At about 5 minutes to 10:00 they move approval of item 32, the Judge Doyle Square.
Here’s the audio
Motion and Public Testimony
Deb Archer from the Convention and Vistor’s Bureau asks them to keep the hotel up front since this is why we are doing it.
Andy Olson asks them to take more time and asks what is in it for the public?
Sorry, that was really, really brief.
Additional registrants – Exact Sciences, 1 in support, one not in support or opposition. Mayor says there was a statement from Alliance for Madison’s Future.
Presentation
George Austin is asked to do a presentation. He speaks from the back but is asked to move to the front. He says in February the council adopted a RFP to be issued, it was a result of suspending negotiations in the December before, the concern was the project was too expensive and to bring the cost down, they council believed an RFP should be reissues. The RFP was due May 1st. On May 1st 4 proposals were received. They are on the website. The proposals were complete and in compliance with the RFP. They then looked at extraordinary circumstances, they thought the relocating headquarters of Exact Sciences was considered to be unprecedented, and has been in the downtown plan for 5 decades so they felt it deserved special attention and based on the conditions of the proposal, it didn’t meet the deadline to make a decision by June. They want to be here by July of 2017, this is just one of their options for relocation. The team recommended to the Board of Estimates a series of recommendations in the resolution tonight, it was unanimous. They will bring back information and check in on June 8th and then it would come back to the council. If they can’t come to agreement by June 29th, then they will re-open negotiations. No one is being thrown out, someone is just at the front of the line. They RFP was clear they could do that. It is unique, it is nimble, but does not per-determine anything, they have all the process before them.
Questions
Rummel asks how this is a larger subsidy than we had in the first place. What do we get for our money, what makes it worth taking this on. Austin says that there are no recommendations about subsidy. He says the density is more, this is a 250,000 square foot facility plus 107,000 square foot phase 2, based on that density of office use, the retail and 210 – 250 room hotel, that requirement more parking. They need 800 stalls for Exact Sciences, that has yet to be negotiated, it is more dense and more expensive. The $45 – 55M includes parking utility replacement of the ramp, which is 20 – 25M.
Rummel asks if they are looking for comments from the council? Austin says that they are not on a separate track, they receive direction from the Board of Estimates and they hope to bring back a package so they can make choices. Rummel asks if they are asking for input now. Austin says he doesn’t know how the body will proceed but he would like their feedback.
Verveer asks about the alternate that Ahrens suggests, that includes negotiating with all 4 right away. He asks if they have the capacity to do that. Austin says he saw the substitute and they have a number of issue – the substitute does raise legitimate project risk issues with the project, the staff has id’d these and many others. He says the negotiating team doesn’t have the capacity to entertain 4 projects simultaneously for 5 weeks and be able to bring back the level of info you need and meet the needs of Exact Sciences. They are not asking for a rushed decision, they want the council to be informed. He says there is another issue that the city would be disadvantaging itself by negotiating with JDS first and they don’t think so. They need to understand the project, understand the gap for city participation and then ?? (missed it). He says the city staff has met with Exact Sciences, they are in 4 locations and they think that they need to consolidate, their timeline could work. He says that if they could achieve this on this site we should look at it. If at the end of the day if the substitute is adopted we are rejecting Exact Sciences.
Ahrens asks what the meaning of a short sale is. Austin says you believe the stock value is going to go down. Ahrens asks about the short sales of Exact Sciences. Clear asks if this is relevant. DeMarb asks Ahrens to explain. Ahrens says that short sales are 30% and he is responding to the letter from ??. Austin talks about reports where the board responds to that.
Confusion . . . silence . . . not sure who is supposed to be talking.
Ahrens asks the the Exact Sciences person to talk about short sales. He says he works closely with Kevin. Ahrens says that short sales is an indicator of confidence, and he says that in January it had the highest percentage of short sales, that is a question about the viability of the price. He says that researchers strongly support them, what you are alluding to is people who believe or don’t believe. It is typical to have short sales in new companies. 4 people moved here from Boston to build the company, a lot of people bet against them. The short interest was higher, that has fluctuated, but the last 6 years is continued appreciation and growth. In the last 6 months their product was approved by the FDA, they can’t guarantee the future, they have seen strong growth and the analysts have been optimistic. They have grown to 575 people, they are trying to grow, they want to be in Madison and they are growing. Being in 4 buildings is not efficient and not sustainable. He is the chief operating officer and wants a building next month, its a long shot, this is an investment for them. They encourage the council to do their due diligence.
Zellers asks Austin about the considerations in assessing what seems to be a big risk for this kind of office building for this kind of use, biotech survival rate is not real great, buyouts and moving is a real thing. Maybe they will be wildly successful on the other hand and outgrow the building. Austin says they have not talked to them about their business plan. They are working on questions with people who have experience with one large user of a building. Will there be new product lines, what are the lease terms, what is the risk of a single tenant, will investors invest, will lenders take the risk. What will the lenders require. If they are bought out and relocated, what will the lenders require. WE should have covenants that address that as well.
Schmidt asks if all the proposals need a city participation. Austin says 3 of them do. One has no TIF or parking assistance, they would be leasing the land. Schmidt asks why we need $36M for parking. Schmidt says every proposal required city money, how do we decide how to pay for it. Austin says the council does. Schmidt says that was a leading question.
Baldeh asks if they could negotiation with more than one if not all four. Austin says probably they could and its a question of how many balls they can have in the air. He says that they can’t focus much attention on anything but Exact Sciences at the moment. He says in terms of what they expect in terms of quality of information, breadth of the info, takes time and intensity, its only 5 weeks away. They are prepared to do that.
Baldeh asks Exact Sciences if they are willing to work with the other three developers. He says if it was a regular building use, but this is a lab and has special needs, they have been working for 6 months and it wouldn’t be practical. So that is a no? That is a no.
Rummel asks about info at the next Board of Estimates to have a basic summary of all 4 by the next Board of Estimates. Could some info be condensed. Austin says he can do that. She wants some basic info easily accessible by the next meeting. They can do that.
Zellers says this goes away if they can’t come to terms in 5 weeks, are we at risk with any of the others if we don’t attend to them sooner than 5 or 6 weeks. Austin says they informed the other candidates, Vermillion said that they would be prepared to incorporate Exact Sciences, two of the others are willing to incorporate them. Urban Land is willing to wait.
Discussion
Mayor says that unless you were born before WWII you were not in an era where people are not moving to the cornfields. This is a dream. Public transportation makes this point, you have to look at the investment outside of the ledger book for that system, if you only look at the fares and the expense of the system, obviously a narrow minded person would call it a failure, but there are esternalities hat come with it, is reduces expenditures on highways and roads and air pollution, it brings efficiencies, that is why despite all the issues with New York City, it is the most efficient with economics and the environment. It is the best in the country, we have watched for decades the subsidization and the choice of the cornfields of Middleton and Sun Prairie and this is an opportunity we have never seen before. This is positive because of the synergy and relationship to the rest of the metropolitan area, it will make public transportation and energy systems more efficient and attract additional investment in the city of Madison, especially in the older parts of the city, it will create challenges in the older parts of the city, but we should welcome that. As much as rail would be a tremendous addition, it is impossible because of our size and density. Over the next decade this could change and rewrite the role of rail in the development of Madison. When you look at similar companies, they are not located in the city. Microsoft is not in Seattle, all the name brands from Silicon Valley are not in San Francisco or San Diego. This is a chance to not make a second disaster like when we let Epic go – because it was too much of a headache to take on the challenge of serving a private investment of that magnitude, it was better to ignore it. The great irony is that the vast majority of employees prefer to be in Madison. He says that they are wondering where all the spin offs of restaurants etc are in Verona and other places in Dane County. He says that he has known Kevin for 5 years, he is committed to the city. Yes this is risky, but its not nearly as risky as not doing it. They are not the kind of company they will buy for the intellectual property or patents. This is not that kind of enterprise. This is not those kind of people. He would suggest they take the opportunity, put all their effort into to, the worst thing that will happen is they will fail. The consequence of failure is small compared to the high probability of success. Bob Dunn in one of his statements underestimated the significance of this project, he compared it to Verex, it pales in comparison, the size and externalitites are different, it was shoehorned on the lake, there was no opportunity to expand and grow the area. This is the kind of thing the council was dreaming of 6 years ago when it went into a risky adventure, one he didn’t approve of the financing of, with the Don Miller properties and Union Corners. This will bring fiber network to the city and free us from Charter and AT&T. Will Exact Sciences be a part of that, no, but they will create a tax base and demands. He wants them to give it them their whole hearted support, lets not fail because we fail to recognize the dream.
Schmidt says every RFP required 10s of millions, one didn’t have TIF but they had 36M for parking and 24M for MMB. The JDS has a high number because they listened to our debates last fall, they have us owning all the parking. So when thinking about the caparisons, you have to look at the entire city contribution. On a per stall basis, $37K is what we have been estimating ourselves. Some issues will be constant, but there is not as much disparity as has been argued. Will we use Parking Utility reserve, how much TIF, or CDA bonds or G.O. debt. It will probably be more a mixture. On this matter, we shouldn’t talk ourselves out of this, and talk ourselves in to mediocrity. He says that we are building ourselves into a bedroom community. Apartments always look better. What are we out if we have empty offices 15 years from now, we might have empty parking. The benefit is too huge to ignore. They aren’t hiding anything, there might be a month of extra space in there, all four other developers want to work with Exact Sciences too, they don’t see a risk. This is a locally grown company, we have been bad at this. We have an opportunity to bring them downtown, worst case is we have labs and offices downtown that other companies being incubated could use. The four proposals are not equal, one we shouldn’t be even be talking about, which one tells you what the door knobs cost, do we need to know that. This is worth the risk. We have a history with the developer, they came to us twice and when they came back the second time it still cost too much. This is worth letting staff do the analysis. We never get to compete with the greenfields because they want to be downtown. They want to be here, we want them to be there, the time they spend working with us is an investment on their part. Normally he would caution us, but this is worth looking at first. No one else came in with anything as exciting, no one else had tenants.
Kemble asks how JDS will support transit if they are building all the parking. Mayor says first is they will bring in more transit riders than if they were in the suburbs but the second is that just as we evaluate transit beyond the revenues and expenditures, we have to look at the consequences in the spin off of other investments and impacts on retail and commerce. You can’t just look at the corners of this project and the revenues generated. You have to look at the other esternalities.
Ahrens moves the substitute, its on their desks, it was sent out yesterday. Baldeh seconds it. He says the purpose is to extend negotiations to all 4 parties who submitted a proposal. He says negotiating with multiple parties is more advantageous for the buyer. He says that they need to look at the nature of the proposal and the parties in detail. He says that having a time certain by July is important. They got a letter last week from Mr. Conroy, they want to break ground by December, a delay or a year or more would compromise their ability to leverage their most valuable commodity. He says they have a year or more. Ahrens says he is suspicious of those who say that they need this by a date certain or no deal, he says it is coercive and they are not acting in good faith. He says over the next month hopefully they will have a closer look at the corporation and the field they are working in. As good of a product this is, they have one product, it hasn’t been introduced to the public, when you look closer at the product there will be questions about that as well. He hopes they also look at the competitors. He was surprised to hear that it would not be a big deal if they lost the tenant and had parking spaces and empty offices. Ahrens thinks that would be a big deal. It could impact the TIF or loan and other capital as well. He says he wouldn’t be blithe to put all their money on Red 7 and see how it turns out. He says they have to be mindful and do their due diligence. The kind of talk about it exploding the downtown, a dream realized, this is not a sober discussion. He hopes in the future he hopes they are more grounded than the flights of fantasy about what is going to happen. This will be our money on the table, and our constituents, and a loss of it we will all pay dearly. He says Exact Sciences indicated they have more time and we need to take that time and talk to all of the bidders. He doesn’t expect them to get a suite of rooms and run from room to room, but in the same was as Exact Sciences is negotiating with 4 other municipalities, that shows this is normal. Only we are the ones saying we can only negotiate with one, the alternate here is a common sense measure that protects our best interests.
Mark Clear says Ahrens can play word games with the letter. Timidness does not build great cities. He says that bold decisions do. He remembers shopping at Manchesters and JC Penney’s before east towne and west towne and the downtown was a ghost town for 20 years until Monona Terrace. He says 2 of the 3 people who made that happen are here in the room. This is less of a risk than Monona Terrace but will have an equal or greater transformative effect on the downtown. We could take one of the fairly normal proposals.
Verveer also urges them to reject the substitute. The fact of the matter is that he gives Ahrens credit for being a doubting Thomas or devil’s advocate and that is a compliment not a criticism, he has continued in that he raises important and substantial questions, there are legitimate risks here, and in future decisions but he thinks it would be tragic to adopt the substitute and reject the unanimous advice of the negotiating team and BOE. The BOE recommends that we move forward and negotiate. We have been presented this opportunity and it would be a monumental mistake for us to say no to them tonight and disrespect them and their timetable to make their decision. He thinks the Ahrens substitute sends a dreadful message to Exact Sciences. He says all this resolution does, and it is a monumental opportunity, but what is says that in the next 5 months we will try to meet the timeline given us. The BOE will be updates and then we will make a final decision, this is not a blank check. He says they can’t lose sight of the original goals of Judge Doyle Square. He says that he doesn’t want the excitement to be at the detriment of Monona Terrace and the parking utility. He thinks it is appropriate for them to work with one dvelopment team at this point. He has full faith in the negotiating team, they will follow the goals, at the next BOE they will have a discussion on further instructions to the team, and the place to do that is at the next BOE where everyone (alders) is invited to participate, even in closed session. He says that people understand that this potential is one where we need to do our best to take advantage of.
Ahrens says the purpose is not to shut out Exact Sciences, but to give an equity opportunity to all the proposals and he says it is misleading to say otherwise. He says Conroy said that they could delay for up to a year, those are his words. We can use that to our advantage.
Substitute resolution – or alternate – vote is a roll call. Ayes are only Ahrens and Baldeh. Cheeks and McKinney abstain. Interesting. 16 nos, 2 yeses.
Original motion on the floor. Passes on a voice vote, only one audible no.
They move to adjourn.
