Madison, Marcus Corp. intensify
talks on hotel to serve Monona
By DEAN MOSIMAN
March 23, 2009
City officials are speeding up negotiations with a developer on a major hotel to serve Monona Terrace — a controversial and costly proposal that would use the landmark Madison Municipal Building.
The hotel would be the centerpiece of a complicated redevelopment over two blocks that would add perhaps 320 hotel rooms, likely connect them to the convention center by skyway or tunnel, restore the Municipal Building, provide new parking facilities and deliver a separate mixed-use project with new city office space.
“We’re communicating on a weekly basis, sometimes more frequently,” Mario Mendoza, aide to Mayor Dave Cieslewicz, said of talks with Marcus Corp. “There’s a lot to be excited about, but we’re not there yet. We don’t know for sure that a deal is a go.”
While some in the hotel industry oppose any city subsidy toward another private hotel, a new study says a hotel close to Monona Terrace is vital to ensuring its long-term success.
“If another hotel isn’t built, we’re concerned about falling further behind our competition,” Monona Terrace Director Jim Hess said. “It’s critical for the future of Monona Terrace and Downtown Madison.”
Marcus, based in Milwaukee, opened the 14-story, 236-room Hilton Madison at 9 E. Wilson St. next to Monona Terrace in 2001 and has first option to build across the street in a parking lot behind the Municipal Building or the adjacent Government East parking garage site. But that hotel has never been viewed as big enough to consistently draw large conventions to Monona Terrace.
‘A complicated deal’
Marcus officials could not be reached to comment for this story but have confirmed the company’s interest in a new Downtown hotel project. Mendoza said the biggest challenges are financing and figuring out how the city and hotel would share a parking garage. The hotel and parking portions of the project alone are worth an estimated $78 million; the city hasn’t estimated the value of the mixed-use project across the street.It’s not clear if or how the city might help Marcus make a project economically viable, Mendoza said.
The city could reduce the cost of the property, appraised at $11.7 million, or use tax incremental financing (TIF) to help with the parking garage or skywalk.
“It is a very complicated deal,” Mendoza said, adding that the sides should know if a project is feasible in the next few weeks.
If the city and Marcus can’t make a deal, the city would likely move ahead with planned improvements for the Municipal Building, keeping it for city employees, and build a municipal parking garage behind it.
If a deal is struck, the redevelopment could start in 18 months to two years, Mendoza said.
City officials and others in the business community contend the $67 million convention center, based on a Frank Lloyd Wright design and opened in 1997, is losing business because it can’t offer enough hotel rooms nearby.
A new study by Hunden Strategic Partners of Chicago and funded with $40,000 in room tax money supports that view.
The study said Madison’s current hotels don’t meet the needs of convention planners or match what they can get from competitors. Just two hotels — the Hilton and Best Western Inn on the Park — are within the industry standard of 1,200 feet of the convention center, it said. The number of conventions at Monona Terrace doubled after the Hilton opened in 2001 but have stagnated at about 70 per year, Hess said. The new study estimates that since 2001, the city lost 81,000 attendees with an economic impact of $50 million due insufficient hotel space near Monona Terrace.
Hunden recommended a 400-room hotel, which it estimated would result in 117 more events at Monona Terrace, 200,000 more attendees, $8.2 million more in net revenues, and $4.6 million more in room taxes between 2012 and 2016. Site constraints forced negotiators to scale that back, but the impact is still likely to be significant, backers say.
“It’s been one of our key issues,” said Deb Archer of the Greater Madison Visitors and Convention Bureau, which supports a new hotel but is neutral on the question of a public subsidy.
Public money questioned
Marcus was able to secure public financing for the existing $31.2 million Hilton — a move that was controversial then for the same reason the new proposal is today. Marcus got $9.5 million in TIF support and $1 million for a pedestrian bridge between the hotel and convention center. Stephen Zanoni, general manager of The Concourse, 1 W. Dayton St., the city’s biggest hotel with 356 rooms, said he worries a city subsidy through land or TIF would unfairly draw customers from existing facilities.
“We’re not against the hotel being built. We are against the city subsidizing it,” Zanoni said, noting that the Concourse recently made $3.5 million in renovations.
Ald. Mike Verveer, 4th District, who represents the core Downtown, said he supports the concept of a new hotel but has heard from operators who oppose a subsidy.
“I’m opened minded,” Verveer said of a subsidy. “I would hope it’s not necessary.”
City Council President Tim Bruer said that while the city may be reluctant to directly finance the hotel, there are parts of the development where the city and Marcus have a mutual interest that may merit subsidy.
This could be an invaluable spark plug,” Bruer said. “The city absolutely needs to completely explore every avenue.”
Possible phases for a new Downtown hotel:
- Marcus Corp. would acquire the Madison Municipal Building block, appraised at $11.7 million.
- The city would build a parking garage behind the Municipal Building. Early talks called for an 800-space ramp (600 for the city and 200 for the hotel), but negotiators may now be discussing something smaller.
- The city would move employees from the Municipal Building to a temporary location.
- Marcus would refurbish the Municipal Building, a neo-classical revival style building built in 1927 and on the National Register of Historic Places. Marcus would use it as the main hotel entrance and locate ballrooms, meeting space and perhaps some guest rooms there. A hotel tower would be built above the new parking garage and would likely be connected by skywalk to Monona Terrace.
- The city would demolish the 450-space Government East parking garage across the street and build a multi-use project including three floors of city office space.