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A massive new state office building on Madison’s West Side could spur additional redevelopment opportunities Downtown as the state moves and consolidates its agencies, Mayor Paul Soglin said in an interview Wednesday.

The Department of Administration is close to finalizing a $177 million redevelopment of its Hill Farms office building on University Avenue.

DOA officials are emphasizing not only how the original estimated $197 million cost to taxpayers has come down more than 9 percent, but also the economic benefit to the state and city.

According to a Baker Tilly economic impact analysis, the entire redevelopment of the site will generate 1,943 construction jobs, 1,359 private-sector jobs, $15.4 million in additional state and local taxes related to construction, and an annual boost in local and state taxes of $11.4 million.

Also with 50 percent more space the state will be able to consolidate other agencies there, cutting more than $1 million in annual heating, cooling and maintenance costs, and another $1 million in rent.

“The proposed Development Agreement is a very good deal for taxpayers,” the department wrote earlier this month in a synopsis of the project. “This agreement will allow the state to operate cost-effectively and space-effectively for years to come, while returning underutilized land to the private sector at a fair market price.”

The new building will house about 1,200 Department of Transportation employees, but also draw another 800 employees from a handful of state agencies, many of whom currently work for the Wisconsin Economic Development Corp. and Department of Financial Institutions in the Tommy G. Thompson Commerce Center on West Washington Avenue.

Soglin said the city is waiting for more details of the Hill Farms project before commenting on specifics, but he said he could envision the state moving employees from the dilapidated GEF-1 building on East Washington Avenue, where a fire last year caused $15 million in damage, to the Thompson building.

That would free up the GEF-1’s prime Downtown real estate location for future private redevelopment.

“It’s something we’d be really interested in discussing,” Soglin said. “I would think that if they were to vacate GEF-1, the building would come down. No one would keep it.”

DOA spokesman Cullen Werwie declined to comment on Soglin’s suggestion Wednesday.

The Hill Farms redevelopment would mark the first sale of surplus state property identified under a provision in the 2013-15 state budget.

An agreement between DOA and developer Smith Gilbane, which was selected earlier this year from four groups bidding on the project, was approved unanimously by the State Building Commission on Aug. 12. The deal still requires a final green light from the Legislature’s Joint Finance Committee.

Werwie said the project can break ground once the committee signs off, possibly as early as this fall.

Construction of the $149.8 million building and $36.1 million parking structure would take about two years. Demolition of the old building would cost about $4.4 million. At $249 per square foot, the building cost is just below DOA’s original estimate of between $250 and $275.

As part of the agreement reached with Smith Gilbane, a consortium of four Midwest-based companies, the state also would sell for private redevelopment nearly 14 acres at the Hill Farms site and a property on Badger Road that houses the Department of Employee Trust Funds, which would move to the new building.

A May 2014 independent appraisal valued the 21-acre Hill Farms property at $18.3 million or $20 per square foot. Under the agreement the state would sell 14 acres for $12.1 million, or $20 per square foot. The Badger Road facility was valued at $2.8 million and would be sold for $1 million.

Soglin said the private redevelopment of those properties would go through the city’s normal planning commission process. The Badger Road sale presents “some exciting possibilities on a significant private development in that area.”

Part of the discussion of the Hill Farms site will be the relocation of the Sheboygan Avenue Community Garden, which will be displaced by the new state office building, Soglin said.

Soglin said the city has tried unsuccessfully for two years to find an alternative location within a half-mile radius of the property for the gardens, which he said provide subsistence food to dozens of local residents.

“We can’t force them, but we can ask, we can request, we can suggest, we can lobby,” Soglin said. “We’ve told them that we hope that somehow in their design they can figure out how to accommodate a garden.”

Werwie said the developer has agreed to help move the community garden topsoil, “we just need to know where it will go.”

Rep. Joe Sanfelippo, R-West Allis, one of three GOP lawmakers who sent a letter to DOA last December objecting to the cost of the project, said after reviewing the project with DOA officials that he still isn’t satisfied with the cost or building it in Madison.

“This building costs way too much to construct and should not be built in that location,” Sanfelippo said. “There is no reason why we have to keep all these agencies headquartered in Madison.

“We are creating a false real estate market and driving up costs on our self.”

Gov. Scott Walker vetoed a late addition to the state budget requiring DOA to consider locating new state office buildings outside of Dane County. He also vetoed a proposal that would exempt the redevelopment from Madison city zoning laws.

Editor's Note: This story has been corrected to remove references to the state leasing space in the new state office building. The state will own and maintain the building, according to the state Department of Administration.

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Matthew DeFour covers state government and politics for the Wisconsin State Journal.