Opponents of the Edgewater Hotel project's city loan squared off with city staff and developers Monday on the eve of what could be the project's final showdown.
The informational meeting was held to discuss plans for the city to chip in $16 million in tax incremental financing for the new and renovated hotel. That subsidy would go to help build a public plaza leading down to Lake Mendota, which accounts for about a third of $98 million redevelopment.
"The city is putting $16 million into a $34 million asset that will be open to the public," said Hammes Co. developer Bob Dunn. "The size of the public terrace is somewhere between the Memorial Union and Monona Terrace, with direct access to the water."
Dunn said the hotel, if approved, could have its opening in fall 2012.
Members of the Madison Common Council, many of whom were at Monday's meeting, will vote Tuesday on the TIF subsidy. This vote is just one hurdle of many that the project needs to clear before moving forward. But some see the funding as the key component that will determine the fate of the hotel.
"I think the $16 million plan is the largest and toughest question for my colleagues, yet it requires the lowest vote threshold with a simple majority [11 alder] vote," said Ald. Mike Verveer. Other votes on tomorrow's agenda include an effort to override a Landmarks Commission denial that will require a supermajority of 14 votes.
Opponents have criticized the TIF funding since it will draw from revenue beyond what the Edgewater project generates, including commercial development at University Square. Said city TIF coordinator Joe Gromacki, "The stand-alone TIF district wouldn't be able to support the indebtedness."
The current downtown district is scheduled to run out and fulfill its payments in 2015, but adding the Edgewater project would extend its life until 2019.
Uneasy alders with sticker shock over the $16 million took aim at the risk involved over the payback period. City staff and Dunn emphasized the large $43 million equity figure investors have agreed to inject into the project upfront.
"In terms of equity leverage, it's the most we've seen in quite some time," Gromacki said. "We usually see 5% to 10%, and that's not terrible. This particular project is going well beyond the call of duty to put money into the project."
Dunn also stressed the large equity, and pointed to the Concourse Hotel as a comparable example with double the amount of rooms but less than half the tax revenue generated as the Edgewater project.
"You have a number of protections that I think give the city an incredible high level of security," Dunn said. Since it is not considered "self-supporting," the project will require an exception to the city's TIF policy.
Several alders hammered city staff and Dunn about a plan to sell condominiums in the top two floors of the new structure. Opponents worry that the reduced number of hotel rooms will throw off projections for the TIF agreement.
"I still don't understand how their analysis is accurate," said Verveer, citing a city rule change in 2009 that restricted any investment in condo projects. "They looked at it as a traditional hotel; we're pretending in city hall that there won't be any condos."
But Gromacki explained that the city weighed just the hotel rooms in its calculation, and the added condos will not significantly alter the data. Dunn said the condo revenue will go directly toward the public plaza portion of the project and help with cash flow.
The full council will meet Tuesday at 6:30 in room 201 of the City-County Building. It's expected to be a long one. Verveer said the latest he remembers a meeting going was 6:30 a.m., when the city upheld a public smoking ban. "We could definitely still be there at that time Wednesday morning."