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Friday, December 19, 2014 |  Madison, WI: 26.0° F  Overcast
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Judge Doyle Square proposals arrive just as state threatens to strip Madison's hotel room tax funding
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Mayor Paul Soglin has called it the biggest project the city has ever attempted.
Credit:JDS Development

Two development groups have submitted detailed proposals for the massive Judge Doyle Square project in downtown Madison just as the Wisconsin Legislature is proposing to strip the city of its main mechanism for funding Monona Terrace -- hotel room tax revenues.

Judge Doyle Square -- which Mayor Paul Soglin has called it the biggest project the city has ever attempted -- is being proposed primarily to benefit the Monona Terrace Community and Convention Center by adding a headquarters hotel on the same block as the Madison Municipal Building, across the street from the center. But the project has many other components, including underground parking to replace the Government East Garage, offices, retail and housing.

Four development groups originally were interested in the project, which could near $200 million. But only two were asked to submit detailed proposals by Monday's deadline: JDS Development LLC (which includes Hammes Co., which is now renovating the Edgewater Hotel) and the Texas-based Journeyman Group.

The proposal offers two different development options, one that would convert the city-owned municipal building into a 308-room hotel and public food court and another that would build the same-sized hotel behind the municipal building. Converting the municipal building would save the city $20 million in financing, JDS argues. Much of the savings would come from being able to build more surface parking, which is cheaper than underground parking.

In its preferred option, JDS would move the city offices currently located in the municipal building into 80,000-square-feet of office space it would build where the Government East Garage is now located. If JDS is allowed to use the municipal building for a hotel, its financial plan calls for roughly $50.9 million in city financial help in a project that would cost slightly less than $160 million. Without the municipal building, it would require more than $67 million in financial aid for a $190-million project. JDS did not name a hotel operator, but listed several it has worked with in other projects.

The Journeyman proposal would leave the municipal building as city offices and proposes building behind it a 352-room Marriott Hotel with a restaurant and bar, and 18,200-square-feet of meeting and convention space. It would also build 11,680-feet of retail, 52,190-square-feet of class A office space and 134 residential units. In its financial plan, the group wants $46.7 million in tax incremental financing for the project.

Both developers would build around 1,000 parking spaces, a mixture of surface and below-ground parking on both blocks. As requested by the city, both groups would build a "bike center" for the project -- Journeyman proposes a full-service Trek store with showers and changing rooms; while JDS would start with a self-serve center that could evolve into a full-service store, depending on demand.

But Republicans in the state Legislature last week threw a potentially massive monkey wrench into these plans. Both branches introduced a bill that would strip the city's ability to decide how it uses revenues from hotel room taxes.

Room taxes (an 8% charge on all hotel rooms) have long been the main mechanism for funding Monona Terrace. The revenues have paid for the debt to build the center and provided a healthy operating subsidy.

In 2013, room taxes are expected to generate $10.4 million for Madison -- of that more than $6 million is earmarked for Monona Terrace and another $2.2 million will go to the Greater Madison Convention & Visitors Bureau, which helps promote the center.

Under current state law, 70% of the room tax revenues have to be used to promote tourism, promotion and development activities, according to Nick Zavos, an aide to Mayor Soglin. Senate Bill 301 (and Assembly Bill 385) would require that the city turn 70% of its room tax revenues over to an independent commission established within each municipality, which would decide how the funds are used. A commission could continue to fund Monona Terrace, but there's no guarantee that it would, Zavos says.

Zavos says he's unsure why the changes are being proposed. "The way communities spend that money is really varied, but it's all legitimate," he says. "What's the problem we need to address? We really haven't gotten a clear picture of what the abuse is."

Calls to two of the bill's sponsors, Sens. Robert Cowles (R-Green Bay) and Luther Olsen (R-Ripon), were not returned.

"It'd be absolutely devastating to the Terrace," Zavos says. "With the current levy limits, it's not like the city has any ability to make up this funding."

The city could still give its 30% cut of the room taxes to Monona Terrace, but that would only make up about half of the current city subsidy. Says Zavos: "You cut that chunk of x-million out of the budget there's no place to make it up."

It isn't just Monona Terrace that could suffer. Smaller portions of the room tax fund Rhythm & Booms, the Overture Center, and the annual Wisconsin Interscholastic Athletic Association boys' basketball tournament.

The Legislature will hold a hearing on the bill at 2 p.m. Wednesday, Oct. 2, in room 328NW at the Capitol, Zavos says.

Ald. Mike Verveer says this type of legislation has been proposed in the past, as the state tourism industry tries to get more control over room tax dollars. Verveer is hopeful the proposal will again be defeated, but says if it passes, it could certainly hurt funding for Judge Doyle Square, depending on who sits on the commission.

Says Verveer: "Local innkeepers are not exactly excited to see their competition subsidized by the government."

Meanwhile, the process for selecting a developer for Judge Doyle Square moves forwards. Over the next two months, a committee will evaluate the proposals. JDS representatives will be interviewed Oct. 14; Journeyman on Oct. 16. A recommendation is expected to go to the Common Council in December. Negotiations with a developer would take place early next year.

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