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Cutting Through the Red Tape

There are still skeptics, but the city of Madison's initial moves to improve its review process for commercial development projects have been greeted enthusiastically by developers, and more change is forthcoming.

Facing a tax roll with more than 50% of its property off limits, and fiscal realities that have prompted Mayor Paul Soglin to call for budget cuts, the city is taking steps to shed its reputation – fair or unfair – as hostile to commercial developers.

Perhaps it was the fiasco that was the Edgewater Hotel review, or the vows of some developers to never again do business with the city, or an economy that's still not firing on all cylinders, but the city's process makeover is welcome news in the construction and development business.

Even George Gialamas, who wasn't shy when hammering Dane County's land-use policies under former County Executive Kathleen Falk, believes the city is taking a step in the right direction. "It's a small step, but it's very important," said Gialamas, president and CEO of the Gialamas Co. "The city wants to start working more collaboratively with developers. I think it took a hard hit [the recession] for all of us to realize we're on the same team."

Concrete steps

Tim Cooley, the city's former economic development director, and now capital development director for the Wisconsin Economic Development Corp., summed up the complaints he's heard from developers. "What they said was that it's too convoluted, it takes too long, and is subject to the whims of individuals who have little knowledge of what goes into a successful building project, especially defining developments," Cooley stated. "There's not an appreciation of cost and risk associated with the additional time needed to work through the labyrinth of the process, or the additional costs involved in trying to meet the demands required in the process."

All that could be changing. Steve Cover, the city's director of planning and community and economic development, believes Madison has gotten a bum rap over its process, noting that more than 90% of development proposals have received approval during his brief tenure, and several more are in the pipeline.

The process changes, the result of an internal review conducted by city staff, will occur in two phases. The first series, which does not require Common Council approval, is highlighted by the creation of a city design team, within Cover's department, that will review larger projects before they are submitted for approval.

"In other words, it will be an informal review to make sure, from a design standpoint, that a project is on the right track before it's even submitted, which we know will save a lot of time and cost for the applicants," Cover said.

Also in Phase I, the city will eliminate multiple applications for its commissions, meaning that if a project is routed through its Urban Design Commission and the Plan Commission, the applicant will only have to fill out one application form, not two separate forms.

In addition, the city will include economic, fiscal, and tax incremental finance analysis as part of its reporting on projects, which is something it's never done. "That will communicate to boards and commissions and the council what the economic impacts are of each project," Cover said. "We don't prepare reports for the Urban Design Commission, and that has caused some problems in that when a project goes to UDC, the discussion is wide open.

"We will also be providing staff for these boards and commissions so they are not just note takers, but people that will be guiding and assisting the boards and commissions."

Cover is not in a position to disclose much about Phase II changes, but he's looking to build more efficiency into the processes of the Plan Commission, UDC, and Landmarks Commission.

While the city's attempts have not gone unnoticed by developers, not everyone is convinced of their ultimate value. Cooley believes the influence of neighborhoods has to be reined in or any worthwhile process changes will be undermined.

In addition, with nearly 100 commissions, committees, and task forces together with dozens of neighborhood associations with their own committees, subcommittees, and task forces, he said process improvement initiatives can be eviscerated and diluted to protect entrenched interests.

"The reality is that investment, talent, and innovation don't care about city, state, or, increasingly, national boundaries,"

Cooley remarked. "They go wherever it makes the most sense to do business. The same holds true with the Madison region and the city of Madison."

Cooley stressed that he is not being critical of city staff, which he characterized as very professional, interested in moving appropriate projects through as efficiently as possible, and possessing the expertise "to do much on their own." The culprit, he contends, is the overall city political culture of looking at things to death and wanting to accommodate every last person who has any opinion, bias, or passing fancy.

"We have to be careful in Madison, with small aldermanic wards, as you have alders talking a lot about their neighborhoods, but they must take a wider look and realize they are impacting a city," Cooley said. "They are also representing an entire city, and it becomes politically problematic for them. Some actually try to micro-manage staff and insert themselves into what should be an executive branch process and decision."

Cooley uses the term "proportional input" among neighborhoods, developers, city staff, and elected officials. "If the neighborhood wants to have its say, so be it. They should have an opportunity for input, but to tie it up for months on end at the neighborhood level because you're afraid to go anyplace else or the alder tells you it's not going to happen without the neighborhood's buy-in, that seems to be usurping the power of the city to make land-use decisions."

Local attorney Joseph Boucher, who serves as chairman of the city's Economic Development Committee, acknowledges the criticism of Madison's past development review process, but noted the challenges of economic development in urban settings have not prevented active development. He cited the low residential room vacancy rate in downtown Madison and a spate of emerging projects like Ruedebusch Development and Construction's redevelopment plans for the Royster-Clark property.

"Urban areas have, by definition, more complications than raw land in the middle of Green County," Boucher noted. "That's just the way it is, but look at the development in Madison. It's all over the place."

Suburban sensibilities

Given the spirit of regional cooperation that has been fostered by groups like Thrive, suburban officials are reluctant to criticize Madison's process or boast about taking advantage of it, but many have taken steps to make their approval process as efficient as possible.

For the most successful proposals, the key appears to be getting historic preservationists and neighborhood groups to weigh in early in the process or run the risk of costly delays when the proposals reach municipal committees. Neighborhood input can be embedded in the municipal planning process, where master plans are designed based in part on neighborhood preferences, and as part of a developer's initial steps toward introducing project concepts.

With the right project vetted by city administrative staff and neighborhoods, many suburban communities say all the necessary approvals could come within 30 to 60 days of formal plan submission. Projects that require rezoning or conditional use permits can take additional time, but communities have worked to ensure a predictable schedule of approvals rather than the tabling of projects for another 30 days, which results in costly delays.

Mike Davis, administrator for the city of Middleton, said city planning staffs always "put it on" the developer to meet with neighbors before submitting a concept plan. "That seems to work pretty well for us," Davis said. "Obviously, we have conflicts with neighbors on occasion, but the earlier the meetings take place, the better."

While neighbors can demand changes that make projects less economically viable, Davis said most of the developers Middleton has encountered are interested in working with neighbors to come up with better projects.

Suburban municipalities also review their ordinances and comprehensive plans to look for opportunities to modernize. Gregory Frahm, director of economic development and planning for the Village of DeForest, said his community has been neglecting process re-evaluation but now is "diving in head first."

The deep end of the pool starts with identifying everything that requires a conditional use permit (CUP), which triggers the need for a public hearing and multiple public meetings. The exercise will help the village identify which items should fall into the CUP category due to issues like traffic, land-use compatibility, and use of dangerous chemicals, and which items can be changed to a "permitted by right" designation, which requires no public review for the land-use piece.

Frahm acknowledged that such efforts take significant staff time but are worth it if one decent business comes to the area because of a more efficient process. No community should compromise its quality-of-life integrity, but he said more process does not necessarily mean a better result.

"Some ordinances have been on the books for 15 or 20 or 25 years, and they are no longer applicable," he stated.

With an economic development strategy based on public-private partnerships, the city of Fitchburg already has staff teams, including the mayor on certain projects, that meet with applicants to work through any technical issues and help them finalize their applications, according to Mike Zimmerman, economic development director for the city.

He said the city's approach to cutting through red tape also involves outreach to brokers, developers, contractors, architects, lawyers, and accountants. "We reach out to the development community to let them know about opportunities in Fitchburg so when they are working with prospects, they know what is available," Zimmerman said.

Tiff over TIF

Also yet to come are city staff recommendations for changing the city of Madison's controversial tax incremental financing policy, which has placed more conditions on the use of such financing. Cover declined to specify the eventual recommendations but indicated they will be announced in a few months.

Carole Schaeffer, executive director of Smart Growth Madison, is enthusiastic about the changes the city is making to its development approval process but agrees the TIF policy needs more work. She cited one particularly glaring example of conditions the city places on TIF projects, one that's an anathema to developers and, she contends, puts the city at a competitive disadvantage with neighboring communities.

She said that under the so-called "equity kicker," the city gets paid back twice what it invests in a TIF project. "Let's say there is a $3.4 million TIF and they close it 20 years later. Not only do you pay back the $3.4 million, you have to write a check for another $3.4 million when you close the TIF, or when you sell the property," Schaeffer explained. "The city gets paid back twice what they invested. You don't have that in other communities."

The origins date back to a previous project in which the developer made a killing, Schaeffer explained, and the city felt taken advantage of and wanted to "participate in the upside." So instead of being satisfied with the increased tax base that is the purpose of TIF, the city created a disincentive to growth, she said.

With attractive suburban options for developers and new residents, Schaeffer has called on Madison to rethink its policy. "You're already dealing with that kind of competition," she noted, "and now you're dealing with a policy like this equity kicker."

MIG & Arbor Hills: Partners in Economic Development

If there is a model for developer-neighborhood harmony in Madison, it might be the process that led to the construction of Arbor Gate. The ingredients for this story of peaceful (and mutually beneficial) co-existence are many: a developer, MIG, that drilled deeply into neighborhood preferences long before plans were brought to the city, a neighborhood that coveted the right kind of development, and neighbors who took a realistic attitude toward the possibilities and maintained constant communication throughout.

In truth, MIG had a head start, since it had been in communication with neighbors for more than three years prior to submitting plans for Arbor Gate. A previous development proposal, Landmark Gate, had been introduced for the area, but it had to be scuttled after the state Legislature passed a law related to the city's ability to redevelop at-risk commercial areas.

Neighbors, who wanted a quality development on the frontage road along the Beltline off Todd Drive, wanted MIG to continue pursuing a development to replace the unattractive, free-standing buildings that populated the area in question. MIG partnered with Sean Baxter, president of Westwind Associates, to craft a new development, and neighbors assisted with ideas on traffic, tenant mix (restaurants, retail, and office), improved lighting, and the treatment of structured parking in the rear of the buildings, which would be situated between the frontage road and residences.

That way, when the Arbor Gate proposals were vetted with city reviewing bodies, the neighbors had MIG's back and vice versa. Thirty to 40 residents, who had become familiar with MIG President Brad Hutter at neighborhood meetings designed to flesh out the details, would attend city meetings and surprise alders with their strong and vocal support.

"I remember they would groan audibly if an alder would say something they thought was undermining the project," Hutter said. "It sent a strong message to have the council chambers packed with people in the neighborhood who were all holding hands and singing 'Kumbaya' with developers."

Sheri Carter, resident and spokesperson for the Arbor Gate Neighborhood Association, said MIG was willing to incorporate some items from the neighbors' "wish list," including the restaurant that turned out to be Bonfyre American Grille, but they took a realistic approach, especially when the economy turned south.

They did not get the coveted hotel or bank branch they wanted, but Carter has no complaints about the way it turned out. To keep neighbors apprised of the development and the process, the Arbor Hills Neighborhood Association used a combination of leaflets, Internet communications, and newsletters to communicate with its roughly 600 residents. About 30% were members of the association before the Arbor Gate development was proposed, and that percentage grew as they became vested in the project.

Heading to City Hall as a united front enabled the new partners to fend off suggestions to build Arbor Gate buildings right up to the sidewalk, with no parking lot in front, like on Monroe Street. "I think they were shocked when we came back up and challenged that," Carter said. "That is not what we wanted."

Carter would not diminish the clout of Madison's neighborhood associations, but her advice to any neighborhood that wants to work with a developer is to be realistic. "The neighborhoods need to recognize that if they have areas that need improvement, that have sat vacant for quite some time, they have to be open-minded when the developers come in," she stated. "They can't say, 'Well, we all have one-story houses so we just want you to build a one-story plaza.'"


2012 Commercial Space Guide


Getting a read on Greater Madison's commercial real estate market remains a tricky proposition. As the economy gains inches instead of acres, it's hard to know whether it's a tenant's market or a landlord's market, or if some equilibrium has been achieved in the various submarkets that comprise Dane County.

Whether or not area landlords are still willing to negotiate lease terms, as they were at the height of the recession in 2009, seekers of space can get an idea of what properties have room for them, and at what asking price, by perusing the hundreds of listings in the 2012 Commercial Space Guide.

The 2012 Guide offers IB readers a cross-section of properties available in Dane County as of July 16, 2012, most according to PropertyDrive.com.

The list is divided into three primary sections: Office Space, Retail, and Industrial. Each section is further divided into five geographic areas within the county: Dane County East, Dane County West, Madison East, Madison West, and Madison Central. Within each area, properties are listed according to the maximum square footage available, from largest to smallest.
 

Click to download the complete list of over 650 available properties in an Excel spreadsheet.

Sign up for the free IB Update – your weekly resource for local business news, analysis, voices, and the names you need to know. Click here. If you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.

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