By Shereen Siewert
WAUSAU — City leaders this week took no immediate action on a proposal for for a mixed-use development in downtown Wausau that would require roughly $2.5 million in incentives from the city.
Instead, members of the economic development committee on Thursday directed city staff to continue discussions with Lokre Companies about the plan.
The $6 million proposal calls for construction of a four-story, 42-unit high end apartment building at 120 Scott Street with underground parking and ground floor retail space. The initial proposal requests the city sell the land to Lokre for $500,000, provide a $250,000 grant for site work, and provide a $99,000 reverse TIF payment annually for 12 years, according to city documents.
A reverse TIF payment at $99,000 annually for 12 years means the city would provide the developer with more than $1.12 million over the course of the agreement.
The city purchased the property from McDevco in April 2016 for just over $1.6 million, which means the transaction would result in an immediate $1.1 million loss. But council member Tom Neal, chair of the economic development committee, told Lokre representative Victor Anderson at Thursday’s meeting that the committee likes the look of the building and recognizes the positive addition to downtown the project could make.
Before the committee went into closed session to discuss the proposal, Council President Lisa Rasmussen asked Economic Development Director Chris Schock whether the city’s $1.6 million debt on the property would become immediately due upon the sale of the parcel.
Schock said he believes the financing agreement would allow for making annual payments to satisfy the debt. “It would not be due upon the project sale,” Schock said.
But city documents show the financing agreement does call for immediate payment of the note upon redevelopment.
Under the terms of the financing, approved by the council in 2016, the city agreed to pay the Alexander Foundation annual interest-only payments with one principal balloon payment after 10 years, with an interest rate of 2.75 percent for the first five years. The loan term described in the document is the “shorter of the life of Tax Increment District Three, the redevelopment of the property, or 10 years.”
The proposal comes just days after Moody’s Investor Service downgraded the city’s credit rating from Aa2 to Aa3 amid concerns over the city’s mounting debt. Mayor Rob Mielke, in an email Friday to Wausau Pilot and Review, said the downgrade was “not as bad as one might think.”
The downgrade was discussed earlier this week during a finance committee meeting. Finance chair Lisa Rasmussen told Wausau Pilot and Review on Friday that Wausau’s financial advisor indicated that the Aa3 rating is expected to improve once large development projects currently planned and in progress are completed.
“While the committee discussed the issue in detail, they did not see it as cause for immediate alarm based on how rapidly a large number of projects have taken off in a short span of time, as some short term impact to the rating was expected when we reviewed the debt last summer and approved some restructuring to transfer the utility debt to the utility and off the city’s burden,” Rasmussen wrote.
“While that is a plus, among the other diversification we did in the debt structuring, it will take time, and patience to realize the benefit.”Pages from ECON_20160308_Packet