I was sooooooooo disappointed on the lack of questions on TIF from the alders on Thursday night. It is very likely that most of the discussion on TIF will happen behind closed doors and we won’t be able to get answers to the many questions. I’ve stared at what little information we have quite a bit, and can’t really make heads or tails of it, but this is what I’ve got. I’m looking facts surrounding the four major issues I’ve heard people asking about and preparing a list of questions that should have been asked. It also includes an update on TIF from last night’s council meeting.
LATEST NEWS – FROM THE COUNCIL MEETING LAST NIGHT
Clear introduced the Edgewater TIF resolution which is sponsored by Clear and Mayor Dave by title only and reads:
Title
Authorizing the Mayor and City Clerk to execute a development agreement to fund a
$16,000,000 Tax Incremental Finance Loan to Landmark X, LLC (“Developer”) to assist in the development of the Edgewater Hotel redevelopment project.Fiscal Note
A fiscal note will be completed when relevant financial information becomes available.
Note, they made a procedural error in introducing this. It requires a 2/3 vote and they did not take one.
2.05 INTRODUCTION OF BUSINESS.
(1)(b) Any business to be referred may be introduced from the floor, and if no fiscal note is prepared, will be referred to the comptroller for a fiscal note. Introduction of any matters by title only or without a fiscal note shall require a two-thirds (2/3) majority vote. Any matter introduced from the floor shall be either (i) referred to the next Common Council meeting for action or (ii) automatically referred to the next Common Council and be placed on the agenda as if for introduction, solely for the purpose of additional referrals.
Additionally, you should note that this is by title only because something is going on and Hammes and the City have not been able to reach an agreement on the term sheet which is required to write the resolution to be introduced. I guess we’ll have to stay tuned.
TIF REQUEST ON EDGEWATER PROJECT ONE VS TIF REQUEST ON EDGEWATER PROJECT TWO
First of all, I can’t for the life of me understand why the project can change, the costs change and the TIF remains $16M. The first version of the project (TIF application) and the version where they knock two stories off the new building and the 70s building (2nd TIF application) and its still $16M. That seems statistically impossible. It seems even more implausible after the TIF Coordinator went through various other poorly thought out scenarios where the TIF goes as high as $44M. (See page 6)
Here’s a breakdown of application one vs. application two. Remember these are the numbers as provided by the developer.
Costs of the project according to developer
– Square footage of project 87,990 vs 88,992
– Cost to purchase 666 Wisconsin Ave (Edgewater Hotel) and National Guardian Life property $8.5M and $7.5M. I believe the $1M difference comes from a $1M drop in the purchase price of the hotel from $5.5M to $4.5M)
– Total Land Costs $9.9M vs. $9M
– Sq Footage of New Hotel 289,468 vs 216,769
– Rooms 228 vs 180-192
– Underground Stalls 364 (420 w/valet) vs. 233 (275 w/valet)
– Demolition costs $1.4M vs 1.5M (wow, taking two extra stories off the 70’s building only cost $100,000 more in demolition costs?)
– Sitework $4.4M vs $3.2M
– Hotel Redevelopment $53.1M vs $38.5M
– Parking Structure $8.45M vs $4.9M
– Total Hard Costs $65.9M vs $46.6M
– Architecture and Engineering $4M vs $2.7M
– Site and Environmental $350,000 vs 295,000
– Testing and Inspection $330,000 vs $270,000
– Marketing and Collateral $750,000 vs $550,000
– Project Management $2.66M vs $1.88M
– Other Professional Services $1.22M vs $840,000
– Taxes and Insurance $690,000 vs $480,000
– Permits and Regulatory $290,000 vs. $225,000
– Miscellaneous $340,000 vs $180,000
– Financing Costs $2.66M vs $1.5M
– Total Soft costs $14.55M vs $8.95M
– Total Project Costs $90.4M vs $64.6M
Every single cost went down, except the cost to the city. It remained $16M.
Gap in the cost of the hotel according to the developer
– The project goes from being valued at $86M to $42.3M
– The Debt Coverage Ratio goes from a 1.5 to 1.73
– The Loan to Value % goes from 61% to 71%
– They go from borrowing $52.5M to $30M
– Equity goes from $33.5M to $30.9M
– Total sources goes from $86M to $61M
– Total uses goes from $90.4M to $64.6M
– The gap goes from $4.4 to 3.5M
Those last numbers should have dropped the TIF request to $15.1M if you look at gap for the hotel alone.
Operating Revenues according to the developer
– Hotel Revenue for 2012 $15.9M to $11.7M
– Restaurant Revenue for 2012 $6M to $341,000 (Holy Crap! That’s a HUGE drop)
– Spa Revenue for 2012 $1.5M to $86,000 (Again, holy crap!)
– Total Revenues $23.5M to $12M
Those are some MAJOR drops in revenues. Were the first numbers that inflated, or the new numbers that skimpy?
Operating Costs according to the developer
– Hotel Expenses $9.7 to $7.2M
– Restaurant $4.5 to 0??????
– Spa $1M to 0?????
– Property Taxes $1M to $800,000
– Insurance $209,000 to $200,000
– Total Expenses from $16.5M to $8.7M
– Net operating income $6.8M to $3.5M
CITY COSTS FOR PUBLIC SPACE AND PARKING
Second, based on the information in the latest presentation, I’m unclear why they are attributing $29.3M to the public access costs. $17.9M public and $11.4M allocated to the Hotel costs. (According to page 2 of Thursday’s TIF presentation, but I think those numbers are backwards.)
According to the developers numbers (page 2 here) and the staff numbers (page 7 under public access numbers and private costs allocated) we see the following:
The costs are divided into public access costs and private development “public improvements” in the base building. I’m totally unclear what that includes and no one asked. The “public access” is $17.9 with the city paying for $12.5M. The “private costs” are $11.4M but the city is paying for $3.5M. Total, the City is paying for 55% of these costs. The way it has been explained is that $4M is parking, which I think is the $3.5 in the developers application for the city’s share of the private costs. But none of the numbers add up correctly.
What is clear is that the city is expected to pay the following:
$1.2M for landscaping and site restoration
$500,000 for site utilities
$8.1M for the “Mansion Hill Terrace and Gardens”
$2.2M Grand Stair and Waterfront Access
$900,000 Waterfront Improvements
That is in addition to the parking costs (?)
$1.8M for earth work
$800,000 for Demolition
$2.4M for soft costs
VALUE OF THE HOTEL
Third, based on research done by others, the valuation of the hotel seems a little off. Check out the comparisons to other hotels in the are and that are somewhat comparable. The first number is the assessment, the second number is the number of rooms and the third number is the assessement per room.
Edgewater Existing $5,336,100 107 $48.870
The Concourse 18,224,900 356 51,194
Inn on the Park 4,276,700 212 20,173
Hilton Monona Terrace 20,407,800 240 85,033
Campus Inn 2,975,700 74 40,212
Double Tree 4,913,000 163 30,141
Total 51,848,100 1,152 48.728The Pfister, Milwaukee 32,700,000 307 106,515
American Club, Kohler 23,048,700 240 96,036
The Saint Paul, St. Paul 11,500,000 254 45,276
The Drake, Chicago 19,260,514 535 36,001
Fontainebleau, Miami 220,000,000 1,504 146,277
107,826
Edgewater Proposed
Low Value $43,000,000 190 $226,316
Medium Value 45,000,000 190 236,842
WHO’S PAYING BACK THE TIF
Kristin Czubkowski covers this issue well. But the $16M loan appears to be paid back by Hammes/Edgewater paying $6m and the rest of the TIF district paying back the remaining $10M.
QUESTIONS THAT SHOULD HAVE BEEN ASKED
This will have to wait until tomorrow . . . Enjoy the information and let me know what you are interested in knowing!
