By Keene Winters
Sequels are a dicey business. Usually, to merit a sequel, the original has to have been good. That means what follows has to clear a pretty high bar of expectations. So, let us see if this letter to the voters of Wausau can top the tale of how city money was frittered away on the Quantum Ventures deal.
Readers may recall, that the original opinion editorial exposed how Quantum Ventures, the successor to Frantz Community Investors was given conditional grants totaling $2.74 million dollars to construct two buildings on Wausau’s riverfront destine to be worth about $5.9 million. The deal essentially builds-in a huge windfall profit on the developer’s expected investment of $3.16 million. And, the developer still gets to own, rent and maybe sell the buildings.
No one involved in creating this deal has, as of yet, agreed to provide a compelling explanation of why so much corporate welfare was needed to attract a developer to our prime urban waterfront.
Now, if you thought the Quantum Ventures give-away was inexplicable, then hold on to your hat. The deal cooked-up for Wausau Chemical surpasses it in every way.
By the numbers, it is much larger. The city agreed to provide Wausau Chemical with what amounts to a conditional grant of $7.95 million (called a forgivable loan in the term sheet, embedded below) and about $150,000 in free land. That is $8.1 million all together. In return, Wausau Chemical was obligated to do basically three things: (1) establish a facility in the industrial park with a minimum assessed value of $7 million, (2) pay property taxes on the new property for seven years and (3) hand-over their federally-designated Superfund Site to the city for taxpayers to fund the demolition and clean-up. At very least, Wausau Chemical is getting 115% of the taxable value we expect them to create. Plus the city is absorbing the the financing costs and the clean-up costs. How is that for corporate welfare? The corporation is putting up zero dollars.
Not only is it more expensive than the Quantum Venture deal, it is also less justifiable. There was no pressing reason to move Wausau Chemical. The company did want to move. The site had an established monitoring routine. There are no developers waiting in the wings. On the contrary, we had enough trouble getting just two replies to the request for proposals to build on the 16 acres of clean and green riverfront south of Bridge Street. It is a mystery to me why, at a time when the city’s resources were stretched thin and there was already so much open land on the riverfront, city officials would open this can of worms.
And while city government shifted focus to Wausau Chemical in 2016 and 2017, it turned its backs on the Wausau Center Mall. Now, with all the anchors and several more stores gone, the mall is weaker than ever.
Moreover, the city really did not have the money for this move. The last $18 million it has borrowed—including the $7.95 million for Wausau Chemical—has been in bond anticipation notes (see below). Bond anticipation notes are used as a patch when an entity would have trouble issuing more bonds. The lender gets a higher interest rate on a five-year, interest-only loan that has a balloon payment of 100% of the principal in Year 5. They are called bond anticipation notes because it is anticipated that the borrower will have to borrow more money to make the balloon payments in 2022.
Does anyone think interest rates will be lower in 2022 than they are now? Does anyone think the city’s bond rating will be better in 2022? It is clear where this is headed.
What’s the plan? How will this massive borrowing and corporate welfare benefit regular citizens? Will it trickle down into subsidized jobs and places to live?
Now, more than ever, we need to hear from the architects of this plan. Alderperson Tom Neal, Chair of the Economic Development Committee, and Alderperson Lisa Rasmussen, Chair of the Finance Committee, need to lay-out a competent argument for all of this borrowing and spending, which originates in their committees. The voters are waiting to hear how this investment will payoff.
Editor’s Note: This is the fifth in a series of opinion editorials by Keene Winters on what he sees as flawed decision-making at city hall. Winters served as an alderman in Wausau from 2012-2016. Opposing viewpoints are welcome; email guest editorial submissions and letters to the editor at firstname.lastname@example.org.Hypertext 3