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Epic Systems: Epic decision
The company's siting choice has profound and troubling implications for the region

Credit:S. V. Medaris

First published May 17, 2002

Where do you work?

Do you have an office with a door to shut out the world? Are you in a semi-private cubicle, or an open-space seating plan? Are you hunkered down on the factory floor? Or behind the sales counter?

For most of us, where we labor is usually less important than what we do. But at Epic Systems Corp., the fast-growing medical software company, concern for the work setting is at the forefront of corporate planning.

Epic's insistence on a horizontal workspace for its 700 or so employees, with an artful mix of private and group space in a pastoral campus setting, is turning out to be the first major land-use decision of the new century in Dane County.

The company is uprooting itself from Madison's west side, where it occupies the old Odana School, 5301 Tokay Blvd., and five satellite sites. These include buildings in the University Research Park and substantial rental space at nearby Westgate Mall.

With lavish financial assistance from Verona, Epic (after rejecting competing sites in Madison and Fitchburg) will build a consolidated campus on 346 acres of farmland near the Sugar River on Verona's southwestern edge. Site work will begin this fall, with the campus to open in 2004. The price tag? At least $45 million.

The move seems destined to influence housing patterns, commuter trends and commercial growth for decades to come. Already, there are two proposals for "big box" regional retailing in Verona, a bedroom community with only small-town shopping.

"It's sprawl on an Epic scale," says County Supv. Brett Hulsey, who works for the Midwest office of the Sierra Club.

Epic's siting decision has ominous implications for Madison as the city approaches the end of its age-old pattern of growth by annexation. Madtown is beginning to be boxed in by its neighbors and by the sheer constraints of geography -- just like many faltering central cities in the Midwest and East.

Think Milwaukee.

"We're not going to be able to compete for companies that exist on 300 acres," predicts David Cieslewicz, executive director of the land-use group 1000 Friends of Wisconsin.

"Over the course of the next five to 10 years, we're going to run out of land to annex," he says. "This will be a historic change for Madison. The loss of Epic may be the first shot fired in this new battle."

What's not to like?

Making Epic the bad guy in a land-use morality play is overly simplistic. The company, by most accounts, is everything that Madison and Dane County want to encourage in commerce. Now in its 23rd year, Epic is a textbook example of how a little tech company nurtured in the shadow of UW-Madison has grown to become a leader in its field.

Epic designs and sells integrated electronic software packages for doctors and hospitals. Programs that schedule appointments, chart treatments, record test results, send out bills and more. Are you due for a Pap smear? Epic's patient software generates that sort of report.

Founded by Judith Faulkner in 1979, the company has annual sales in the $70 million to $80 million range and employs upwards of 700 people, according to chief operating officer Carl Dvorak. The company remains privately held, with the staff sharing the success -- about half of the employees are enrolled in the company stock plan, he says.

"We like this kind of employer," says Mark Bugher, who runs the University Research Park. "They hire university graduates. They hire quality employees. They're a nonpolluting industry that produces a quality product. And they pay nice salaries.

"Moving to Verona is not like moving to Illinois, so there's some comfort in that," Bugher adds, reflecting a widely held view. "But still, these are the kind of companies you hate to lose."

In more ways than one.

"The overall environmental impact of Epic's decision to relocate has to be negative," says Rob Kennedy, a transportation consultant and member of the Regional Plan Commission. "It will dramatically increase the amount of driving. It will dramatically increase the amount of land consumed.

"There's no way you can do campus-style office buildings and pretend that you really care about the environment," he continues. "I'm sorry. You can't say you're 'green' because you have a solar panel on your roof, when you're sitting out in the middle of a cornfield."

Kennedy and others would like Epic to move downtown, to settle in the east rail corridor or along East Washington Avenue. How about the Mautz Paint property? Or the office tower at 222 West Washington Ave. that Alliant Energy is abandoning?

Savvy tech companies like Epic should have an affinity with downtowns, says Cieslewicz, citing the research of economist Richard Florida, who argues that both bohemian and techie types are drawn to the same cultural and lifestyle amenities. Want to recruit bright new talent to your enterprise? Put it downtown where the coffee shops, little bars, music clubs, distinctive neighborhoods, bike paths and buses are, Cieslewicz suggests.

"We have to show companies like Epic the attractiveness of locating in real urban places, or else we're out of the ballgame," he says.

But to Dvorak, this reasoning does not compute. The last thing Epic wants to do, he says, is to stuff its staff "like sardines" into downtown Madison.

Room to move

Indeed, Epic's move to Verona is all about space. It's about how a company heavily invested in research and development agonizes over the work environment for its tech-minded creative staff.

"Vertical space doesn't give you as much as horizontal space does," says the soft-spoken Dvorak. He's at Epic's Tokay Boulevard headquarters, explaining the company's decision to build a low-rise campus in a park-like setting. "We didn't want to pack people in the way they do downtown.

"It's hard to articulate, but people don't interact the same way in a five-story building as they do in a two- or three-story building," he says as he begins a walking tour of the old school, which has been dramatically updated and expanded.

It's a great space, with art on the wall, rich wood accents and an open, almost ranch-house design that lets the sunlight flood in. Staffers have their own offices so they can do the heavy lifting of software development uninterrupted. (Epic etiquette: Come in if the door is open, stay out if it's closed.) One of the conference rooms even has a fireplace. In the back, behind a modest parking lot, is a big swath of greenery, Odana School's old park, that adds to the calming campus setting that Epic so desires.

The problem is that Epic has outgrown its 117,000 square feet at Odana and has sprawled into those five satellite sites.

"It's really a painful, painful thing from the productivity standpoint," says Dvorak of the time lost to commuting between buildings. "To build these large integrated computer systems, we really want our people right next to each other, to be able to ask one another questions, to work as a team."

Hence the desire to bring everybody under one roof, not just for the immediate future, but to have the expansion room to satisfy Epic's space ambitions for the next 25 years. The Verona site would do just that, and a lot of people think it's exactly the right project to go there.

Even the town of Verona, which agreed to the city of Verona's annexation of the site, supports Epic's plan. Though members of the Regional Plan Commission raised questions about sprawl, they too voted for it, including Kennedy. (It's questionable, though, on what legal basis the RPC could have rejected the extension of Verona's urban service area to include the Epic land.)

Indeed, there's a strong case for the Epic project fitting well there. The project, which calls for more than three-fourths of the land to remain vacant, is seen as the perfect endpoint of Verona's western development as it transitions to the Sugar River floodplain.

This is environmentally sensitive land, overlooking the river valley and the popular Military Ridge bicycle trail. In the distance are the rolling hills of Blue Mounds. It's a gorgeous site. But the shallow bedrock and the soil types pose drainage problems and construction challenges, according to the Regional Plan Commission's analysis. The river, meanwhile, is considered an "exceptional resource water" by the state, and its protection is a high priority.

For Epic, with its idyllic vision of building a creative commercial enclave in the countryside, this is all fine. It has signed a pledge that no more than 20% of the land will be developed, that extensive environmental corridors will be preserved, and there will be no West Towne-like sea of asphalt parking; Epic will build a nine-story parking structure.

Epic's architects, the Seattle-based Zimmer Gunsul Frasca Partnership (which counts Microsoft as a major client) and the Cunningham Group of Minneapolis, try hard to be reassuring about its yet unrevealed design. In testimony before the RPC, architect Patrick Gordon lifted a page from Frank Lloyd Wright's theory of organic architecture as he explained how the site itself "would inform" the architects on how to design the Epic complex.

"It's a site that has an aspect of intimacy and enclosure around the trees and natural features. It's a site that has prominence and view," he said. "We fully intend not to alter that site in a negative way.... We think our buildings ought to really enhance the site. That's the fundamental attitude we bring to the [design] process."

Secondary impacts

The project sounds great, but the problem is that Epic's campus won't exist in a bubble. Its secondary impacts on housing, traffic and shopping patterns will be substantial, longstanding and growth-inducing. One land-use planner predicts there will be heightened housing pressure on the driftless (unglaciated) area of the county and beyond, as Epic employees seek to build on environmentally sensitive bluffs and valleys west of Verona.

Epic's projection for an eventual 2,000 employees, meanwhile, will generate 7,000 auto trips on an average workday. (The nearest Madison Metro bus stop is four miles away.) The project plan requires immediate construction of a new on/off ramp from U.S. 18/151 and other roadwork as well.

These secondary impacts sound pretty darn good to Verona Mayor John Volker. "We know there will be a lot of spin-off that will help our commercial development in Verona," he says. "Epic rents 200 motel rooms a week for training, so we'll likely be looking at a new motel that will be on our tax rolls. They have catering, they have copying. They'll have 700 employees, so naturally at noon hours and coming to work and at quitting time, it will help our whole economy -- groceries, gasoline, restaurants, everything.

"It's almost scary the ancillary things that will go with Epic," the mayor says.

Simultaneously, Volker reports that the city's moribund technology and commerce park, at the intersection of 18/151 and County PB, is suddenly drawing interest from two "big box" developers, Continental Properties and the Livesey Co. Both are interested in creating regional shopping attractions, including possible home-improvement, variety and department stores.

It's not difficult to imagine a whole new vortex of growth being generated by Epic in the next decade in the greater Verona community. It's also not hard to imagine how it could drain life from the metropolitan core, namely Madison.

Whether Madison ever had a real chance to keep Epic is open to question. Interviews with city officials and a review of correspondence show that the city worked hard to keep the software vendor in town, but in the end Mayor Sue Bauman and the Board of Estimates concluded that they could go only so far in offering land and a subsidy for Epic to stick around.

The city tried to interest Epic in a northeast site near the airport, but most of Epic's employees live on the southwest side. Last August, the city formally proposed a site off Mineral Point Road on South Point Road in a new industrial park, but it wasn't enough.

"We as a city did not have the amount of land they were looking for," says Bauman, who like her staff was uneasy about turning over an entire commercial park to one tenant. "In some ways it flies in the face of what an urban setting is," she says.

Other Madison players were also making a pitch. Bugher wanted to put Epic in a new university research park on the west side. George Gialamas, whose Old Sauk Trails was the first big office park in town, was trying to find Epic a site as well.

"There just wasn't enough land for them," says Gialamas. "There's a shortage of good parcels to develop in Madison. This has been a problem for quite a while now. I hope [Epic's departure] is a kick in the pants to get the city thinking about annexing large parcels of land."

Perhaps the most intriguing idea came early on. It was for Epic to stay in place, to build in the park behind its headquarters and buy and redevelop nearby Westgate Mall for its corporate purposes. Talk about a novel urban infill project! But the city wouldn't bite.

"What I heard from the Epic people is that if they had gotten city assistance to purchase Westgate Mall and that rather underutilized park behind them, they probably would have stayed," says Bugher. "I don't want to be critical of the mayor, because there are other angles, other issues."

There were: Giving Epic exclusive rights to the park was unacceptable, says Bauman. Supv. Hulsey, though, thinks the infill idea should have been pursued: "When you have a struggling mall like Westgate with a big parking lot, that's a classic redevelopment opportunity. We've got to make it easier for folks to redevelop there as opposed to pushing them out to Verona."

Whatever the merits of the Westgate park option, Epic soon began to look outward for a new space -- a big, big site of the sort that we don't see around Dane County . A minimum of 160 acres. To put this in context: The biggest tract Gialamas has sold at Old Sauk Trails (all but 50 of its 486 acres are developed) is 25 acres.

Or compare Epic's suburban move to Alliant Energy's. Alliant left its downtown headquarters to build a new 325,000-square-foot building in the American Center on Madison's far northeast side. This was done on 25 acres and includes room for a 135,000-square-foot expansion, according to Alliant.

Epic, when it began shopping sites in Madison, Fitchburg and Verona, said it wanted to build a 300,000-square-foot complex, with perhaps another 200,000 square feet to be added in a second phase in six years or so.

That's 160 acres for Epic versus 25 acres for Alliant for building roughly comparable square footage.

"To take 160 acres and just develop on 40 of it doesn't make a lot of land-use sense for Madison," says city real estate manager Don Marx. "They were after something we wouldn't do."

Unanswered questions

Madison also wasn't willing to dig as deep into its wallet as Verona. Not by a long shot. The city offered about $1 million in infrastructure improvements and staff time for the Mineral Point/South Point site, but said that TIF -- a developer subsidy known formally as tax increment financing -- "is neither politically nor financially feasible at this time."

Verona, in contrast, will pay a small fortune, to the point that the city's officials admit to some nervousness over their investment. Verona has pledged to pay for $11.1 million in site improvements through 2008. The TIF tab rises to $14 million when the city's interest costs are added.

That investment will be repaid from the new taxes generated by the development. (During the life of a tax increment district, other governmental bodies, notably the schools, receive none of the new taxes.) If the new taxes exceed the city's expenses, the excess will be applied to paying off another Verona subsidy -- a $9 million tax-free bond to finance the parking ramp. City administrator Larry Saeger predicts that Verona will wind up paying about a third of the ramp's cost.

It will take 23 years -- the maximum allowed by law -- before Verona recaptures all of its investment and the Epic property is returned to the tax rolls.

Madison officials quietly shake their heads at how deeply Verona has bankrolled the project. What happens if Epic tanks, if it's Enronized? As strong as the company's financial performance has been, it's not an unreasonable question. Companies rise, companies fall. Epic, for instance, recently beat back a potentially ruinous federal lawsuit filed by a competitor alleging that it had stolen trade secrets. What other travails await it?

"I'd be lying to you if I didn't say there was some risk [to Verona's subsidy]," says Mayor Volker. "I always tell my guys it's like Richard Petty says: 'If you're not a little scared, you're not driving fast enough.'"

Is that the best way to do economic development?

Is Epic in Verona the best outcome for the Dane County community?

The best outcome for the environment?

For the taxpayers?

For Epic?

For Madison?

Volker says in a perfect world development would be done on a metropolitan basis in Dane County. Madison would share Verona's costs in serving Epic's expansion, and share in the new tax base as well.

Gialamas backs a countywide approach, so the cities and towns and villages aren't constantly fighting one another. Mayor Bauman agrees that a better way must be found.

Nobody sounds like they expect anything to happen soon -- except ground being broken for Epic's new home.

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