Ald. Barbara McKinney describes it as trying to make a decision while “we’re already off the diving board in mid-air.”
As the Common Council careens towards a decision on the controversial and lingering Judge Doyle Square project, many are grappling with what they see as insufficient information on the project and a rushed timetable that has been set by the developer.
The proposal by developer Bob Dunn would build a corporate headquarters for Exact Sciences, the nascent biotech firm, next to the city’s Municipal Building and construct 1,250 parking spaces and a hotel.
The $200 million redevelopment project calls for about $67 million in funding from the city.
Most of the city money would pay for the construction of parking — $19.2 million to build 600 spaces to replace the city’s Government East Parking garage and $20.8 million to build 650 parking spaces that the developer will control.
The city will also give Exact Sciences $12 million for a “jobs-based” tax incremental financing loan, pitch in $1 million for a bicycle center and finance the land acquisition for $13.9 million. The developer also proposes to build a 216-room hotel that will complement Monona Terrace Community and Convention Center.
There is sharp disagreement among council members as to whether this is a good deal.
Ald. Mark Clear feels confident it’s a good investment for the city. “Even if you take away all the benefits that are difficult to quantify, like being catalytic for other developments and [hotel] room tax revenue and all the things that exist...the worst-case scenario is a 20-year payback [on the city’s investment],” he says. “For organizations like governments, that’s a pretty good return.”
But Ald. Rebecca Kemble sees numerous red flags, including the design of the parking structure, the high subsidy and the lack of financial information provided by the developer.
“The proposal is so crazy, I just can’t wrap my mind around why so many people are taking it so seriously,” she says. “There are so many outrageous asks.”
Regardless of the concerns, the city’s Board of Estimates nudged the project forward Monday night. The Common Council will take up the proposal at its Sept. 1 meeting, which is certain to stretch into the early morning hours.
In a report filed last week, Joe Gromacki, the city’s TIF coordinator, noted numerous issues with the proposal and found that it would violate 13 provisions of the city’s tax incremental funding policy.
The $12 million TIF loan to Exact Sciences, he wrote, provides “no repayment by tax increment and likewise no tax increment guaranty. This structure defines a grant, not a loan.” (The company will have to pay back portions of the loan if it doesn’t meet its job growth targets.)
Based on the city’s TIF policy and the property value expected to be created by Exact Sciences’ portion of the project, the company would qualify for, at most, $1.4 million in a job TIF, he wrote.
On Monday evening, Gromacki added that because the developer has provided so little information about the financing structure that there is “no way to ascertain what the $12 million is being used for” or whether it complies with the city’s policies. It could be used to help pay for operating expenses, which is not allowed by state law, he said.
Gromacki also noted that developers generally turn to TIF in order to help cover the cost of building parking. But in this case, the developer expects to make $900,000 a year from parking the city will pay for. And, he notes, the developer needs the cash flow from the parking to finance debt for other elements of the project.
“Why is this necessary?” Gromacki wrote. “Staff can draw no conclusion based upon the facts at hand.”
Confusing matters is that the city’s finance director, David Schmiedicke, filed a separate memo outlining how the project costs and revenues balance out, albeit not necessarily during the life of the tax incremental financing district.
Although the TID would close in 2023, the district would still be paying property taxes, generating money for the city, he said.
“David’s job is to figure out how to make it work at all, so he has greater latitude [than Gromacki],” says Ald. Chris Schmidt. “But it’s still a lot of money, and it’s not being paid back in the traditional way.”
Ald. David Ahrens, a leading critic of the project, finds the logic troubling. “We’ve come to start to think that people paying taxes is the same as paying back a loan,” he says. “I pay back loans, but I also pay taxes.”
Other issues remain. The developer is asking for a delay of up to three years before breaking ground on the hotel, which has been a major goal of the project all along.
Fitchburg is also seeking to woo the company. And in June, Exact Sciences purchased land for $4.8 million at its current west-side location, University Research Park, where another tax incremental district is proposed. The deal has some speculating that the company might just stay where it is, and the jobs will remain in Madison without a hefty subsidy.
JP Fielder, a spokesperson for Exact Sciences, says the purchase was made because the company is expanding rapidly and needs space for its research and development employees.
“We bought that because we need places to work, and we’ve outgrown the places we have,” he says.
It’s tough to get a read on which way the council is leaning on the project. To pass next Tuesday, the proposal will need 11 of 19 votes. Ald. Maurice Cheeks has recused himself over controversy that he’s done work on behalf of Exact Sciences, taking his vote out of play.
Some votes are easy to gauge — Clear, an enthusiastic yes; Ahrens, a resounding no. Parsing out other votes is more difficult, with several alders saying they’re torn and confused.
Ald. Paul Skidmore, who is generally pro-development, is on the fence. He’s concerned by issues raised by Gromacki and has heard a lot of concerns from constituents regarding the heavy subsidy and free parking for a company.
“I’m kind of going back and forth on this, to be real honest,” he says. “I like the concept of the development downtown, I really like the density, but I’m not swayed by all the arguments of it.”
At Monday’s meeting, Mayor Paul Soglin urged the council to take the plunge on the project, while simultaneously reassuring people that any outstanding questions about the project will be answered in time.
“In this day and age, if a municipality wants to foster economic growth and job development, risk has to be taken,” Soglin said. “That’s the modern world.”
Ahrens counters that the city’s economy is doing quite well, and the city doesn’t need to subsidize a wealthy corporation in a risky field.
“We’re not a city that’s depressed,” he says. “If you look at where the city was five years ago and where it is now, that’s a sign of significant growth.”
He notes that if the TIF district were closed next year, the city could immediately spend $4.4 million (a year’s worth of tax increment) on affordable housing.
“That’s just a piece of what we can do,” he says.
Editor's note: This article was corrected to note that 11 votes, not 10, are required to approve the Judge Doyle Square project. The required number for approval does not change based on absences or abstentions, according to city attorney Mike May.