George Austin kicks it off . . . how much are we paying him to coordinate all this city staff???
I’ll make the audio available when I get a chance. Like, um, now . . .
PRESENTATION
Powerpoint presentation (not currently linked, but perhaps it will be), doing his best sales job about how this property is “ripe” for development. Blahbitty, blah, blah fancy planning words. Talks about the years of process they have gone through. Studies and staff reports were done and approved in 2012. It’s the standard review of all the things that people approved that weren’t important at the time if you were to ask, but now are key to moving things forward. He is now saying that all they are doing tonight is proceeding to negotiations, then they would decide to build it or fund it. Committee has been working for 17 months. Says preamble is the big picture, whereas’s are the process, and the be it resolved clauses, select JDS development to be preferred developer and enter into negotiations and report back by August 15th, 2014. Then they will consider this during the budget and start the negotiation with Marcus Hotel about the first right of approval. It also has guidelines for the negotiation process. He says the guidelines are important – there were two good proposals, but neither of the proposals were ready to be constructed, but JDS was best able to address the best interest of the City if they can get to the proposal. Keep MMB in civic use, with an active connection to buildings, high design, honor historic nature of the building, affordable to taxpayers, careful analysis of TIF with focus on public benefits, not specific investment beyond parking were important. He talks about the parking goals and making sure it is visually appealing. TPC recommended items 4, 5 and 6 of the resolution. The resolution also talks about Monona Terrace and having a “flagship” hotel. He talks about it being a place for people to engage. Here’s the resolution.
(Sorry, I was distracted as Deb Archer (Great Madison Convention and Visitor’s Bureau) is talking Steve Cover’s (Director of Planning and Community and Economic Development) ear off and distracting me.)
Aaron Olver talks about the history. Says these properties need to be put back on the tax roles to aid in economic development. He says that the hotel was important for the hotel. He says a large amount of the revenue comes from a small amount of the events. Hotel is important to business community when trying to attract talent or bring in investors and to help capture dollars from outside the city. He says that we need to capture restaurant dollars. Talks about transportation interconnectivity as being important. Shows map of TIF investments – says that it is dispursed on the isthmus and has a variety of projects – spurred office, condos and other residential projects including affordable housing like the Mark. Also moving the children’s museum. Says our investments have paid off, overall tax base is 4%, downtown 6% and TID 25 is 9%. He says it is a premium return for tax payers. He shows a massing of the project, he talks about the hotel use on block 88, says there would be retail uses (restaurant, cafe) incorporated in hotel, some structured parking, exact mix unknown, some above and below grade, will push hotel rooms up to enjoy the view. Block 105 is government east parking ramp, would have bike center and retail. They want to activate Pinckney like the block with Merchant on it. He says the green roof would be on the parking structure for office or residential. 80,000 sq ft of office in original, it might get scaled back. They are trying to screen the parking form the street and increase the tax generation of the project. He said JDS 2 was $190M, they had 90M in equity but $21M in TIF and $40M from parking utility – but he says these numbers will change with negotiations. He says that we need benefits for the investment the public is making. JDS was also concerned about the pro forma penciling out. The big issue will be the parking utility ability to pay for this is a big concern, $40M is too high of a burden to place on the parking utility and they will need to reevaluate that. They will come back for briefings as this process goes along. He shows a slide comparing the three proposals Journeyman and JDS versions 1 and 2. He talks about the public investment which will be more than the costs of the parking. He also talks about the “quiet” costs of giving them the land as opposed to selling it. He then talks about the taxes that will be made off the project. He says the public investment would be a new TID could support the project by itself. A mixed use TID is only 20 years and they couldn’t recapture the costs in that time, they need 30 years. If they draw a blight based TID they don’t think it will be large enough for it to work in 27 years so they are thinking to use TID 25 or another option with a new TID with a donation from TID 32 – TID 25 is the preferred option. He says they will recover the initial investment through various means – including hotel taxes (that got to Greater Madison Convention and Visitors Bureau). He says that this is equal to investment in Hilton and Block 89. Subeck asks to have a number. Olver can’t answer her one. She asks what they invested in at the time, he waffles and says “its on that scale”. He says there has been a lot of scrutiny and that is important to get the project right, but now is a good time to do this, interest rate is good, need to replace government east, hotel market is strong, TID 25 is strong and that allows us to use the strength of that to reduce the risk and enhance the benefits to make investments in less risky ways. GEts the project on the tax roles quicker. This is the most favorable window we will ever have, this is a unique moment.
Dave Schmiedicke talks about TID 25 that has been around since the mid 1990s. There will be a brown bag lunch with the mayor on Friday. He says that with TID 25 we can’t make expenditures after 2017 if we use that as the source of investment. It has to close in 27 years and that would be Sept 2022, they can’t spend money in the 5 years. There is $27M in the TID right now, but there are parking bonds, if they closed it, there would be $17M. He says that is a conservative number. He says there could be $50 – 60M in the TID by the end of the 27 years, excluding any new developments. He says under the levy limit law, when we close the TID we get 50% of the growth or 3/10ths of a percent more under the levy limit. He talks about the developer contributions and bonds being paid. He talks about the Marcus Corporation requirement having a block of 150 rooms and right of first refusal. A new TID would be a problem in identifying blight, if they close the TID they might open up other issues. Using TID 25 could bring the project on the tax roles sooner. They would have to go back to the Joint Review Board to amend the project plan. If a new TID is used, that will require Joint Review Board as well.
QUESTIONS
Marsha Rummel asks about Marcus Right of Refusal. How does that work side by side with our negotiations? Schmiedicke says that it is 120 days that the developer has to be in negotiations and if they can’t reach an agreement then they can go to a 3rd party but must offer terms substantially similar. Rummel asks if that goes first. Schmiedicke says it is parallel. Rummel says that it is hard to see how that works if they are finding out costs and trying to negotiation. George Austin says it is all complicated and on a parallel track. They haven’t decided what hotel flag to use and they want the city’s input. They have to negotiate the hotel block. He says if this is passed tonight they can start in a general way. He says it is a long answer and there is a lot to do before August 15th to get it in a form you can approve.
Lisa Subeck asks about the public investment vs. the tax benefits, she says it shows little difference and will it be 30 years before we see a benefit. She says that the room taxes are included and asks if that is the city controlled portion or not. Olver says it is an estimate of the direct tax benefits (room, property, sales). He says it doesn’t include indirect costs like benefit to Marina (increased property taxes due to looking at a nicer project). He says the property taxes alone will pay the investment back over a generation and future generations will enjoy the benefits. The room taxes, 30% is fungible for the city and 70% is for tourist uses, someone says we’re grandfathered (but we all know they expect us to adhere to that rule) and if the state law passes that 70% will go to a private board.
Subeck asks about increased business at Monona Terrace, what would we get? She asked at BOE. Monona Terrace staff talks about the Humden study, and says DEb ARcher was going to get that info to them. Subeck says she didn’t see the specific numbers in that study. $1M in additional business and $2M after the hotel opens.
David Ahrens asks about the staff report and the risks and issues and says that there are significant issues not addressed – market risks from hotel, offices and residential – do you now have an answer for that. Olver says that the slide has to be put in context. He says there were several things that they were noted were not addressed, like would the private sector want office or residential. City wasn’t deciding that, it was outside the scope of their analysis and they left it to the developer to decide. The hotel they have done three studies.
Ahrens says that if that wasn’t the intent, the hotel studies didn’t consider the 600+ new rooms constructed, will you be doing an analysis of that? Olver says the HVS study did include some, the Hampton, the Edgewater. Other hotels are possible but haven’t started and its unknown if it will come to fruition. Ahrens says he asked the consultant that question and points out a chart. Olver explains the chart and says some of the hotels that are possible there. Ahrens presses about there being an analysis – how would you take that into consideration. Olver says that the slides summarize the analysis and when he did it at the Judge Doyle he did go through the analysis of the Hampton and Edgewater. Ahrens says he didn’t address how demand changes. ahrens points out other potential hotels. They argue back and forth.
Ahrens asks if the project will include offices. Olver isn’t sure, office has a couple things going against it. First job growth is sluggish compared to the rest of the nation, we are lagging in job creation. We aren’t seeing that in need for office, you see that in the vacancy rates. Second the office takes up a lot of parking. Third, the underwriting standards have tightened and its hard to do speculative commercial development, you’d have to have a commercial tenant. He says he sees a sluggish demand for commercial and higher need for residential. Ahrens asks if there will be residential, Olver says yes.
Cnare says they don’t have to dig a hole and do the project, but its like getting off the ski lift and saying I don’t have to go down the hill. What are the deal breakers? Austin says the guidelines are a place to look. He says if this conabalizes MOnona Terrace and competes with it, that would be bad. He says if the design amenities are too much. If room block agreement isn’t enforceable to get the additional benefit. He says that if they have to tear down all the existing parking. (I missed some) He says there are more, but the 9 guidelines are the framework for the mayor and negotiating team to go forward. Cnare asks if we have ever failed to come to an agreement on TIF of this magnitude. Austin says yes, projects have gone away, some early in the process, some later. Cnare asks if we know how to say no? He says yes, he says we don’t need to do this, He says there are lots of reasons to do this, but we can say no.
Rummel says we want to have a room block, but can we get a price block? Will we be able to negotiate? Monona Terrace says they can’t negotiate rate, but 150 room agreement. They will have to offer a rate that the market will accept.
Rummel says they could offer us a block at a rate that wouldn’t induce it. We could get a block that didn’t work. MOnona Terrace staff says that there is a seasonality to the pricing and it is ideal for the group to arrive on a Sunday, but we can’t tell them what to charge for their rooms. Until a negotiating team talks to the develper and the hotel its hard to know.
Rummel asks about the room block going away when the TIF goes away, then what? How does that change things? Guy from Monona Terrace says they will address it as it occurs, we are attached by a skywalk and we have a tood working relationship, we have a pattern of how we do business and that includes offering rooms and they don’t have meeting space, so he doesn’t think that without the agreement that things will change.
Resnick says there are no more questions and he will see everyone in 10 minutes.
