Madison is considering investing an additional $11 million into the massive $186 million Judge Doyle Square project after the developer said increased cost estimates on one block of the project were too expensive.
The major endeavor, including both public and private resources, is slated for two blocks downtown and includes plans for an underground parking garage to replace the current Government East parking ramp, a hotel, apartments, a bike center and retail and commercial space.
However, Beitler Real Estate Services informed the city last fall that the estimated construction cost for the private portion of the project on the same block as the Madison Municipal Building — a 144-unit apartment project with 160 parking spaces and some retail space — was $48.5 million, according to a memo Mayor Paul Soglin sent to the City Council Tuesday.
The original budget for the project’s private component on Block 88 was $32 million. Beitler concluded in January that the private project on this block would not be feasible at the increased estimated cost.
“It’s just very unfortunate that what Beitler had promised us was seemingly too good to be true,” Ald. Mike Verveer, District 4, said.
In January and February, the developer tested alternative uses for the apartment project such as a grocery store or medical offices but concluded that they were not feasible.
On April 17, Beitler informed the city that it was not prepared to move ahead on the private project unless the city constructed the accessory parking and a structural slab to support the apartments. Otherwise, Beitler requested the city lease 150 stalls of parking from within the municipal garage for the private project.
“The City Project Team believed this request was antithetical to the purpose of the project because it would reduce the public parking supply to the commercial district surrounding the site and Monona Terrace, a commitment the City had made in the issuance of the Judge Doyle Project Request for Proposals in 2013,” the memo said.
If the private project does not start when the municipal garage is complete, scheduled for April 2019, the city will have to cap the underground ramp to comply with zoning and building code regulations.
Ald. David Ahrens, District 15, compared the situation the city is in to “negotiating with a gun to our head.”
“It’s very tough to make a best decision when we’re hanging out there with a six-story deep hole in the ground, and we’re going to definitely need something to fill that up,” Ahrens said, referencing the massive hole behind the Municipal Building where the city has started to build the underground garage.
To move forward, Soglin and Ald. Mike Verveer, District 4, have recommended one of three options given by city staff. The resolution introduced at Tuesday’s City Council meeting recommends building the $11 million podium and capping the municipal garage to allow for apartments and office and retail space.
“It would allow a higher and better land use to be constructed, maximizing the City’s investment in the underground municipal garage solution that the Common Council selected in 2016,” the memo said.
Under the resolution, the city would increase the 2018 capital budget by $4.4 million from Parking Utility reserves to increase the total project budget to $50.4 million.
Verveer said the increased costs were due to incorrect estimates, the rising price of materials, such as steel, and the labor costs. He said the resolution is the “best of many bad options."
“If indeed Beitler walks away from the project or at least one block of the project, the resolution that was introduced tonight will preserve our best available options to secure another developer that will provide as much value to the block as possible,” Verveer said.
The resolution is referred to committees and expected to go before the City Council May 15. Because of the major design changes, the project will need to receive land use approvals from the Urban Design and Planning Commissions.
Other options include building a roof slab above the underground parking and first floor retail at an estimated cost of $5.4 million. However, that would would preclude building more parking and uses above it in the future.
A third option would be to build the podium with one floor of parking at an estimated cost of $7.5 million.
“This option, while less costly, will reduce the development potential of the development to be constructed above the parking in the future and the resulting tax base and lease revenues to the City,” the memo said.