With a vote on the major Judge Doyle Square project approaching, City Council members now have a full development agreement and updated financing report to make their final decisions.
Released Wednesday, the negotiating team’s latest report resolves some lingering pieces of the agreement with JDS Development, but the updated tax increment financing report lays out significant concerns with the city’s $46.7 million investment in the private portions of the development.
The total $200.7 million project would locate biotech company Exact Sciences Corp.’s headquarters downtown, along with a 216-room hotel, public and private parking, a bicycle center and commercial space. The new development would replace the Government East parking garage on Block 105 and would sit alongside the Madison Municipal Building on Block 88.
“I expect a close vote and I expect it to be adopted,” Mayor Paul Soglin said Wednesday at a press conference, declining to say how confident he was.
City Council is scheduled to vote on the final development agreement for the project at a special meeting on Tuesday, and council members are largely divided on the project.
Soglin said he is determined to see this project adopted, evidenced by his earnest tone at Wednesday’s press conference and at a Rotary Club of Madison meeting last week where he asked supporters of the project to contact their alders.
District 15 Ald. David Ahrens, one of the project’s most outspoken opponents, said he doesn’t believe the project has the votes to pass and is too much financial risk for the city.
“Of course you have to take some risk,” Ahrens said, “but there’s risk of driving the beltline at 5:30 and there’s risk of driving in the wrong lanes on the beltline at 5:30 — and that’s what (the mayor) is proposing to do.”
The land use and financial terms of the agreement have long been hammered out, but a few pieces of the final agreement remained uncertain until recently. The revised agreement now removes the developer’s right of first refusal to lease public parking spaces and includes language on a labor peace agreement, reacquisition of block 105 if the hotel does not proceed by May 2017 and a real estate purchase agreement.
It also includes a more thorough tax increment financing analysis that raises lingering questions and concerns with the city’s $46.7 million investment in the private development, saying the guarantee structures represent “a significant policy exception.”
The report from TIF Coordinator Joe Gromacki found that the project does have a $12 million funding gap, though Exact Sciences as a tenant does not. The gap comes from below market rent paid by Exact Sciences, conservative underwriting by lenders driven by Exact Sciences’ risk as a start-up and the relatively high cost of the phase 1 development.
“A less risky, better paying tenant would eliminate the $12 million gap,” the report says.
The relatively high cost of the development is due to the cost of about 200 excess parking stalls constructed for subsequent development (the hotel and office expansion space) and the project requires excess net parking revenue for debt service payments and to provide a return to investors.
The report also found that, adjusting for inflation and interest rates, the city is only projected to recover $15.6 million in property taxes on the development over 27 years.
The city’s negotiating team is holding two briefings with City Council to go over the agreement on Thursday and Friday this week, with the vote scheduled for a 6:30 p.m. meeting next Tuesday.
If it passes, the project will still have to go through land use and other approval processes.
Asked multiple times, Soglin declined to say what the next steps for the city would be if the development agreement ultimately did not pass.
“I don’t consider that an option,” he said.