Madison is pressing ahead with a major Downtown redevelopment despite claims from the city’s private partner that it has illegally seized a portion of the project, rendering a venture that is already over budget even more difficult to finance.
Even as Beitler Real Estate Services, of Chicago, sues the city over what it says is a violation of its agreement to develop Judge Doyle Square, Madison officials continue to work on the necessary approvals for private elements of the two-block, $186 million project.
But the lawsuit, filed in an Illinois federal court last week, could affect the scope and timeline of the project.
“The parties to the agreement are supposed to be working cooperatively, so it could create some bad blood that could have long-term effects in terms of lack of trust and other issues,” said Brian Ohm, a professor of urban and regional planning at UW-Madison.
Beitler’s lawsuit focuses on the City Council’s 18-0 vote last month to appropriate an additional $11 million to build about 8,000 square feet of retail space, two levels of above-ground private parking and a structural slab — collectively called the podium — atop an underground public parking garage being built on the block that holds the Madison Municipal Building. As a result, the city would own that part of the project.
The city acted after Beitler informed the city in April that, due to rising construction costs, it would not be able to complete the private portion of the development of that block.
City staff have said Beitler asked Madison to consider funding the podium.
But Beitler contends the city “unilaterally seized, for its own financial gain,” the podium in violation of a development agreement the parties signed nearly two years ago.
The podium and nine floors of apartments above it make up just one of three components to Beitler’s private development. The others are two towers consisting of apartments, a hotel and retail space on the block across South Pinckney Street that now holds the aging Government East parking garage.
Beitler alleges its development agreement does not obligate it to start the work on the Madison Municipal Building block first. Instead, Beitler has two years after the public garage is completed to secure financing for any one of the three components, allowing the developer to begin work on the Government East block first, the lawsuit said.
The company is asking a jury to bar the city from constructing the podium once the underground garage is complete.
“Obviously, if they get an order that says we can’t continue to do what we’re doing, that’ll delay the project,” City Attorney Michael May said. “We don’t anticipate that happening.”
In the meantime, construction will continue on the 560-stall public garage, said Natalie Erdman, city director of Planning, Community and Economic development.
Ohm, who formerly practiced law in Minnesota, said the city likely will need to hire a law firm in Illinois, since that’s where the lawsuit was filed.
May declined to comment on whether the city would contract outside legal counsel but said he is “quite confident in the city’s position.”
Mayor Paul Soglin declined to comment, citing a directive from the city Attorney’s Office that questions regarding the lawsuit be referred there.
Representatives for Beitler did not return requests for comment last week.
Redesign prompts worry
The city’s plans to take over a portion of the private development faced opposition from another corner last week, when members of the Urban Design Commission expressed concerns about a proposed redesign of the podium.
To save money, the city is hoping to scale back the current plan for cladding the podium in glass and would require a ventilation system for the enclosed above-ground parking.
Commissioners were presented with three redesign options in which the glass facades on three of the four sides would be replaced with masonry work, and openings would be cut into the sides to avoid the need for ventilation, but they were not pleased with the designs.
The commission called for a more modern, contemporary look for the podium.
“If nothing is going to be built on top of it for a while, then we need to see how it stands alone and how it stands in relation to the (Madison Municipal Building),” said chairman Richard Wagner.
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Some struggled with the uncertainty of how long the project will take to complete.
“We approved the complete project. Now we’re breaking it down and saying, ‘Approve this base, but don’t worry about what goes on top,’ when they have to complement each other,” said commissioner Rafeeq Asad. “You can’t approve the bottom of a building and not approve the top, because they have to work together.”
George Austin, the city’s project manager for Judge Doyle Square, said he anticipates an application for a major alteration to the approved project design and zoning will be submitted in July. It would likely reach the City Council in September.
“We’re definitely going to get all the approvals we need to proceed with that construction,” May said of the podium. “We’ll have to just see where we are when we get to that point in time in the building of the (underground) ramp and where we are legally.”
Capping the public garage
A crucial point of contention is how the city’s underground garage will be capped after its expected completion in April.
At the May 15 meeting when the council approved financing the podium, Austin said both the city and Beitler had previously agreed it would be most efficient to continue with the private development above once the underground parking garage is finished.
But the cost for Beitler’s development on that block rose from an initially estimated $32 million in April 2016 to $48.5 million, according to city staff.
“As Beitler has repeatedly advised, the private development above the public ramp cannot support any further additional costs and still remain economically viable,” an attorney for Beitler wrote to assistant city attorney Kevin Ramakrishna on April 18, according to the lawsuit.
Instead, Beitler said it wants to start work on the other block, where where Beitler has determined construction is more economically feasible.
In its lawsuit, Beitler argues it presented the city with two options to solve the issue of capping the garage: Put a roof over the underground garage and allow Beitler to lease 150 of the public parking spaces for private use, or purchase Beitler’s “rights and interest” on the Madison Municipal Building block “at a price acceptable to Beitler.”
At a January meeting, May, the city attorney, said that Beitler offered a proposal for the city to construct the podium.
A slideshow May shared, which he said Beitler representatives used at the meeting, presents three options to address the building’s increased cost. One of the options read: “City issues a change order to the ramp and builds up through the transfer slab.”
The other two options would have the city issue a new request for proposals after two years or have Beitler construct three to four floors of retail on the Madison Municipal block instead of the initially proposed plans.
“They came to us and said this is an alternative, and we pursued,” May said.
“Then we get sued.”
The Judge Doyle Square project — named for Judge James E. Doyle, who worked in the Madison Municipal Building when it was a federal courthouse — has had a long, and at times bumpy, road from the beginning.
In 2013, the city sought out companies interested in developing the area.
The city set some goals for the project, including bringing in a hotel to serve Monona Terrace, replacing the Government East ramp and maximizing the development opportunity — and thus taxable property.
A plan for Exact Sciences Corp. to expand at the Downtown property fell apart in 2015 after the maker of the colorectal cancer test, Cologuard, decided to expand at its site in University Research Park on the West Side instead.
That eventually led the city to consider proposals from two previously rejected developers, Beitler and Vermilion Development, also of Chicago.
In April 2016, the City Council selected Beitler and its proposal to deliver a 252-room hotel, housing, retail and commercial space, a bicycle center and more than 1,000 parking spots. For the right to develop, Beitler would lease the property from the city for 99 years.
‘You can’t approve the bottom of a building and not approve the top, because they have to work together.’ Rafeeq Asad, member of the Madison Urban Design Commission