LATEST NEWS - FROM THE COUNCIL MEETING LAST NIGHT
Clear introduced the Edgewater TIF resolution which is sponsored by Clear and Mayor Dave by title only and reads:
Title
Authorizing the Mayor and City Clerk to execute a development agreement to fund a
$16,000,000 Tax Incremental Finance Loan to Landmark X, LLC (“Developer”) to assist in the development of the Edgewater Hotel redevelopment project.
Fiscal Note
A fiscal note will be completed when relevant financial information becomes available.
Note, they made a procedural error in introducing this. It requires a 2/3 vote and they did not take one.
2.05 INTRODUCTION OF BUSINESS.
(1)(b) Any business to be referred may be introduced from the floor, and if no fiscal note is prepared, will be referred to the comptroller for a fiscal note. Introduction of any matters by title only or without a fiscal note shall require a two-thirds (2/3) majority vote. Any matter introduced from the floor shall be either (i) referred to the next Common Council meeting for action or (ii) automatically referred to the next Common Council and be placed on the agenda as if for introduction, solely for the purpose of additional referrals.
Additionally, you should note that this is by title only because something is going on and Hammes and the City have not been able to reach an agreement on the term sheet which is required to write the resolution to be introduced. I guess we'll have to stay tuned.
TIF REQUEST ON EDGEWATER PROJECT ONE VS TIF REQUEST ON EDGEWATER PROJECT TWO
First of all, I can't for the life of me understand why the project can change, the costs change and the TIF remains $16M. The first version of the project (TIF application) and the version where they knock two stories off the new building and the 70s building (2nd TIF application) and its still $16M. That seems statistically impossible. It seems even more implausible after the TIF Coordinator went through various other poorly thought out scenarios where the TIF goes as high as $44M. (See page 6)
Here's a breakdown of application one vs. application two. Remember these are the numbers as provided by the developer.
Costs of the project according to developer
- Square footage of project 87,990 vs 88,992
- Cost to purchase 666 Wisconsin Ave (Edgewater Hotel) and National Guardian Life property $8.5M and $7.5M. I believe the $1M difference comes from a $1M drop in the purchase price of the hotel from $5.5M to $4.5M)
- Total Land Costs $9.9M vs. $9M
- Sq Footage of New Hotel 289,468 vs 216,769
- Rooms 228 vs 180-192
- Underground Stalls 364 (420 w/valet) vs. 233 (275 w/valet)
- Demolition costs $1.4M vs 1.5M (wow, taking two extra stories off the 70's building only cost $100,000 more in demolition costs?)
- Sitework $4.4M vs $3.2M
- Hotel Redevelopment $53.1M vs $38.5M
- Parking Structure $8.45M vs $4.9M
- Total Hard Costs $65.9M vs $46.6M
- Architecture and Engineering $4M vs $2.7M
- Site and Environmental $350,000 vs 295,000
- Testing and Inspection $330,000 vs $270,000
- Marketing and Collateral $750,000 vs $550,000
- Project Management $2.66M vs $1.88M
- Other Professional Services $1.22M vs $840,000
- Taxes and Insurance $690,000 vs $480,000
- Permits and Regulatory $290,000 vs. $225,000
- Miscellaneous $340,000 vs $180,000
- Financing Costs $2.66M vs $1.5M
- Total Soft costs $14.55M vs $8.95M
- Total Project Costs $90.4M vs $64.6M
Every single cost went down, except the cost to the city. It remained $16M.
Gap in the cost of the hotel according to the developer
- The project goes from being valued at $86M to $42.3M
- The Debt Coverage Ratio goes from a 1.5 to 1.73
- The Loan to Value % goes from 61% to 71%
- They go from borrowing $52.5M to $30M
- Equity goes from $33.5M to $30.9M
- Total sources goes from $86M to $61M
- Total uses goes from $90.4M to $64.6M
- The gap goes from $4.4 to 3.5M
Those last numbers should have dropped the TIF request to $15.1M if you look at gap for the hotel alone.
Operating Revenues according to the developer
- Hotel Revenue for 2012 $15.9M to $11.7M
- Restaurant Revenue for 2012 $6M to $341,000 (Holy Crap! That's a HUGE drop)
- Spa Revenue for 2012 $1.5M to $86,000 (Again, holy crap!)
- Total Revenues $23.5M to $12M
Those are some MAJOR drops in revenues. Were the first numbers that inflated, or the new numbers that skimpy?
Operating Costs according to the developer
- Hotel Expenses $9.7 to $7.2M
- Restaurant $4.5 to 0??????
- Spa $1M to 0?????
- Property Taxes $1M to $800,000
- Insurance $209,000 to $200,000
- Total Expenses from $16.5M to $8.7M
- Net operating income $6.8M to $3.5M
CITY COSTS FOR PUBLIC SPACE AND PARKING
Second, based on the information in the latest presentation, I'm unclear why they are attributing $29.3M to the public access costs. $17.9M public and $11.4M allocated to the Hotel costs. (According to page 2 of Thursday's TIF presentation, but I think those numbers are backwards.)
According to the developers numbers (page 2 here) and the staff numbers (page 7 under public access numbers and private costs allocated) we see the following:
The costs are divided into public access costs and private development "public improvements" in the base building. I'm totally unclear what that includes and no one asked. The "public access" is $17.9 with the city paying for $12.5M. The "private costs" are $11.4M but the city is paying for $3.5M. Total, the City is paying for 55% of these costs. The way it has been explained is that $4M is parking, which I think is the $3.5 in the developers application for the city's share of the private costs. But none of the numbers add up correctly.
What is clear is that the city is expected to pay the following:
$1.2M for landscaping and site restoration
$500,000 for site utilities
$8.1M for the "Mansion Hill Terrace and Gardens"
$2.2M Grand Stair and Waterfront Access
$900,000 Waterfront Improvements
That is in addition to the parking costs (?)
$1.8M for earth work
$800,000 for Demolition
$2.4M for soft costs
VALUE OF THE HOTEL
Third, based on research done by others, the valuation of the hotel seems a little off. Check out the comparisons to other hotels in the are and that are somewhat comparable. The first number is the assessment, the second number is the number of rooms and the third number is the assessement per room.
Edgewater Existing $5,336,100 107 $48.870
The Concourse 18,224,900 356 51,194
Inn on the Park 4,276,700 212 20,173
Hilton Monona Terrace 20,407,800 240 85,033
Campus Inn 2,975,700 74 40,212
Double Tree 4,913,000 163 30,141
Total 51,848,100 1,152 48.728
The Pfister, Milwaukee 32,700,000 307 106,515
American Club, Kohler 23,048,700 240 96,036
The Saint Paul, St. Paul 11,500,000 254 45,276
The Drake, Chicago 19,260,514 535 36,001
Fontainebleau, Miami 220,000,000 1,504 146,277
107,826
Edgewater Proposed
Low Value $43,000,000 190 $226,316
Medium Value 45,000,000 190 236,842
WHO'S PAYING BACK THE TIF
Kristin Czubkowski covers this issue well. But the $16M loan appears to be paid back by Hammes/Edgewater paying $6m and the rest of the TIF district paying back the remaining $10M.
QUESTIONS THAT SHOULD HAVE BEEN ASKED
This will have to wait until tomorrow . . . Enjoy the information and let me know what you are interested in knowing!
Everyone should be aware that when we say that "the TID district is paying back the remaining $10 million" that represents $10 million that could otherwise go into the general fund to reduce our current taxes or pay for City services.
ReplyDeleteIn other words, the Mayor is willing to line Hammes' pocket to the tune of $10 million that could otherwise be used to reduce our taxes or pay for City services. The Mayor does so even though, for example, he threatened to close about a half-dozen ice skating rinks around town for a lack of a measley $38,000 to maintain them.
The final kicker is that the so-called "public" terrace will NOT be public because the draft contract is written so that Hammes is allowed to close the terrace at-will for private events (which, at a hotel, will be every weekend for weddings).
To the previous poster: "Everyone should be aware that when we say that the "the TID district is paying back the remaining $10" that represents $10 million that could other wise go into the gneral fund..."
ReplyDeletePoint of clarification. Technically TIF can only be used if, without that use of TIF, the project wouldn't otherwise occur. By extension, without the use of TIF that money wouldn't be available to go into the general fund.
Now, we can debate whether or not the Edgewater proposal could occur without TIF assistance and therefore if, or how much, it should revieve; but I believe making an arguement against the use of TIF because of what the TID revenues are being used for is clouding the waters. Because again, if TIF is being used properly then without TIF there would be no new property tax revenues available for the general fudn.
To Anon. #2 -- We could open a separate TIF district, rather than adding Edgewater to TID #32. (One actually part of the physical proximity of the Edgewater.) Then, we could close TID #32 and start putting the $1.5 million surplus from TID #32 back into the general fund to reduce taxes or pay for other city services.
ReplyDeleteHowever, if we did this, the Mayor could not say that the $16 million Edgewater TIF loan will be paid back in 6 years. Notice how he says that all the time? Six years?
The Mayor wants the taxpayers to think that the Edgewater TIF loan will be paid back in 6 years without telling everyone that, to do so, the taxpayers will have to pony up $10 million on behalf of Hammes.
You see, telling taxpayers to wait 16 years to recoup the added taxbase doesn't sound so great. Hence, the hocus pocus.
The inordinately high assessed values per room, suggest to me that Hammes doesn't expect to make much money off of the Edgewater as currently proposed.
ReplyDeleteI suspect Hammes hopes to improve their return on investment when in a few years they propose to build a 100 room addition on the east side of the new tower.
This would explain why they are so adamant about not providing setback from Wisconsin Avenue and not moving the tower just 30' east over their new loading dock.
It would also explain why Hammes has located the elevator banks for the tower on the east side of the tower closest to lake.
ReplyDeleteNo other explanation exists for such an off-kilter location of the elevator banks other than the location becomes centrally located with the addition of a new, large wing to the east.
When's the last time you saw elevator banks in an highrise hotel that were way off to one end of the building?
Brenda, your analysis shows us that this developer is pulling numbers out of his ass. He can't wait to get his grubby hands on that $16 million, and the mayor can't wait to hand it right over to him.
ReplyDeleteThere is nothing in this project that deserves even half the amount he requests, but they won a key battle when they got Mayor Dave in their back pocket.
Time to find ourselves a new mayor.
The sharp drop in projected restaurant & spa revenues and zeroing out of related operating costs makes me think they decided to turn the restaurant & spa over to tenant businesses.
ReplyDeleteYeah, that was my guess too. But then there should be rental income right? You think the $318,000 and $86,000 is rental income?
ReplyDeleteWOW Brenda - amazing!!!!
ReplyDelete