Madison’s City Council will wait until next year to reconsider a $600,000 payment to Chicago-based Beitler Real Estate Services as a way to settle a dispute over the Judge Doyle Square project.
Alders have previously voted twice and both times refused to pay Beitler in exchange for ownership of and development rights to a portion of the $186 million development. The City Council will vote on reconsideration at its Jan. 11 meeting.
The major downtown project calls for a hotel, apartments, retail and commercial space and a new parking garage on the blocks that hold the Madison Municipal Building (Block 88) and Government East parking garage (Block 105).
Conflict between the city and its development partner, Chicago-based Beitler Real Estate Services, became clear in July when Beitler filed a lawsuit, claiming that the city “unilaterally seized” part of the project that consists of first-floor retail, two levels of private parking and a structural slab.
Two months prior, the City Council approved an additional $11 million to construct this part of the project, collectively known as the podium, after the developer said the apartment component of the project was getting too expensive due to rising construction costs.
Beitler later dropped the lawsuit in August. The city and Beitler began negotiations that resulted in the $600,000 payment in exchange for the city’s exclusive rights to own and build the podium.
Beitler said in a memo to the city that it does not want to sue. However, if the city pursues plans to transfer part of the project from private to public ownership, it will “result in a lawsuit for damages associated with the entire project in excess of $40 million.”
Ald. Rebecca Kemble, District 18, said she supported the delay on a decision because the city “can get a better deal.” She said she would be in favor of the payment if Beitler gives up its rights to Block 88.
“Nothing has really changed since last week other than a threatening letter from the developer,” Kemble said.
If the dispute is not resolved through a settlement, Beitler could pursue litigation.
City Attorney Michael May said in a statement Nov. 16 that litigation could last several years, cost hundreds of thousands of dollars and cause uncertainty about the status of the Judge Doyle Square development. The costs of the lawsuit and any damages would not be covered in the city’s insurance policies.
“The main lesson of litigation is that it is uncertain,” May said in a memo. “One of the main benefits of an agreement or settlement is certainty. A settlement buys peace; it resolves an issue.”
The amended resolution contains several benefits to the city, according to May, including an accelerated timeline for Beitler to start construction on the hotel.
Under the current development agreement, Beitler has up to one year after the new parking ramp is complete to start construction on the apartments on Block 88, the apartments on Block 105 or the hotel on Block 105. Beitler also has up to three years to start construction on other parts of the project.
This means that Beitler could wait up to 36 months after completion of the parking ramp and podium to start work on the hotel, which could be as late as November 2022.
Under the amended development agreement, Beitler would begin construction on the hotel first and start construction 18 months after completion of the parking ramp and podium. This effectively changes the required start date for hotel construction from November 2022 to May 2021.