Basics of the proposed Judge Doyle Square project

By Madison Alder David AhrensThere are three basic elements to the JDS proposal: a 250,000 SF office complex built for Exact Science, a 650-stall private parking garage, a 600-stall public parking garage owned by the Parking Utility and a 200+ room hotel. The entire project would be developed and owned by JDS LLC, owned by Bob Dunn (developer of the Edgewater Hotel) and Majestic Realty, an LA real estate company.

A. Office Building: EXACT SCIENCE

1. The office space would be used by Exact Science Co. (EXAS), a biotech firm which currently has offices at University Research Park and other facilities in the town of Madison and Fitchburg.

EXAS manufactures and markets a test for colon cancer, called “colonguard.” EXAS did not discover the test but instead leases the patent for this product from the Mayo Clinic. Finding an alternative to the standard test, the colonoscopy is a very competitive field. A number of bio- research firms in the US and Europe are close to developing a blood-based diagnostic test that would, in the words of EXAS, make their current and only product “obsolete.”

2. The city is offering a $12 million non-repayable grant to EXAS if it moves its 300 employees at University Research Park to a new downtown location. By 2018, it would hire an additional 100 employees. The city payment for 100 additional jobs is a cost of $120K for each new job!

If the company does not bring these required positions to downtown locations, or leaves the city before a term of eight years, it must return a proportional amount of funding. It is worth noting that the state’s WEDC has also given EXAS $9 million in tax credits for the same jobs.

This grant is given under a project called a JOBS–TIF program. This is the first project under JOBS–TIF. However, most significant provisions of the TIF ordinance, such as repayment of the loan, must be exempted under the proposal.

EXAS has not claimed that it cannot pay the full cost of its lease or the development of its space or that it would not move downtown “but for” the TIF. It has tens of millions of dollars in cash and has sold billions of dollars in stock. The CEO and COO were paid a total of $5 million in 2014. It has stated that it doesn’t want to pay prices of working downtown and wants city taxpayers to pay the costs that are normally paid by other corporations.

3. The project will be constructed on the lot behind the Madison Municipal Building (MMB) and the current Government East Parking garage on East Wilson St. (GE ramp). The value of this land has been appraised at more than $11 million. Under this proposal, the City will give the land at no charge to the developer. These two prime real estate sites have never been offered for sale to a private developer so the amount of the potential revenue and the nature of the development are unknown.

4. The basic lease between EXAS and JDS LLC would be 15 years. However, for a fee, EXAS can terminate the lease after five years. The vast majority (90%) of new biotech firms are out of business within five years. If this firm runs out of funds, is purchased or simply seeks to move, it would leave 250,000 SF of Class A (expensive) empty office space. This is a site larger than the offices of the City-County Bldg. This would reduce property values throughout downtown (rather than increase them as projected.)

B. Parking ramps

1. There are two parking garages planned under this proposal. One is the rebuilding of the 600-space GE ramp from revenue from the Parking Utility. At the same time, we will build and lease a $21 M parking garage for Dunn with these terms: $170,000 per year rent for 650 parking stalls. The rent is unchanged for 27 years. After 27 years, Dunn will pay the city $4 M for its purchase! The business plan indicates that Dunn will charge 10 times the rent that he pays the city for the same space. He predicts that he will net $1.6 million in the first year and up from there.

2. The private garage will be built below the city Parking Utility garage and cross Pinckney Street and occupy part of the office building. It can and most likely will charge below municipal fees for monthly and hourly parking. Because Government East has revenue of about $2 million per year, the loss of revenue there will seriously impede if not jeopardize our efforts to replace the other ramps over the next 10–20 years.

The simple math anticipates a very bad outcome for the Madison Parking Utility. Of the 650 private spaces, it is likely that less than 200 will be occupied by EXAS due to high rates of bus/bike commuters. The hotel will not be built for up to two to three years and when it is built it will occupy on average about 100 spaces. This leaves 350 spaces available to the current users of the Municipal ramp who will be happy to pay lower rates for below-grade parking.

3. The potential profits from this garage—built with no TIF loan—are enormous. They are so great, that the profits will be used to pay off the debts of the hotel and the office building. Thus, although the city is not lending the money for the office and hotel, it is creating such a favorable deal for the garage that those private loans will be paid virtually with public funds. Indeed, for the next ten years, Dunn projects that 98% of the profits from the garage will be used to pay the debts of the hotel and garage.

C. The hotel

1. The key element of the initial RFP for JDS was to build a 300–400 bed hotel. Three other respondents to the RFP included such a hotel in their proposals. JDS LLC proposes building a 215–room hotel. The developer has also requested up to three years to build such a hotel.

2. The city has requested that the developer require that the operator sign a Labor Peace Agreement for employees. At this time, the developer has not agreed to require such an agreement that would recognize a union based on a card-check of qualified employees.

3. There have been substantial questions raised concerning the need for a new hotel considering that over 500 hotel rooms have been built downtown since the last of three consultant reports called for more hotel rooms to support Monona Terrace. Data indicate that few Monona Terrace events require more rooms than are currently available downtown.

4. The developer, JDS LLC (Bob Dunn), is the co-owner of the Edgewater Hotel, which had requested $17 million in TIF from the City prior to its construction. Currently, the hotel  has up to $10 million in liens against it from contractors. In consideration of its myriad financial problems, there have been questions raised about the commitment of the developer to building a hotel that would directly compete with its existing financially strapped operation.