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Wednesday, August 20, 2014 |  Madison, WI: 76.0° F  A Few Clouds
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Union Corners on course again
Gorman & Co. sign agreement with city to develop in four phases
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The first attempt to develop Union Corners stalled in 2007, leaving a huge empty lot on East Washington Avenue.
Credit:Linda Falkenstein

Aaron Olver sees Union Corners as an important entry point to the city.

"As East Washington curves around and lines up with the Capitol downtown, this is really the site that feels like the gateway into the isthmus," says Olver, director of economic development for the city of Madison.

In the months to come, the gateway is about to be transformed.

Almost six years to the day after the first Union Corners project halted, the city of Madison and developer Gorman & Co. have signed a letter of intent setting the terms for a new mixed-use, phased neighborhood development on the 11.4 acre site at the intersection of East Washington Avenue and Milwaukee Street.

Development is still in the conceptual phase, but the letter of intent, based on Gorman's initial proposal (PDF), opens the possibility for a UW Health clinic, a public library, retail and office space and a restaurant, along with multiple residential units and parking.

When first proposed by developer Todd McGrath in 2003, Union Corners project was pegged as the city's largest urban infill project to date. The ambitious plans called for clearing the multi-block site of existing structures, including the Rayovac factory building. But in 2007 the development stalled in a sour housing market. Since then the large lot has sat empty, an eyesore to many and a painful reminder of a development gone bad.

"The neighborhood has been waiting for the promise of this property to come alive," says Ald. Marsha Rummel, who has represented Dist. 6 since 2007. "So I think there's a lot of goodwill and interest in moving this forward, and excitement too."

Unusual deal

Given the city's history with the site, the letter of intent employs an unusual approach to transfer the Union Corners land from the city to Gorman, says Olver.

The city itself has already invested heavily in the site, he explains: $2.8 million for public infrastructure improvements and an additional $3.6 million to purchase the land from M&I Bank in 2010.

To offset the city's investment, the letter of intent requires that the Gorman development guarantee $6 million in new property taxes for the city. The city, in turn, reduces upfront costs for Gorman by selling the land for $1.

In essence, this deal represents a $6 million TIF (tax increment financing) loan from the city to Gorman without any cash changing hands. The exact terms of the TIF repayment by Gorman will be set in a separate TIF loan agreement. The $1 sale price is a net gain for both Gorman and the city, according to Olver. He sees the arrangement as one that caps the city's exposure while still facilitating development at Union Corners.

Olver notes that while the arrangement is unusual, it is not without precedent. The city worked out a similar deal in 2005 when it sold the former SuperSaver grocery store on Verona Road, at a loss, to a developer who converted the space into affordable family housing. Gorman was also the developer on that project.

Other terms of the deal are also a bit out of the ordinary. Rather than requiring a personal guarantee, per normal city TIF guidelines, the letter allows Gorman to parcel off portions of its $6 million guarantee to other entities. But, says Olver, "those entities will have to have the assets and net worth to back that guarantee."

Mayor Paul Soglin is especially proud of the letter's reversionary clause, which stipulates that if the development is not phased in as planned over the next five years, any undeveloped land would revert to the city for $1. Soglin calls that a "critical" piece of the deal.

Development phases

The first phase of development calls for a 60,000-square-foot medical clinic, followed by construction of 50 to 100 residential units with parking. The third phase would feature construction of a mix of retail and office space that could accommodate a public library, along with more residential units and parking. Phase four calls for more retail, a restaurant and potentially more residential units.

Gary Gorman, CEO of Gorman & Co., is committed to putting all the elements together in a cohesive plan. "It won't be four phases in isolation -- we do have to plan how they move and work together."

Soglin says the first phase -- the relocation of the UW Health clinic from East Towne to Union Corners -- is vital to the success of the development. "There is no question that Gorman or the city could not do the project without the clinic."

Olver agrees: "The clinic alone will produce over $5 million of [tax] increment. Just locking in the clinic will get the city about 85% of the way towards recovering all of our debt."

The clinic, adds Gorman, would also provide "a spectrum of jobs" and bring "traffic into the neighborhood, which will feed the retail."

Concerns

But not everyone is excited about increased traffic to the neighborhood, which will likely be car-based. Moreover, says Rummel, "We always have this love-hate relationship with parking."

Rummel thinks installing a multilevel parking structure at the clinic instead of a surface parking lot might be one solution.

Gorman says such feedback from the neighborhood has been an ongoing, significant contribution to Union Corners' development. "The community has been really involved for years, ever since Todd McGrath worked on the project."

Because of community input, for instance, his plans make sure that the buildings along East Washington Avenue "don't create a wall -- that it appears welcoming."

Rummel says the relationship between her constituents and Gorman & Co. is one of mutual respect: "They [Gorman] have a vision that fits the neighborhood, and that the neighborhood supports."

Before construction begins, the letter of intent needs to be approved by the Common Council.

Rummel will introduce a resolution to the council on July 2 that names Gorman & Co. the developer of Union Corners, authorizes the execution of a purchase and sale agreement and incorporates the terms and conditions in the letter of intent.

The Board of Estimates and the Plan Commission are expected to act on the resolution July 8, and the Economic Development Committee will take action on a date yet to be determined. After the resolution passes through those legislative bodies, the Common Council could take it up as early as July 16.

Once the sale agreement is approved, Gorman will be able to submit land-use and TIF applications, which he says his company "will be pursuing as rapidly as we can."

Despite the excitement over Union Corners' potential and eager anticipation of the start of construction, Soglin understands the project's significance and is committed to keeping a steady course.

"This is one of the largest public/private partnerships the city has ever done," Soglin says. "We'll be focused on this as it evolves in stages over the next three or four years."

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