Downtown Madison's Judge Doyle Square redevelopment project is in a tight spot.
Construction on a new municipal garage is underway (note the huge hole in the ground behind the Madison Municipal Building between Doty and East Wilson streets). However, the developer said it is too expensive to construct a building on top of the underground ramp and is asking the city to fund a structural component of the project.
Project manager George Austin said that structural slab, or “podium,” is integral to keeping the public parking garage open during future construction.
While a city staff team has developed options, the recommended plan is to build the $11 million podium, which would give the city control over additional parking and preserve the site for future revenue sources.
The City Council is scheduled to vote on the resolution authorizing additional funding May 15.
Let’s rewind. What is this project again?
Judge Doyle Square, the two-block area in downtown Madison, encompasses the Madison Municipal Building on Block 88 and the Government East parking garage on Block 105. Judge Doyle Square is named after Judge James Doyle, the late federal judge and father of former Gov. Jim Doyle.
The 520-space parking garage was built in 1958, is reaching the end of its useful life and needs to be replaced. Government East is open for downtown parkers throughout the construction project.
The area is bounded by Martin Luther King, Jr. Boulevard on the west, Doty Street on the north, East Wilson Street on the south and a group of buildings on the east that mainly face King Street. Blocks 88 and 105 are split by South Pinckney Street.
What’s being built on the two blocks, who is doing the building and what’s the deal with the massive hole in the ground?
The major project is a partnership between the city of Madison and the Chicago-based developer Beitler Real Estate. The city selected Beitler’s plan in July 2016. It will eventually bring a new underground parking garage, hotel, bike center and space for commercial and retail uses.
Because it’s a public-private partnership, the city and Beitler are responsible for different components of the project. The big hole in the ground behind the Madison Municipal Building is the city’s responsibility. It is the site of the new 608-stall underground parking garage.
Once the new garage is finished, the city will demolish the Government East garage. The city would lease the air rights on Block 88 and the property on Block 105 to Beitler to build a mixed-use project that includes commercial, residential, hotel and parking components.
The estimated completion date of the public parking ramp is April 2019. Both parties have agreed that construction on the private development project element — the apartment complex with above-ground parking — would continue on Block 88 as soon as the municipal garage is completed.
So, what’s the problem?
Beitler Real Estate told the city April 17 that it would be too expensive to pursue building the apartment complex and accessory parking on Block 88 unless the city paid for the parking and a structural slab (the “podium”) to support the apartments.
The original budget for Beitler’s work on Block 88 was estimated at $32 million. Beitler had another estimate prepared in April 2017, which put the hotel and parking at $42 million. That number increased to $48.5 million as of this fall.
Without the city’s financial help, Beitler requested that the city lease it 150 parking stalls from the new municipal garage, reducing public parking available in the structure. The purpose of placing the garage underground was to create above-ground development opportunities that would add to the city's tax base and bring in future lease revenues.
Why did the estimates increase?
A number of cost factors contributed to a 30 percent increase in the cost of the private development on Block 88, Austin said, including higher steel prices and a tight construction market. Additionally, the original estimate was conducted in 2015, which was a favorable economic year, and design plans and construction documents have evolved since the development agreement was signed.
Austin also said at the Finance Committee May 7 that increases are expected on Block 105 and design changes are anticipated.
Does the city have a plan?
City staff developed three options if Beitler does not continue the construction of the apartments and parking as soon as the city finishes the new municipal garage on Block 88. They include:
- Construct a roof slab on the municipal garage and ground floor retail for $5.4 million. This would cap the garage and prevent the opportunity to build accessory parking above the structural slab in the future. This option would not include accessory parking, which would eliminate many development options.
- Build the podium, which includes two floors of parking above ground and the load transfer slab, for an estimated $9.92 million. This would cap the municipal garage and provide future opportunity to build a variety of uses with the accessory parking to support them.
- Construct the podium with one floor of parking instead of two for $7.5 million. This would reduce the development potential that could be constructed above the parking in the future.
“The question is evaluating the tradeoff of cost to make the investment and what it generates long term for the city,” Austin said at the Finance Committee meeting.
What’s the recommended path forward?
The city staff team recommends moving forward with building the podium for a total estimated cost of $11 million, which includes soft costs.
“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,” according to the staff memo.
Austin also said this option would allow the city to maintain control of the 160 parking spaces for future development and ensure continuous access to underground public parking spaces during construction.
Madison’s Finance Committee recommended the option May 7. The City Council will review the resolution favoring the second option, sponsored by Mayor Paul Soglin and Ald. Mike Verveer, District 4, at its meeting on May 15. Verveer said pursuing the recommended option is the only path forward.
“We have got to preserve the highest and best use development potential in this prime downtown location in the future,” Verveer said. “We have to protect our interests. We have to do it the correct way.”
The Transit and Parking Commission voted May 9 in favor of using additional Parking Utility funds for the project, with Alds. David Ahrens, District 15, and Arvina Martin, District 11, voting against.
Ald. Rebecca Kemble, District 18, reluctantly voted in favor but urged city staff to take a harder line when re-negotiating the development agreement, including reducing the time the developer is allowed to wait before building.
Under the current development agreement, Beitler has up to three years from the time the city completes the public garage to close financing on all of the private development project elements, meaning that construction can begin.
“I also think that shortening the timeline for starting building for any developer is just common sense,” Kemble said.
Where will the money come from?
The 2018 capital budget authorizes $45.96 million for the public elements of the Judge Doyle Square project, including $1 million for the bike center and $1.3 million for city fleet stalls in the public parking garage.
However, based on accepted bids for the parking garage and the estimated cost of building out the bicycle center, the total cost for the project is estimated at $39.4 million. This leaves approximately $6.6 million in unused spending authority.
Under the resolution, $4.4 million would be used from the Parking Utility reserves (and added to the $6.6 million) to increase the total project budget to $50.4 million and pay for the $11 million podium.
Beitler would pay $755,000 to lease Blocks 88 and 105, with the amounts increasing by 5 percent every five years. The Parking Utility could also net revenues of approximately $300,000 per year from retail leases and the above-ground parking.
The city projects the $11 million would be repaid to the Parking Utility reserves in about 12 years, assuming an interest rate of 2.5 percent.
Assistant Parking Utility manager Sabrina Tolley said future capital projects would not be affected if additional funding from the reserves is used. The next major project on the docket is the replacement of the State Street Campus Garage on Lake Street, an estimated $22 million project.
Tolley estimated that if the garage was replaced in 2023, the utility reserves would be at $11.1 million, which she was was an “appropriate level” to start 2024.