If you ask me, no, this has been rushed too much, much of the discussions have been in closed sessions and there are too many remaining questions. Here’s what we know, what we don’t know and what you can do.
WHAT WE KNOW
The council is being asked to:
– Accept the June 25th report to the Board of Estimates
– Authorizing the Mayor and City Clerk to Execute a Preliminary Development Agreement with JDS Development LLC for the Judge Doyle Square Project
– Directing Follow-up Actions Outlined in the Master Schedule for the Project
– Directing the Judge Doyle Square Negotiating Team to Continue the Exclusive Negotiation with JDS Development/Exact Sciences Over a Final Development Agreement
– Report Back with a Report and Final Development Agreement at the Board of Estimates’ August 24, 2015 meeting, to be followed by Common Council action.
Only 4 alders are sponsors on this – Council President Denise DeMarb, Council Pro Tem Maurice Cheeks, Sara Eskrich and Mike Verveer. Other alders who’s names were automatically added have removed their names because they have concerns, including Marsha Rummel, Barabara McKinney.
From the (very short) resolution, this is being rushed, rushed, rushed (2.5 months so far) and they used an unusual process by ignoring the other responses to the Request for Proposals (RFP) they issues and exclusively negotiating with one developer, they haven’t voted on the budget required to move forward and staff are spending ALOT of time on this:
– The adopted 2015 capital budget includes $700,000 under PCED project #12 for the South Capitol Transit Oriented District ($380,000 in Federal TIGER II grant funds and $320,000 in TID 25 proceeds).
– The Parking Utility budget includes $11.95 million in 2015 for replacement of the Government East parking garage (Parking Utility project #2, Judge Doyle Square Garage).
– Additional background information on the project can be found at the Judge Doyle Square page on the City Planning website http://www.cityofmadison.com/planning/judgeDoyleSquare.
– Staff resources from the Department of Planning & Community & Economic Development, Finance, Traffic Engineering, Parking Utility, Monona Terrace and City Engineering will be allocated to provide support for the negotiation process without the need for an additional appropriation.
– All future expenditures associated with the project will require further Council approval other than the costs associated with the review and developer selection and negotiations with the selected developer.
– On May 19, 2015, the Common Council accepted the Report of the Board of Estimates and directed the Judge Doyle Square Negotiating Team to immediately engage JDS Development LLC/Exact Sciences in an exclusive negotiation of a preliminary development agreement and report back to the Board of Estimates with a report and draft preliminary agreement by its June 29th meeting. The Judge Doyle Square Negotiating Team has engaged the JDS Development LLC/Exact Sciences in negotiations and submitted a Report to the Board of Estimates dated June 25, 2015. This has all happened in just 2.5 short months.
Recommendations in the report for the development agreement
The Judge Doyle Square Negotiating Team recommends that the City enter into a development agreement comprised of the following key elements:
Land use Elements
– A 250,000 square foot corporate headquarters and research facility for Exact Sciences on Block 88 with a 107,000 square foot expansion site on East Doty/South Pinckney Street corner of Block 105.
– A 210 – 250 room urban-style hotel on the East Wilson/South Pinckney Street corner of Block 105. JDS Development LLC agrees with the goal to achieve a 250 room hotel.
– A 600 stall public parking facility to replace the Government East Ramp to be owned and operated by the Madison Parking Utility on Block 105, including 40 replacement stalls for municipal fleet parking to be displaced from Block 88.
– A 650 stall private accessory parking facility to serve Exact Sciences and the hotel on Blocks 88 and 105. This ramp would be owned by the City of Madison Community Development Authority and leased to the developer for 27 years.
– Retail uses at grade along South Pinckney Street including a bicycle center.
Financial Terms
– Private investment by JDS Development LLC of at least $130 million.
– City funding of the Government East replacement parking facility in the amount of $19.2 million.
– City capital funding for a Bicycle Center of $1 million.
– Public investment in the JDS Development LLC/Exact Sciences development of $42.5 million; comprised of:
o Direct City financial support in the amount of $12.0 million to Exact Sciences to retain and create 400 jobs at the Judge Doyle Square site by initial occupancy of the Block 88 office facility in July 2017.
o City funding for the private accessory parking facility in the amount of $20.8 million.
o City financing for the land acquisition cost for the private development of $9.7 million, the estimated fair market value of the land to be acquired for the private development on Blocks 88 and 105. Of that amount, $4.3 million would be used by the Parking Utility for the incremental cost of undergrounding its parking stalls.
– Exact Sciences would provide a financial guaranty. The Negotiating Team has proposed a guaranty equal to the City financial support to discourage the relocation of the jobs retained and created at the Block 88 facility for a period of twelve years with an annual reduction in that guaranty, the details of which remain under discussion.
– JDS Development LLC would be required to guaranty the incremental property tax revenues from development on Blocks 88 and 105 sufficient to offset the tax incremental financing used to construct the private accessory parking on Block 105 ($20.8 million). The details of this guaranty remain under discussion.
– The City would use TID 25 for construction of the private accessory parking and land acquisition costs. (With the loan agreement to the Metropolitan Madison Schoool District of $9M)
– The City is considering using TID 45 for the Exact Sciences jobs-based TIF loan, pending a boundary amendment. However, there are limitations due to timing issues. Block 88 is in TID 25 and using TID 25 is seen as an appropriate approach if TID 45 is found to be unworkable.
Other Terms
– The transfer of Block 88 and 105 property rights to occur on September 1, 2015.
– Site work to be initiated in December 2015 following the rezoning of the site by the City.
– The Government East parking facility demolition will require that the facility be out of service for 17 months from March 2016 through July 2017. Temporary parking solutions will need to be provided.
– Exact Sciences will commit to support diverse hiring through their existing relationship with the Urban League of Greater Madison, launching featured employer events twice a year around Exact Sciences’ hiring cycles and summer internships.
Additional recomendations throughout the report (sometimes just alternate language)
– Negotiating Team also recommends that the developer be required to begin construction of office space on Block 105 by 2022, or that development right will be forfeited to the City.
– To that end, the Negotiating Team has proposed that the transaction include a provision that Exact Sciences will guaranty that it will not relocate the 400 living wage jobs retained and created jobs for a period of 12 years.
– The Negotiating Team recommends underwriting this project following the “Jobs Project” guidelines.
– The JDS Negotiating Team is recommending a TIF Loan to Exact Sciences in the amount of $12 million. Using the 400 position threshold upon occupancy, this would equal $30,000 per position; well below the SBA maximum guideline. One could argue; however, that the $20.8 million TIF contribution toward the private parking directly benefits Exact Sciences as well. Including both the $12 million and $20.8 million combined into the calculation would yield $82,000 per position using the 400 position threshold. The Negotiating Team would look for an exception to TIF Policy to maintain 400 as the required position threshold.
– The Negotiating Team focused on the low-end of the parking numbers. It targeted 1.7 parking stalls per 1,000 square feet of office space as a ratio comparable to other recent office buildings in the downtown. The proposed Exact Sciences commercial space in the two proposed office buildings on Blocks 88 and 105 (357,000 square feet) would yield 600 stalls using this ratio. An additional 50 stalls dedicated to the hotel would also be provided, totaling 650 private accessory stalls. The Negotiating Team believes there is an opportunity to share parking among the uses given the typical demand pattern that will exist.
– The negotiating team proposed that the private accessory parking (now 650 stalls) be operated by JDS Development LLC, thereby removing any operating burden from the Parking Utility and the inherent financial penalties of a below market rate lease to the Parking Utility.
– Given the limited amount of time available, the details of the many hotel elements cannot be completed in the June time frame. To address this, the Negotiating Team proposed that the initial agreement include three areas of agreement: the location of the hotel on Block 105, the urban mixed-use style hotel as the product, and 250 rooms as the goal for the size of the hotel. JDS Development LLC agrees with this goal but isn’t willing to change the range of 210-250 rooms from its proposal until further work is done on the project design.
– Negotiating Team has proposed that for each year that the Exact Sciences doesn’t relocate the jobs that were created and retained in the Block 88 facility, its guarantee would be reduced by $1 million. As such, the guarantee would be fulfilled within 12 years. In the event that Exact Sciences relocates jobs, it would repay the balance of the guarantee (e.g., if Exact Sciences and the jobs leave in year 7, it would repay $6 million). The details of this guaranty remain under discussion.
There have only been 5 public meetings on this issue so far.
– – May 11 Board of Estimates meeting. You can watch it here.
– – May 19 Council meeting
– – June 2 presentation by developer to the council
– – June 8 Board of Estimates meeting (noticed for closed session.) All we know from this meeting is “No formal action was taken on this item.”
– – June 24 Board of Estimates meeting (also noticed for closed session) All we know is “A motion was made by DeMarb, seconded by Cheeks, to RECOMMEND TO
COUNCIL TO ADOPT – REPORT OF OFFICER. The motion passed by voice vote/other.”
A summary of the JDS Development LLC/Exact Sciences proposal is attached as Appendix A in the report. The complete proposal can be accessed in its entirety on the Judge Doyle Square website at: https://www.cityofmadison.com/planning/judgedoylesquare/gallery.
Risks noted in the report
– Of particular importance in the JDS Development LLC proposal is the relocation of a single business, Exact Sciences Corporation and its corporate office and research facilities to a 250,000 square foot office building on Block 88, with future expansion to a 107,000 square foot office building on Block 105.
– What happens if the company is acquired in a few years? Regarding acquisition risk, EXAS is not a candidate for acquisition for at least several years until it can prove the business model is returning the projected results. The fact that an acquisition of EXAS by another company would be a $3.5 billion to $4.0 billion transaction also reduces the likelihood of a take-over/acquisition in the near term.
– Will the company succeeed or fail? – Regarding the prospects that the company will make a return on investment, the market for Cologuard is extremely large. What if they don’t get approval for private pay reimbursement coverage which could be enhanced by an A or B rating from the US Preventive Services Task Force later this summer/fall?
– Regarding the competitive risks, a blood-based test is not a threat to EXAS at this time. The clinical trials and the FDA review process can take several years and the early blood –based tests have produced significant number of false positives.
The city’s first job-based TIF
Exact Sciences fits many of “Jobs Project” guidelines found within the TIF Policy. It is a “Medical/Biotechnology” related company, which is one of the eligible industry sectors for this type of underwriting. Exact Sciences will create and/or retain living-way jobs as defined in MGO 4.20. The 2015 living wage in Madison is $12.62/hour. At the lowest end of the spectrum, Exact Sciences pays $13.46/hour; however, the average base salary range is between $27.88 – $39.90/hour. In addition, employees are afforded health, vision, dental, life, and disability coverage; along with an annual team bonus plan, 401K, and stock offering.
The job information provided to the Negotiating Team:
– Headquarter jobs are proposed to be located at Judge Doyle Square.
– Lab jobs, which will remain in the Town of Madison until the Town of Madison dissolves in 2022, after which the jobs will be in the City of Fitchburg.
– Field positions are located outside of the region.
– As of the 1st Quarter of 2015, Exact Sciences total employment was at 503, with 201 headquarter jobs.
– At the time of occupancy at Judge Doyle Square in 2017, Exact Sciences projects to have 1,310 positions, with 400 positions to be located at Judge Doyle Square. 201 are retained current positions and 199 are new positions
– By 2023, the company projects a total of 2,000 employees, with up to 650 at Judge Doyle Square.
TIF Policy “Issues”
The City’s TIF policy requires that the amount of TIF assistance per position retained and created not exceed the standard used by the U.S. Small Business Administration (SBA), which is currently set at a maximum of $65,000 per position retained or created. Depending upon how it is calculated (if you add in the $20.8 M for parking), they are getting $82,000 per job. The Negotiating Team would look for an exception to TIF Policy to maintain 400 as the required position threshold.
The Negotiating Team has proposed that Exact Sciences guarantee the 400 positions that are created and retained at the Block 88 facility not be relocated for a period of twelve years.
For each year that Exact Sciences does not relocate any of the 400 jobs used to fulfill the jobs-based TIF loan test, its $12.0 million guarantee would be reduced by $1.0 million. In the event that Exact Sciences relocates jobs, it would repay the balance of the guarantee (e.g., if Exact Sciences and the jobs leave in year 7, it would repay $6 million). The details of this guaranty remain under discussion.
Public Parking, Private Accessory Parking
– 1,410 to 1,540 parking stalls were proposed to be constructed
– City wants 1.7 parking stalls per 1,000 square feet of office space – (357,000 square feet) would yield 600 stalls using this ratio. An additional 50 stalls dedicated to the hotel would also be provided, totaling 650 private accessory stalls.
– JDS Development LLC to permit certain public stalls to be available on a reserved basis for use during certain peak periods of operation.
– The Government East replacement ramp would be 560 stalls and the municipal fleet parking would be 40 stalls, for a total parking count of 600 public stalls.
– All the parking, both public and private would be paid for by the City.
– Under the JDS Development LLC proposal, all of the parking, both public and private, would have been publically owned and the private accessory parking (originally 800 stalls) leased from the Parking Utility for $40,000 per year. The proposed lease structure was unacceptable to the City and the Negotiating Team proposed that the private accessory parking (now 650 stalls) be operated by JDS Development LLC, thereby removing any operating burden from the Parking Utility and the inherent financial penalties of a below market rate lease to the Parking Utility.
– The ramp configuration as proposed in the RFP response poses multiple issues in regards to ingress and egress, circulation, and layout. Based on preliminary discussions with City staff and the development team, significant changes to the ramp design are underway that will be considered in the rezoning entitlement process to be undertaken later this year.
– JDS Development LLC/Exact Sciences will be required to undertake a transportation demand management plan as part of that process.
Bike Center
– The RFP stated that the City of Madison would construct and own a bicycle center.
– This won’t happen until the next phase of design for the project.
– The City has projected $1.0 million in capital cost for the center as part of the project financing.
– The operations of the center would be contracted out to a private entity.
Maintenance of Public Parking During Construction
– The timeline to achieve the Exact Sciences relocation to Block 88 by July 2017 will require that the entire public and private accessory parking for Judge Doyle Square (1250 stalls) be built on Blocks 88 and 105 in the Phase I.
– The Government East ramp demolition will commence in March 2016 and be out of service until the replacement facility is completed in July 2017, resulting in the removal of the public parking at the current Government East ramp for 17 months.
– Temporary parking solutions for commuters and the South Square retail and entertainment district users will need to be provided.
– Preliminary strategies to address the interim parking demand during construction include the following ideas to be pursued. A team will need to be formed to work on this issue and to have alternatives in place and communicated to the public before March 2016.
Evening and Weekend Options
– Direct users to other Parking Utility ramps/surface lots
– Work with privately owned parking such as Block 89 to accommodate additional parkers
Weekdays and Large Event Parking
– Investigate potential park and ride lots based on a survey of Government East users/Monona Terrace as to the market for a park and ride solution
– Potential locations to be investigated:
– – Alliant Energy Center (well-known location)
– – Truman Olson site (large site that the City owns on South Park Street)
– – Contractors – The recent downtown construction boom may be driving more contractors to park in downtown ramps. If this is confirmed, could the City work with contractors on Judge Doyle square and other major downtown projects to a shuttle lot, freeing-up room for others in other City ramps?
Hotel
– The JDS Development LLC proposal included an urban style mixed-use hotel concept of 210 -250 rooms at the East Wilson/South Pinckney Street corner of Block 105.
– The plan did not include a selected brand and indicated that the brand “would be determined once the final plan and hotel program are defined. The City will be welcome to participate in this process.”
– The proposal also included a conference center on the ground floor of the Block 88 office building as part of the proposal’s “civic core”.
– Given the limited amount of time available, the details of the many hotel elements cannot be completed in the June time frame. To address this, the Negotiating Team proposed that the initial agreement include three areas of agreement: the location of the hotel on Block 105, the urban mixed-use style hotel as the product, and 250 rooms as the goal for the size of the hotel. JDS Development LLC agrees with this goal but isn’t willing to change the range of 210-250 rooms from its proposal until further work is done on the project design.
– As a second stage to follow the initial agreement, the City would engage JDS Development LLC in the selection of the hotel operator after which the hotel flag with a national sales force and reservation system would be determined.
– Opportunities for the future expansion of the hotel size would also be explored.
– These elements would be completed by December 2015 and would require City Council approval.
Project Financing
– Total project cost between $186 million to $203 million, depending on a number of factors, including the overall number of parking stalls.
– JDS LLC proposes bringing $46 million of equity and $91.7 million of debt, for a total private
contribution of $137.7 million. Some of this equity is in the form of a transaction under federal tax law, known as a 1031 transfer, where proceeds from the sale of an asset need to be reinvested in a new asset, in this case the land value of Blocks 88 and 105, by September 1, 2015. For purposes of this discussion, it is assumed that the developer will be able to secure the equity and debt components of the project financing.
– Parking Utility Reserves currently total over $26 million and are sufficient to finance the cost equivalent to replacing the Government East ramp with an above ground ramp.
– As allowed under a recent change to the state’s TIF law, TIF revenues will be used to finance the added cost of locating those parking stalls underground, through the sale of the Parking Utility air and subterranean rights on Block 105.
– The TIF support will come from Tax Increment District (TID) 25.
– A third source of financing will come from the City, whether through general obligation debt or other sources, to finance the 40 parking stalls for City vehicles as well as a bicycle center. The anticipated cost for the 40 parking stalls is $1.3 million and the bicycle center is $1 million.
– TIF proceeds will also be used to indirectly finance the acquisition of Blocks 88 and 105 from
the City and Parking Utility, respectively. City staff estimates a total fair market value for the two blocks of $13.1 million (see table below). This reflects a per square foot value of $150, which is comparable to other land sales in the downtown area. Of this $13.1 million, $8.3 million is associated with those portions of the air rights that will be occupied by the private development. The remaining $4.8 million is associated with the structured parking (air and subterranean portions). The structured parking allocation includes $2.3 million (48%) that is associated with the Parking Utility and City Fleet portions of the structure. As such, that portion of the air and subterranean rights will be retained by the City for parking and will not be sold for development.
– Of the $10.8 million of proceeds that will be received for air and subterranean rights ($13.1
million less the $2.3 million of land value that will be retained by the City), $4.5 million will
accrue to the Parking Utility and $6.3 million will be paid to the City.
– $42.5 million is provided from tax increment district revenues toward the project. This includes $12 million in a jobs-based TIF loan to Exact Sciences, $9.7 million for land acquisition for the development, and $20.8 million for parking needs associated with the development
– The development is within TID 25. TID 25 has been in existence since 1995 and has an estimated cash balance of $25 million, and a surplus net of future commitments of $19.5 million, at the end of 2014. Under state law, TIDs generally have a total life span of 27 years and an expenditure period of 22 years. As such, TID 25 can incur expenses until September 2017.
– The TIF would be paid off in 11 years.
– The TID is scheduled to close in 2023 or 2024 but the property won’t be on the tax rolls until 2018 (block 88) or 2023 (block 105).
The following will need to occur in the City’s 2016 capital budget:
– The City will make an appropriation of $4.2 million to the project from the proceeds paid to the City for its land ($15 million paid by the developer for land acquisition, less $10.8 million that the City will retain based on fair market value).
– The City will make an appropriation of $9.7 million from TID 25 proceeds ($10.8 million fair market value for City land, less $1.1 million net equity proceeds paid by developer for l and acquisition). This represents a TIF grant to the development which is equivalent to the fair market value of City land, as required under the RFP. Payment of these funds will be subject to approval of a project plan amendment to TID 25 by the Joint Review Board.
Personal Guarantee
City TIF Policy calls for the developer to make a personal or corporate guarantee of the incremental revenues. In other words, the developer makes a commitment that it has sufficient assets to ensure that any shortfall in incremental revenues used to support the TIF subsidy will be repaid. The developer has proposed a guarantee through JDS Development LLC based on a net worth test with a maximum of $10 million and remains under discussion. This is not full assurance as is required in most City TIF loan covenants and the details of the guaranty remain under discussion.
FOURTEEN Exceptions to policy
The JDS Negotiating Team is requesting the following exceptions to the City’s TIF policies ( TIF Policy in italics).
1. Section 1 Sub 7 – 55% Gateway
Reference section 3.1(7) of the TIF Goals, Objectives and Process exceptions below.
2. Section 1 Sub 8 – C – 3 – A (p. 3)
“……. shall not exceed 60% of the net present value of tax increments generated by the Employer’s project.”
The project will use 100% of the net present value of tax increments.
3. Section 1 Sub 8 – C – 3 – c
“Developer shall guaranty that tax increments are sufficient to recover the Jobs Project TIF Loan from the date of loan disbursal to Employer “
Developer will not provide an increment guarantee on the Jobs Project TIF. However, Exact Science would provide a stronger jobs guarantee than policy requires.
4. Section 1 Sub 8 – C – 4 – Gap Analysis Waiver
The City is aware that Exact Sciences is exploring options outside of the City of Madison, which would justify a Gap Analysis Waiver; however, the City has not received documented evidence to this effect.
5. Section 1 Sub 9 – TIF Underwriting Criteria
TIF Staff has not reviewed the proposal in order to make a recommendation on the project due to accelerated timeframe.
6. Section 1 Sub 10 – Equity Greater, Equal to TIF
“TIF assistance shall not exceed the amount of equity provided by the Developer.”
The Sources and Uses outlined in the JDS proposal indicate $45,980,000 of equity, which would exceed the amount of TIF assistance provided to the developer. However, the Developer has not submitted information to establish that equity is greater than TIF assistance.
7. Section 1 Sub 11 – No Rent or Sale Price Write-Down
“TIF assistance will be limited to the amount necessary to make a project competitive with other similar projects in the Madison metropolitan market area.”
Based on information provided from developer, it has been suggested that Exact Sciences would pay a lease rate that is higher than what the company would need to pay in a suburban location, but lower than a comparable downtown space.
8. Section 1 Sub 14 – Guaranty
“The City will require a personal guaranty of increment, sufficient to recover the City’s debt service on City-financed TIF loans.”
Developer will not provide a personal guarantee, but will provide a corporate guarantee. Policy permits a corporate guarantee if the guarantee provides adequate security.
Developer’s corporate guarantee would come from a single purpose LLC and its liability for increment deficit would be capped at $10.8 million instead of the full increment value of $20.8 million on the Block 105 portion of the project. In exchange, Developer proposes to guarantee $10.8 million of increment above the City’s projections.
Exceptions to the “City of Madison TIF Goals, Objectives, and Process
1. Section 2.4 Tenant-Shifting Office Development
“The City may consider providing TIF to retain an employer within the City or to accommodate an employer’s expansion. The City will seek to avoid providing TIF to relocate an employer within the City.”
Exact Sciences is already located in the City of Madison, but plans a significant expansion which would likely require City assistance regardless of location.
2. Section 3.1 Sub 2 – TIF Application Without an Existing TID
“Developers seeking TIF assistance for development on a parcel or parcels that is not located in a TID boundary, and requires either amendment or creation of a TID as part of their request for TIF assistance should ideally apply for TIF and land use approvals by April 15. Applications for TIF after April 15 will be considered, but may bear additional risk for the developer because a TID may not be created in time.”
Providing TIF assistance to Exact Science requires both certification of TID 45, and subsequent amendment of its boundary which will not be certified until April of 2017. Developer has requested that the City guarantee that the TIF assistance be injected into the project by January 1, 2017 (prior to amendment certification) in order to avoid additional risk to the project.
The Negotiating Team expects to move the date until after certification.
3. Section 3.1 Sub 3 (p. 3)
“The TIF application shall be submitted to the TIF Coordinator. The TIF Coordinator, in consultation with appropriate City staff, shall make an initial review of the TIF application based upon the City’s adopted TIF Underwriting Policy and the adopted TIF Goals, Objectives, and Process”
Due in part to the accelerated time frame for negotiations, no TIF application was submitted and the developer has not provided sufficient information to constitute a TIF application.
The final numbers are based on the work of the Negotiating Team exclusively.
4. Section 3.1 Sub 4 (p.3) – Application Documents
As noted above, the standard TIF application documents were not used. Rather, the Negotiating Team requested the information that they needed to advance discussions regarding TIF assistance.
5. Section 3.1 Sub 5 (p. 3) – TIF Team
As noted above, the Negotiating Team led the discussion regarding TIF assistance due to the nature of the negotiation timeline and the role of the Negotiating Team in carrying out the Common Council’s directive.
6. Section 3.1 Sub 6 (p. 4) – Application Fee
No application has been submitted, and, as a result, no application fee has been submitted in accordance with MGO 4.28.
Note, however, that the developer did not request TIF assistance specifically in the RFP. The use of TIF was determined to be the appropriate funding source by the Negotiating Team. Under the circumstances, the fee could be waived.
7. Section 3.1 Sub 7 (p. 4) – Term Sheet
“Requests for TIF assistance that request more than 55% of the Net Present Value of the increment generated by that project will require approval from the Board of Estimates prior the completion of a term sheet.”
The project will require more than 55% of the Net Present Value of the increment generated and has additional exceptions to policy. Given that a term sheet has not been signed, and the time sensitive nature of the project, the JDS Negotiating Team requests a waiver of the requirement for a separate Board of Estimates meeting prior to completing a term sheet.
Real Estate Issues
September 1 Property Transfer
1. City sells Block 88 and subterranean parcel under Pinckney to JDS Holding
2. Parking Utility sells Block 105 to JDS Holding
3. MMB and Government East will be owned and operated on ground leases.
4. Each deed and ground lease will be subject to reversionary interests held by the City with provisions that will cause automatic reversions in the case that the deal does not happen by a certain date. This portion will be handled by outside counsel.
Final Closing on Financing and Land (Estimated December 2015)
1. JDS Holding records 3D CSM for subterranean parcel
2. JDS Holding will record CSM for Block 88.
3. Condo plat will be recorded immediately after CSM as part of final closing.
4. JDS Holding will convey Public Parking Condo (600 spaces) and Private Parking condo (650 spaces) to CDA at final closing.
5. JDS Holding will convey deed to MMB parcel to City of Madison.
Post Construction Transfers (Estimated July 2017)
1. Upon issuance of certificate of occupancy, CDA conveys Public Condo to parking utility
2. Upon issuance of certificate of occupancy, CDA leases Private Parking Condo to JDS entity. Lease will include a negotiated payment of rent to the CDA with will in turn be passed on to the City as a PILOT.
Labor Peace Agreement
For construction, the hotel developer is required to comply with City ordinances on affirmative action, non-discrimination, and prevailing wage. Due to changes in the law, the City would be able to require living wage under MGO 4.20, rather than prevailing wage.
The hotel operator is then required to pay living wage and certain benefits to full time employees. If the employees choose to be represented by a labor union, then the provisions of the collective bargaining agreement apply.
What is not included in the agreement, although should be expected for this hotel, is a non-strike provision.
MASTER SCHEDULE
Land Use Approvals and Subdivision
– Written Pre-Application Notices for Rezoning June 22, 2015
– Submittal to Landmarks Commission for Rezoning, Demo, CSM July 20, 2015
– Apply for Rezoning & CSM Approval July 22, 2015
– Submit to State Preservation Office July 27, 2015
– Landmarks Advisory Recommendation Aug 3, 2015
– State Preservation Office Approval Aug 27, 2015
– UDC Advisory Recommendation Sept 2, 2015
– Plan Commission Hearing Sept 21, 2015
– Common Council Action on CSM and Rezoning Oct 6, 2015
– Remove Conditions of Approval for Permits Dec 6, 2015
City Financial Participation and Land Sale
– Preliminary Development Agreement to BOE June 29, 2015
– Preliminary Development Agreement to Common Council July 7, 2015
– Review and Approval of the following by BOE and Council Aug 24, 2015
– – Development Agreement Sept 1, 2015
– – Land Sale & Land Lease Agreements
– – Preliminary TIF Runs
– – Timeline for TIF Plan Amendments
– – Timeline for Creation of a Redevelopment District
– 2016 Executive Capital Budget to Council Sept 1, 2015
– Sale of Block 88 and 105 to JDS Holding Sept 2, 2015
– Lease back Improvements to City and Parking Utility Sept 2, 2015
– – Lease to Include Reversion Provisions
– Board of Estimates Action on Capital Budget Sept 28, 2015
– Final 2016 Capital Budget Adopted by Council Nov 10-12, 2015
– Review and approval of the following by BOE and Council Nov 2015
– – TIF Agreements including Guaranties
– – Condominium Purchase and Sales Agreements
– – Hotel Operator and Franchise
– – Construction Management Agreement for Parking
– Closing on TIF and Condominium Purchase and Sale Dec 2015
Tax Increment District Approvals
– Proposed financing structure to taxing jurisdictions for discussion July 2015
– Submit TID #25 Project Plan Amendment Sept 1, 2015
– Approval of TID #25 Project Plan Amendment Nov 2015
Construction
– Demolition of MMB Annex* Dec 2015
– Commence Construction on Block 88 Dec 2015
– Block 105 Parking Ramp Closes** March 2016
– Commence Construction of Hotel on Block 105 April 2017
– Complete Construction of Block 105 Parking June 2017
– Complete Construction of Exact Sciences on Block 88 July 2017
– Complete Hotel July 2018
– Phase II of Exact Sciences TBD
WHAT WE DON’T KNOW
This is just a partial list, I’m sure, since the last two meetings about this were in closed session and we don’t know what was discussed. These questions are rather random.
– Where are the details of the agreement with the School Board? Who will pay the interest? Will the school board agree to pay interest on money it should be getting without interest?
– Details of the financial guarantees?
– Why are we paying for parking that will compete with our own parking utility?
– If they don’t rush this, they can provide more parking below grade and save money – money the city is providing. Is that wise?
– Is the $12M for jobs a TIF loan, or a grant?
– How and will the funding for this be funded from 2 TIF districts? (TID 25 and 45)
– Why are we transferring the property on Sept 1 when the land use approvals won’t be expected until December?
– What happens if we sell the land and the 1031 deal falls apart and Dunn owns the land?
– Should we even be negotiating with Bob Dunn given the financial issues over the Edgewater?
– What if the business fails? How would we find another tenant that would use this space?
– Are the city and State paying to create the same jobs?
– Why are the jobs only guaranteed for 12 years, what happens after that?
– What happens if the jobs are not created? (Exact Sciences has asked the City to consider a phase-in schedule for the jobs due to the Federal Drug Administration approval of the manufacturing spaces in the facility that must occur after completion and prior to occupancy of the manufacturing spaces. That approval can take up to a year to achieve.)
– Where are people going to park for 17 months while Government East is going to be out of commission and (gasp) how will that impact businesses in the downtown?
– This was about a hotel, right? And what do we know about the hotel? Meh. We’ll get to that later. Why is it getting pushed off to be negotiated later?
– What is the brand o f the hotel, required in the RFP?
– Will there be conference space in the hotel?
– Why is JDS balking at 250 rooms? (don’t want the competition, eh?)
– What if the Joint Review Board doesn’t approve the TID 25 changes?
– How does this work? Block 88 that would be on the tax roll by 2018 and $50.4 million of property value on Block 105 that would be on the tax roll by 2023. Based on the City’s typical underwriting assumptions, this cost would be repaid in approximately 11 years from the time the entire Block 105 development would be completed. TID 25 is scheduled to close in 2023 or 2024.
– Why is the council just ignoring the TIF policy on this? 14 exceptions to TIF policy?
– How can you make this deal without having a TIF application? Or TIF review?
– How much of the net present value of the TIF will they be using, its more than 55%, but is it really (as suggested by some) over 100% of the net present value?
What can you do?
Email your alder (allalders@cityofmadison.com) and tell them this stinks. Make sure to include your address so they know that you are their constituent, but send to all so they see that the public is trying to pay attention. No TIF application, secret meetings, too many questions unanswered. Also email the Mayor at mayor@cityofmadison.com. Tell the to stop this nonsense and stop wasting our staff time and paying consultants to deal with this.
Show up tonight and ask questions, lots of questions, either the ones above or your own . . . meeting starts at 6:30 in the City-County Building.
