If the Madison City Council sticks by its refusal to pay $600,000 to a developer to resolve a legal dispute over the massive Judge Doyle Square project, it could set the project back by three to five years, Mayor Paul Soglin said Wednesday.
The council is risking litigation, costs and delays by rejecting for a second time Tuesday an amended development agreement for the $186 million project with Beitler Real Estate Services of Chicago, Soglin said.
The payment stems from a lawsuit Beitler filed against the city and then withdrew over the Downtown development. Last month, the council voted 10-8 in favor of the payment, but it failed to reach the 11 votes needed to pass.
The amended agreement rejected by a 14-6 vote Tuesday includes the $600,000 payment and new concessions by Beitler to move up the timeline for the project, which calls for a hotel, apartments, retail and commercial space, and parking across three glass-sheathed towers on the blocks that hold the Madison Municipal Building and Government East parking garage.
The city, Soglin said, has a legal contract with Beitler and the council’s rejection of the amended agreement “only hurts the city.” The council can have a third vote as soon as Nov. 20, he said, vowing to fully lay out legal underpinnings and implications of the decision.
Ald. Mike Verveer, whose 4th District includes the project, said he changed his vote Tuesday from supporting the payment to opposing it so he could request the issue be reconsidered again.
Verveer, who expected new concessions by Beitler to secure passage Tuesday, said the motion failed due to fatigue over the project, lobbying by the project’s chief critic, Ald. David Ahrens, 15th District, and a rush to a vote on a night the council was also considering the 2019 budget.
“I think we all felt very pressured and rushed last night,” he said Wednesday.
Verveer said he’s already formally asked for reconsideration, but isn’t sure if an actual debate on the merits of the amendment would occur Nov. 20 or at a later date.
Ahrens was unmoved.
“Unfortunately, through the use of a legislative maneuver, the council will have to vote for a third time on this issue,” he said Wednesday. “And for the third time, I think the Council will reject the $600,000 payment.
“In the brief period of our contract, there have been nothing but lawyer fees, development fees and $11 million in construction costs that we thought would be their responsibility,” he said. “We can close this chapter and look for a developer who will deal with the City in good faith.”
Ahrens and many on the council, Soglin said, don’t seem to understand the implications of their votes. The city can’t simply swap out developers, he said.
“I’m more concerned about our legal responsibilities than anything else at this juncture,” he said. “I see an enormous gulf between the obligations of the council and the votes that have been taken.”
Beitler sued the city in June after the council authorized $11 million to construct first-floor retail, two levels of private parking and a structural slab, collectively called the “podium,” above an underground, public parking ramp now being constructed on the Municipal Block. Beitler claimed the city was trying to seize the rights to develop the private portion for financial gain, while the city maintained Beitler asked it to consider building the podium due to rising construction costs.
In August, Beitler voluntarily dropped the lawsuit, and the two parties negotiated the $600,000 payment that would have explicitly given the city the right to build and own the podium.
As part of the agreement rejected Tuesday, Beitler would have had to start construction on its hotel within 18 months of the podium being completed, instead of the current agreement that grants the developer two years to start building any component of the private construction.
Also, the amended agreement would require that Beitler has filed for a building permit for the hotel on the Government East block before the city is required to demolish the existing garage.
Currently, the city must demolish the garage soon after it completes the new garage on the Municipal Building block. If the city demolished Government East and Beitler didn’t move forward with a hotel right away, the city would spend about $700,000 to cap the site.
The amended agreement, Soglin said, could save the city that $700,000.
The mayor said he spoke with company president J. Paul Beitler on Wednesday and that Beitler was “extremely disappointed” at the council’s actions but still wants to do the project.
“Anybody who says (Beitler) doesn’t want to do this project is smoking the wrong brand of weed,” the mayor said.
John Paul Beitler III, the company’s vice president, in an email on Wednesday said Beitler assumes the city will move forward under the existing development agreement or reconsider the amended agreement rejected Tuesday.
The podium issue has not been accurately explained to the council and led to misconceptions, he said, adding that the podium isn’t needed to open and operate the public garage now under construction.
Beitler, he said, has term sheets with its hotel operator and hotel brand, but has’t completed franchise agreements with the hotel brand, mainly because Beiter is waiting on several outstanding items from the city. Those items include council approval of a room block agreement for Monona Terrace, final ground lease documents and the recording of the zoning, he said.