parking ratio, waterfront and public space all are not cost burdens placed on others. Monona Terrace got money for extra parking and the gerbil tube. ANswer to if not $16M then what? They redesigned three full time, each time the public space blossomed, if want me to take the ice rink away, response was don’t take it away, same with parking ratio. Answer was no, on and on. Will not redesign a 4th time. What could you do, leave the 70s building there. The reconfigured the parking and public space, but we have to deal with economic realities. We took it away to open up the view corridor. Unless that is a minor alteration, they have done it, have not come up with a better plan. They have answered that a half a dozen time. Second question, fate of the Edgewater? No one can answer that. This is one of the most important sites in the city, region and nation. This completes the Nolen Plan. The future is not very bright if we do not complete this. It’s a serious missed opportunity.

Cnare asks about the valuation of the property.

Dunn says there are assessed value and market value. He says they have to do a market based appraisal, that will produce different amount than an assessed value. Edgewater today is 5M, your tax assessments are dramatically below. Not the same as income based approach or cost to construct. Concourse is 17M, but cost to replace would be way beyond that. Not just hotels, tax assessments and evaluation are not always correlated one to one. Assessed value, $53M with condos and parking structure, was a number derived when working on TIF loan agreement. It will set the increment schedule, regardless, $53M is more than all other hotels in downtown Madison.

Maniaci asks about Aaron Olver memo that says the gap increased due to the parking.

Dunn says that at the time, the breakdown on city contribution 4M in TIF, and 12.8M in public works, design number 2, 3 floors off, changed plaza and parking, then brought gap to $16M. Next iteration, 70s building gone, parking on NGL, increased back up to $20K, no appetite for increasing the $16M and worked out an arrangement with NGL, they contribute $4M for parking on their property, half the cost. Get half the parking stalls in the summer.

Manaici asks what happens if $3.3M is given.

Dunn says financing is gone, commitment letter says contingent on $16M, financing is difficult, amazing we could do this, it is next to impossible to get done. Given that he passed that high hurdle, wants to move forward and get it done.

Scott Resnick asks about the 9 year payback period, on page 12. What economic models did they use to arrive at that. If it came back, how would it be impacted.

Dunn says this is not something they have talked through in this setting, the 2020 payback was defined by the city. Look at Block 89 ad Hilton, in the case of those examples, they were scheduled out using local TIF district and donor districts and full 27 year life. The fundamental difference was that the city put this in TIF district 32 to accelerate the payback period. The 50% test is radically impacted when cut the payback period 1/3. If paid back in 27 years would look very different. He says the 270% number ignores the pay back period. Not fair to compare this to projects from 15 years ago. He argues that the TIF in today’s dollars for Hilton and Block 89 would be much higher by as much as 2 times. (City document says it would be more like half)

Rummel asks questions of Wellman(?) Asks him to comment on Dunn’s comment on their study.

Wellman says that they used industry data that is widely used, anonymous comparisons. They also talked to hoteliers. They asked for objective analysis and they used Smith Travel Research.

Rummel asks if the ADRs (average daily rates) are excessive. Are they hopeful?

Yes stands by his number, could reach it in 20 years. Right now rates are $88 citywide and $95 downtown.

Rummel asks about the staffing they have.

He has worked in many hotels, labor is most critical expense, try to run it lean.

Rummel asks about wages.

He says they are on the high side, they want to be at or 1/4 above the annual rate, housekeepers start at $9 per hours, $9.5 front desk, $8 for tipped employees. $25K starts with management. Maintenance would get $14. Larger hotels would be more.

Do you pay benefits.

Yes (missed some details)

Rummel asks about program to reinvest in the building.

He says that he came in when major renovations taking place, breakfast room and empty space turned into lounge, break room and fitness center, then lighting and aesthetics, and then invest every 10 years in furniture and sof titems (drapes and bedspreads). Some years substantial expenses. $35K for water main break out of the owners pocket. Things happen.

Mike Verveer asks former Comptroller Paul Riley about the but for test and public costs.

Riley says that TIF law has changed quite a bit. Talks about cost of land for the Fauerbach. City purchase the land and reduced the cost. Generally but for is measured by the cost and the revenue and if reasonable rate of return, and if not, how much needed to get it down. IN this case the availability of financing is what they based the gap on. In the case here, banks not lending as much as they used to, used to be $1 for $1.2 now $1 for $1.6. City not meant to be a bank. City report on the public access, yes engineer says that the costs might be reasonable, but should all the components be included in public access, for an elevator or entry to a building. Not sure if anyone could put a handle on it. Reason it was put in TID 32 is because it could not stand on its own, it would take 34 years to get a pay back. He says the the assessed value has to be at market value, it is defined as what someone is willing to pay and someone is willing to sell for. A lot of smoke and mirrors here, large difference between glossy literature and the schedules done by staff.

Verveer says that most costs in the market range, staff says without the public access component, they wouldn’t need the TIF, in your experience, was there ever a TIF deal what was structured in this way.

No. Public access means different things to different people. Staff said it is private property with limited easement, it is in private control. But they said it can be built without public access.

Verveer asks about the $87M in growth in TID 32, can you elaborate on that growth.

Riley says that he hasn’t seen where that came from, there are assumptions about spin off, but this is different, this is historical district and not sure how many businesses will create a spinoff here.

Maniaci asks when he was here.

Riley says he left in 1996.

Were you involved in Block 89 or Hilton.

Left before Block 89 was finalized.

Verveer asks Ostlind about lack of specifics, can you explain your professional background. Then speak to the PAC (public access componenent).

Ostlind says 30 years has been involved in construction and is a consultant now. He says that they list 13 items that are the public access but don’t provide information. 11 of 13 items the city is participating in the costs. These numbers were provided to the city, they are $15.9M. He says the other items are in the tif application. If add it all up, its $26M plus, its a far cry form $34M. Never been a complete list of where the $34 comes from. Parking is PAC, but public gets 4 parking stalls, they don’t cost $8M to construct, what the rest of it is I’m not sure. They did not evaluate if things were truly public accesss. Is the driveway public access wehn they need it and the fire department requires it, is that public access. Demolishing the dock is listed, its not part of the public access but the costs are included. Private driveway to private parking garage, he says moving an elevator in 1940s building and only public access is the restrooms off the walk. NO public access in the building beyond the 1st floor. Demolishing sidewalk along the sidewalk was required in 1965 agreement and paying for it again.

Verveer asks about the calls that the consultant never made about what was public or not.

Ostlind says if read report and listen to testimony, he says we was given a list of costs and verified those were the costs, but did not determine if they were public access items.

Verveer asks for Bill Heidt, but he’s not here.

Cnare asks if different questions, there are other items.

Rummel asks about late registrants. 2 registered and asked to speak. Voice vote allows them to speak. They speak in opposition to the Edgewater.

John Martens says a lot more has changed. This mayor has a different fiscal approach. Change in state govenrment which significant fiscal impact on the City of Madison, UW funding reduced and state employees less money. World stage things have happened as well – Greece, Italy. Wealth of information about the process, heard it before. More about image than substance. If we give the $16M, what kind of repercussions, higher taxes, delayed revenue to school district, benefits few, competing with convention and civic center, negative impact on historical neighborhood and rewarding bad process (promotion and changing the process to conform to the project) and exorbitant amount of money for 700 jobs. Can’t get 700 people on the site, that is over time, equivalent of 175 – 200 jobs. $12M for Epic was a whole lot more jobs. Is changing your mind flip-flopping or wisdom? Abide by the process.

Sharon Kilfoy speaks, Friend of Labor, spent 8 months working on Labor Temple mural. This is not the right time to move forward with this project. Also spends time in schools, and the schools have changed, if you haven’t been to one in the past few years suggest you go visit one. Composition of the community has changed. The majority of kids are children of color and poor. WE cannot spend 16M on a luxury hotel when every member of school board says they don’t want it to go through because of impact on the kids. Has been in Detroit, doesn’t want to have that happen in our schools here.

WRAP UP AND MOVING ON (8:55)
Mayor gives warning about limiting the questions. Cnare says that people who is lead should be the one to make the motion. Problems with the microphone system.

AMENDMMENTS
1 Fire — Station 2 Remodel (Grand Canyon Dr)

General Borrowing 1,244,000
Other Funds
Total 1,244,000
Average Future year debt service $145,835

Sponsors: Alds. Clear, Subeck, Cnare, Skidmore, Johnson
Move funding from 2013 to 2012 for the remodeling, equipping and furnishing of Station No. 2.

No discussion. Passes on voice unanimous vote.

2 Fire — New Station 5 (Far East Side)

General Borrowing 360,000
Other Funds
Total 360,000
Average Future year debt service $42,203

Sponsors: Alds. Johnson, Cnare, Skidmore, Subeck, Clear, Schmidt, Resnick, Phair, King

Complete the design of a Far East Station in 2012 with borrowing reauthorized from 2011. Include $6,210,500 in 2013 for construction.

No discussion. Passes on a voice vote, one no by Satya Rhodes-Conway.

3 IT — Server Air Conditioning Units

General Borrowing 113,000
Other Funds
Total 113,000
Average Future year debt service $13,247

Sponsors: Alds. Clear, Resnick, Schmidt

The Information Technology Data Center renovation is an approved project in the 2011 Facilities Management capital budget. This project will replace old air conditioning systems with more energy efficient ones resulting in long term cost savings and continued reliable computer operations. Bids came in higher than expected and an additional $113,000 is needed to complete the project.

Rhodes-Conway asks staff or sponsor about why this is a budget amendment for 2012 rather than 2011 or full re authorization for 2012.

Jeanne Hoffman, Facilities Manager says the project won’t be put together until 2012.

Rhodes-Conway asks why just the additional amount? Is it reauthorized. That should be done in the budget. Don’t want to be in the position to have extra money and not the whole project.

Hoffman says already borrowed so doesn’t need to be reauthorized.

Passes on a voice vote.

4 Capital Gateway — E. Wash Median Opening ($550k – 013)

General Borrowing
Other Funds
Total
Average Future year debt service $0

Sponsors: Rhodes-Conway, Maniaci, Rummel

Reconstruct East Washington for approximately 500 feet at the intersection of North Livingston Street to allow for left turns from East Washington onto North and South Livingston. Project includes removing existing median, removing and replacing concrete pavement and sidewalk, moving street lighting, installing signal and left turn lanes to allow protected left turn. Construction Year 2013 Cost: $550,000 (Source is TID #36 “Capitol Gateway Corridor” reimbursable General Obligation Debt in Year 2013)Assessments: none

No discussion. Passes on a unanimous voice vote.

5 State Street Mall — Street Furniture

General Borrowing
Other Funds $30,000
Total
Average Future year debt service

Sponsors: Verveer, Resnick

Provide funding for additional street furniture (bicycleracks, trash and recycling receptacles, etc.) along State Street Mall Capitol Concourse.

No discussion, passes on a voice vote, unanimous.

6 Williamson Street — utilities

General Borrowing
Other Funds (1,000,000)
Total
Average Future year debt service

Sponsors: Alds. Clear, Subeck, Cnare, Ellingson, Bruer, Johnson

Delete all funding for the project. (See Board of Estimates Amendment No. 4 and the amendment adopted 10-10-11.)

Maniaci says hope to vote down amendment and support the next amendment. For those on the bus tour, took you down Johnson St. and you will see what will happen. The downtown needs this. Support Rummel’s efforts. What are we going to do with the aging infrastructure.

Larry Palm asks about the impacts of amendment 6 and 7.

Rob Phillips, City Engineer says that item 6 would delete undergrounding completely, item 7 would be in line with current estimates for the project, only two blocks consistent with the policy.

Palm asks what changed the cost estimates.

Phillips says the estimates are more refined, all the numbers not in, but enough in that they think they can do it for substantially less. With the construction of Williamson St, the conduit was put in.

Palm asks about plan for Johnson St.

Phillips is confused. He says nothing included for undergrounding in out years, would need to be added and would need to be compared to the policy to see if it fit the policy. (Hint, it does not)

Rummel says there is a substitute for number 7. Understand $1M is a lot of money, but we spent millions to improve Williamson St. The outcry with the neighborhood was for undergrounding. We all learned about the value of trees and safety issues.

Mark Clear asks if they have to contract with the utilities or can we do it ourselves. Can the cost be reduced further if we have control over it.

Phillips says that utility itself does the work or someone they contract with. The amount is time and materials, not original estimates.

Clear asks if real data when send us the bill.

Yes.

Clear asks on 7, what is likelihood that TID 36 would be extended and that could be used for the cost.

Rummel says if proceed with Don Miller parcel, that is not in TID 36, prior alder was conservative, Alder Maniaci and her have worked on a map and this would be included. It should be ok.

Chris Schmidt says originally concerned cuz thought that the size of the estimate thought getting taken to the cleaners, he has more comfort now, believes in undergrounding. He wants to take the substitute being offered.

Clear says can support substitute for 7, as long as contingent on TIF funding being available. Would sponsors be amendable? Place on table?

Mayor says move substitute 7 now and needs help with language.

Mayor asks him to move sub for 7.

Clear makes another substitute (should be amendment) to make it contingent on TIF funding being available. Mayor tells him how to word it and what his motion is. Direct appropriation must come form TID 36. Mayor makes it clear. If amendment adopted, only way to proceed is if TID 36 produces revenue to underground.

Cnare asks if there is money available, its not just the boundaries which are easy to change.

Aaron Olver, Economic Development Director says there will be a 1.75M deficit at end of year.

Rummel says before say oh my, so sad, expanding TID, more projects being added and all the value will be added.

Anita Wiere is wary of expanding TIF boundaries.

Sue Ellingson asks if Rummel supports this.

Rummel says yes, tried to do the same thing, made a promise to underground, this is the only way we have done it, you will face Manaici when district needs undergrounding and its not in a TID. She supports it, but really, this is a bigger question than the convenience of the expansion of the TID. We may get some upset property owners.

Schmidt says that wary of assuming the expansion but will support it.

Amendment to amendment and the amendment pass on a unanimous voice vote.

7 Williamson Street — utilities
General Borrowing
Other Funds (450,000)
Total
Average Future year debt service

Sponsors: Alds. Rummel, Verveer
Reduce project funding from $1,000,000 to $550,000. (See Board of Estimates Amendment No. 4 and the amendment adopted 10-10-11.)

Mayor explains the procedure, they place on the table . . . I think.

8 Fleet Facility — study language and council approval

General Borrowing
Other Funds
Total
Average Future year debt service

Sponsors: Mayor Soglin, Alds. Verveer, Rhodes-Conway, Claussius, Solomon, Palm

Replace narrative with the following: “The City has a number of space needs related to its bus and vehicle fleet, fire and streets equipment, and police evidence storage. In order to respond to these needs in the most cost-effective and efficient manner, the Mayor will create a staff team that will prepare a report to the Common Council making recommendations regarding overall space requirements, facility relocations and potential property acquisitions. Release of funding is contingent upon Council approval.”

Schmidt has a motion (on their desks) that will allow them to place 9 and 10 on file. Schmidt says the purpose to merge similar amendments, passes on voice vote.

9 Fleet / Streets — site selection review / council approval

General Borrowing
Other Funds
Total
Average Future year debt service

Sponsors: Alds. Schmidt, Bidar-Sielaff, Rummel

Municipal facilities, especially those for vehicle maintenance, must be carefully located to avoid curtailing potential economic development and creating negative environmental impacts. No expenditures shall occur for the new maintenance facility (Streets Project #1 and Fleet Project #5 ) without a site selection and planning review process, with the recommendation to be approved by the Common Council.

Place on file unanimously on voice vote.

10 Fleet / Streets — study / delay funds to 2013

General Borrowing
Other Funds (2,600,000)
Total
Average Future year debt service ($304,799)

Sponsors: Alds. Clear, Subeck, Cnare, Schmidt, Ellingson, Bruer, Johnson, Weier

Move funding to 2013. Add narrative, “Facilities Management will lead an inter-departmental team to develop a comprehensive long-term facilities plan to include Public Works, Metro, Fire and Water Utility to be delivered to the Mayor and Common Council by June 1, 2012 for inclusion in the 2013-2018 CIP.”

Place on file on unanimous voice vote.

11 Vehicle Maintenance — S. Point Rd.

General Borrowing
Other Funds (1,200,000)
Total
Average Future year debt service ($140,677)

Sponsors: Clear, Subeck, Cnare, Schmidt, Ellingson, Bruer, Johnson, Weier

Reduce the Year 2012 amount to the $2,500,000 that was included in the 2011 Adopted Budget Capital Improvement Program. Change the narrative to specify that the project is for construction of warm storage facility at South Point.

Mayor starts taking the vote, Manaici wants to speak, chaos ensues, council gets schooled on parlimentary procedures (WHICH SHOULD BE FREAKING BASIC TO ANY ELECTED OFFICIAL!!!! sigh, sorry for the outburst but it is so absurd they don’t know their own rules). May makes them finish the vote. They reconsider. They eventually get to asking questions of staff – I had some techinical issues . . . am going to part two of the blog to prevent further issues and I lost some of this discussion . . . but look for part two.