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Re-development of $98 million Edgewater Hotel, Madison, Wisconsin
at Risk by Lawsuit that Developer, Hammes Co., Claims is Frivolous

By Dean Mosiman, The Wisconsin State JournalMcClatchy-Tribune Regional News

July 25, 2010--The developer proposing to remake the historic Edgewater hotel is lashing out at residents challenging the project in court, saying a "frivolous" lawsuit is putting the $98 million redevelopment, jobs, tax revenue and other benefits at risk.

The residents insist the lawsuit seeking to overturn the City Council's approval of the project has merit, likely will succeed, and that only Mayor Dave Cieslewicz can negotiate a settlement.

Speaking publicly about the litigation for the first time, Hammes Co. President Robert Dunn said the lawsuit by Fred Mohs and Eugene Devitt and a potential appeal are preventing him from obtaining financing and stalling the project, and he intends to seek damages from them "in the millions."

Dunn, who made the comments to the State Journal editorial board last week, said Mohs, a prominent attorney, developer and property owner, is defying the council and community. He did not focus on Devitt.

"Fred, almost on his own, has decided they're wrong and he's right," Dunn said. "The project is being put at risk by one individual. I can't go buy concrete. I can't go buy steel. Time is our enemy."

In a separate interview, Council President Mark Clear, 19th District, who supports the redevelopment, echoed Dunn. "Fred's only goal is to delay and get this to the point where it's impossible for (Hammes) to continue. I have some concern that may happen," Clear said.

Mohs disagreed, saying, "The point of the lawsuit isn't to hold up the project. It's to resolve issues" over whether the council followed the law.

Devitt could not be reached.

Ald. Mike Verveer, 4th District, who represents the area next to the site and voted against the project, said Mohs and Devitt are acting responsibly. "I'm not going to criticize my constituents' right to have a court review the council's actions. I think a lot of my Downtown constituents and folks throughout the city would be disappointed if this opportunity is not taken."

Cieslewicz, a project supporter, is confident the city acted properly.

If there is an appeal, the lawsuit could take up to two years, City Attorney Michael May said.

Hammes wants to restore the 1946 hotel, cut the size of a 1970s addition and build a public terrace atop it overlooking Lake Mendota, create a staircase to the lake and erect a nine-story hotel tower. The hotel would have up to 190 rooms, up to 10 condos and 355 underground parking spaces.

The project, Dunn said, will deliver a community asset, open the waterfront to the public, bring hundreds of jobs, and generate tens of millions in tax revenue in a tough economy.

Opponents, including a Mansion Hill neighborhood steering committee and the Madison Trust for Historic Preservation, have concerns about the height and size of the hotel tower, the distance the new hotel would sit from the street and other issues.

Meanwhile, Scott Faulkner, the hotel's general manager, whose family has operated the property since it opened in 1948, said uncertainty about the hotel's future is hurting business and "just killing my family."

Overturning the decision

Mohs and Devitt, members of the Mansion Hill steering committee, filed a lawsuit on June 17 asking the Dane County Circuit Court to overturn the council's granting of a Certificate of Appropriateness for the project, required under city law because the property is in the Mansion Hill Historic District.

The council, in a marathon meeting May 18 and 19, voted 14-4 with two not voting to overturn a city Landmarks Commission decision on May 10 to deny the certificate because the project is too large. The council's first-ever reversal of the commission was among five land-use, financial and other approvals given at the meeting, which lasted 12 hours and ended at 7:40 a.m.

The lawsuit claims the council failed to apply the correct rule of law, acted arbitrarily, and made findings and issued a decision to reverse the Landmarks Commission not supported by substantial evidence.

"Tackling all these knotty issues in one meeting was a very unfortunate and unproductive way to handle such an important public issue," Mohs said. "We are entitled to (bring a lawsuit) and should do it."

Under the lawsuit, the city must assemble a record of the council's decision, which includes a transcript of relevant parts of the council meeting and an estimated 2,000-page paper record of the council's review, which should be done in August, May said.

The sides will then submit briefs, the court can ask for arguments, and the court will issue a decision, probably in the fall, May said. The lawsuit will become more specific after the record of the council's decision is provided, Mohs said.

Mohs said he'd consider a settlement but Cieslewicz is in the position to broker a deal.

"This started in the mayor's office," he said. "It got here by being political. (The mayor) proved he could stand up to us. It takes two to tango in this deal. The mayor has the choice of rolling up his sleeves."

Cieslewicz said he tried to avoid the lawsuit but Mohs kept escalating demands, ultimately asking that the new hotel tower be moved. But that was not possible because it would restart the entire city review process, the mayor said.

May said the plaintiffs have made no settlement offer and Cieslewicz declined comment on whether he would become engaged in talks.

Planning to seek damages

Dunn said costs for borrowing and construction are likely to change for the worse but couldn't say if or when delays might kill the project.

He said Hammes is likely to join the city in defending the lawsuit and he is exploring how to seek damages from the plaintiffs.

"If you want to be an obstructionist, you can be an obstructionist," Dunn said. But "we're being harmed here. Fred knows that. It's our intent to seek recovery of damages. You're talking about millions of dollars."

The vow is not a threat, he said, adding, "They're the ones who presented a frivolous claim. This man has made a disgrace out of Madison."

Mohs said, "I'd be worried if I were bringing an illegal lawsuit, but I'm not. This is permitted. It's part of our democracy."

Verveer added, "I don't know what legal grounds Dunn would have. Many of the delays have been caused by the development team themselves."

Regardless, Dunn can continue to proceed with tasks required for a final building permit as the lawsuit unfolds, Mohs said.

Among things to be done, Dunn still must get commission and staff approvals for project details, taxing entities must enlarge the State Street tax incremental financing district to include the Edgewater, and the council must authorize a second $8 million in TIF assistance.

Dunn said he's proceeding with some tasks, but it makes no sense to do expensive work until the lawsuit is resolved.

"My patience is starting to wear a little thin," he said.


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