Dunn is asking for almost three times more tax incremental financing for the hotel as he did for the controversial Edgewater Hotel redevelopment, which cost almost as much.
The figures -- Dunn's formal request of the city -- were obtained Tuesday by Ald. David Ahrens, who provided them to Isthmus. The city is negotiating with Dunn over the project, which includes a hotel to complement Monona Terrace, parking, retail and high-end housing.
The project covers portions of two blocks owned by the city between Doty and Wilson streets. However, the details obtained by Ahrens involve only one of those blocks, behind the Madison Municipal Building, where Dunn proposes building a hotel and some parking. Aaron Olver, Madison's director of economic development, said he expects the city to get details on the TIF request for the other block by the end of the week.
Dunn will likely ask for more money for elements on that block, where the Government East parking ramp is located. This portion calls for the majority of the parking, retail and high-end housing. Rebuilding the 55-year-old Government East parking ramp is expected to require a city contribution of at least $18 million. But the city's planning staff did not give those details to Ahrens.
Ahrens, a critic of the project, says the TIF request -- often referred to as "the gap" in financing a developer needs to build a project -- is unreasonable. "The gap under TIF [policy] is supposed to be fairly marginal," he says. "This isn't a gap, it's a canyon."
"That might be understandable if it had a significant social value to it, if it was a blighted area or we were creating low-income housing," he adds. "There's no social value to this."
Ald. Mark Clear, a supporter of the project, counters that the "number in and of itself doesn't mean anything without the context of the project and expected property tax income."
"I imagine this [TIF request] is the number-one subject of the negotiations," Clear adds. "What staff comes back to us with by mid-August may look very different."
The city's negotiating team is supposed to have a final proposal ready by Aug. 15 for the Common Council to vote on this fall.
Price tag up
The request obtained by Ahrens calls for the city to give the property behind the Municipal Building -- appraised earlier this year at $6.5 million -- to Dunn for free. Dunn would build a 318-room hotel and some retail space for $111 million. The request also calls for 239 underground parking stalls beneath the hotel, which would cost $10.4 million to build.
The price tag is up $11 million from Dunn's original proposal, which projected the cost for the Municipal Building block at just over $100 million. Dunn did not return a call from Isthmus.
Dunn, who heads Hammes Company's sports division, had originally proposed two designs. The cheaper option would have turned the Municipal Building into a luxury hotel with a rooftop restaurant and high-end food court on the first floor.
However, the Common Council opted to keep the building for municipal offices and negotiate on building the hotel behind the Municipal Building.
The developer is best known locally for the Edgewater Hotel redevelopment, which is now under construction. That project was controversial in part because of the high amount of tax incremental financing that Dunn requested: $16 million.
The city initially agreed to that amount, but when Mayor Paul Soglin was returned to office in 2011, he drastically cut the TIF funding to $3.3 million, telling the Wisconsin State Journal: "It is imperative for us to reduce borrowing."
But Dunn is asking for much more TIF for the Judge Doyle Square hotel -- $44.6 million -- even though it is estimated to cost only $13 million more than Edgewater, which had a $98 million price tag.
In paying for the project, Dunn would also use a $46.4 million construction loan and $20 million in equity. The sources of the equity have not specified been specified, Olver says.
Ahrens worries about whether the city is getting a guarantee from Dunn on the investment, as banks require.
"We can't be the party that's left out there without a substantial guarantee," he says.
Dunn's proposal expects the hotel to perform exceptionally well, with revenues of $17.6 million the first year it is open to $25.2 million after 15 years. Rooms are projected to rent for $147.25 in year one, to $194.29 after 15 years. Occupancy is expected to be at 70% for most of those years.