The developer of the Judge Doyle Square development sued the city of Madison on Monday over the city’s appropriation of additional funds to construct some private portions of the massive Downtown project.
Beitler Real Estate Services, of Chicago, filed a lawsuit in a U.S. District Court in Illinois after the City Council last month approved spending an extra $11 million on the project so it could construct first-floor retail space, two levels of private parking and a structural slab — collectively called “the podium” — on the block that holds the Madison Municipal Building.
The lawsuit alleges the city “unilaterally seized, for its own financial gain, the development of an above-grade parking structure and retail assigned to Beitler.”
During discussions on whether to appropriate the money, city staff told council members that Beitler informed them it could not pursue its private development on the block unless the city financed the podium.
Otherwise, the city could lease parking spaces in a public garage under construction to Beitler, allowing the developer to avoid the cost of constructing private parking, city staff said.
“Beitler was not consulted or even informed of the city’s unilateral proposal to the Finance Committee to build the podium in violation of the development agreement. Beitler only learned of the proposal through the newspaper,” the lawsuit said.
Representatives from Beitler were not present at either the May 7 Finance Committee meeting about the proposal or the May 15 City Council meeting where members reluctantly voted 18-0 to appropriate the $11 million.
The lawsuit alleges the city violated a development agreement between the city and Beitler by pursuing construction of the podium, denying the company its exclusive rights to build the private portions of the project.
“After Beitler informed the city earlier this year that it was not able to finance its portion of the parking garage, the city stepped up and appropriated $11 million to build the parking and keep the project alive,” city attorney Michael May said in an email. “Beitler’s response was to sue the city.”
Beitler is asking the federal court to halt the city from going forward with building the podium and “grant such other and further relief as this court deems just and proper.”
The lawsuit contends the city is “waging a public smear campaign against Beitler, falsely blaming Beitler for the city’s request to fund the development of the above-grade parking structure.”
May said that the city has “not breached any of its obligations to Beitler,” and the lawsuit is “a curious response by a developer who claims to want to work with the city to see the project go forward.”
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Ald. Mike Verveer, who represents the project area, declined to comment, citing a directive from the Attorney’s Office for City Council members.
An underground, 560-stall public parking garage on the Madison Municipal Building block is currently under construction. The podium would go on top of the garage, and Beitler intends to build nine floors of apartments above that.
Attached to the lawsuit is a letter dated May 9 from an attorney representing Beitler sent to city assistant attorney Kevin Ramakrishna.
The letter says Beitler gave the city two options: 1. To bear the cost of constructing a roof for the public ramp, lease 150 parking spots to Beitler and enter into an agreement that address the current demands/concerns, or 2. To purchase Beitler’s development rights above the public garage “at a price acceptable to Beitler.”
Beitler claims the city “refused to provide information to Beitler about how it planned to deliver the completed public ramp to Beitler.”
The development agreement gives Beitler two years after the completion of the public garage — expected in April 2019 — to secure financing for one of three portions of its private development.
The remaining two portions of the project need financing to be secured within three years of the public garage being completed.
Beitler is set to construct two towers on the block that holds the aging Government East parking garage. They would contain apartments, a hotel to serve Monona Terrace, parking and some retail. Those towers constitute the second and third portions of the private development.
The developer contends it is under no obligation to start construction of its private portion above the public garage first and could start with its towers in the Government East garage block.
As part of its motion to approve the $11 million, the council directed the city’s negotiating team to work with Beitler on amendments to the development agreement to come up with a “significantly reduced” time for Beitler to begin construction on the Government East block and “even more significantly reduced” time to begin its portion on the Madison Municipal Building block.
The $11 million would be split between $4.4 million more in Parking Utility reserves and using $6.6 million of unspent funds from the originally budgeted $46 million for the underground garage.
The entire project is estimated at $186 million.