By Keene Winters
The problem is solved! Or so that is what city officials would have you believe. The March 27th announcement of Rainy Investments, LLC, as the new financer and co-developer for Mike Frantz and Quantum Ventures, LLC, is supposed to be the fix. Frantz now has the money and the team to move forward with summer construction on the east riverfront project.
But, it should be remembered that similar pronouncements have been made about the additions of Barker Financial, LLC, and Jason Sharkey as the CEO of Quantum Ventures. Could the third investor be the charm — the one that sticks and really has money?
After a long series of unfortunate events, some council member have grudgingly admitted that the developer selection process was flawed. The initial Request of Proposals (RFP) only produced two bidders. Then, no one on the staff did the background checks before the bidders presented to the council. Note that the problem being acknowledged is that the city did a poor job of selecting a developer. How has that been fixed?
Instead of a “fix,” we have had a rolling cover-up. I believe that the public documents released by the city suggest that city staff knew Frantz did not have the financial backing to go forward, and tried to cover for him, hoping he could pull things together. Then, it appears, the city would be off-the-hook for what now appears to be a sloppy and unprofessional recruitment and selection process.
This begins in December of 2016, with the first of three payments made by the city on behalf of the developer. The three are as follows:
- A $290,078.50 check dated 12/27/2016 to Wausau RiverLife, LLC, for the building design by Mudrovich Architects.
- A $68,884.00 check dated 7/24/2017 to Baker Tilly for the business plan.
- A $13,500.00 check dated 7/21/2017 to Ayers Associates for engineering work on the site.
Then there is the curious text of the Board of Public Works meeting from July 20, 2017, a meeting where City Attorney Anne Jacobson is absent and Finance Director Maryanne Groat and Public Works Director Eric Lindman are the only listed participants:
Groat explained [to Lindman] that developer payments are considered by the Board of Public Works, which gives the City Attorney a chance to review [them] and the opportunity to review the developer agreement. It also allows for transparency on [sic] payments. This payment, [(presumably the $290,078.50 to Wausau RiverLife, LLC),] is based on preliminary costs that Frantz encountered on putting together the construction plans. . . The architectural drawings would become an asset of the city if the project does not go through. There are signed consent forms that assign the product to the City of Wausau . . .
Lindman asked if future payments would be brought to the Board as they come in. Groat confirmed [that they would] and stated that all developer payments are considered by the Board of Public Works. She added that this payment will be made today as they [sic] have been waiting for some time.
However, documents indicate that this check was actually written seven months prior to this meeting. No motion is made to pay $290,078.50. Additionally, no mention of it is made in Board of Public Works minutes from November or December of 2016.
A second observation is that this check was written to Wausau RiverLife, LLC, a company formed by Frantz back in December of 2016. I was unable to find any resolution or records of approval for Wausau RiverLife to be a party to the developer agreement along with Frantz Community Investors, LLC, (FCI).
However, there is more going on here. Running the payment for architectural designs through the newly formed Wausau RiverLife instead of through FCI is a plausible strategy to keep the money from being subject to claims which were mounting in Green Bay. Furthermore, city officials took the unusual step of securing ownership of the developer’s building plans in case “the project does not go through.” This contrasts sharply to the public show of confidence in the developer usually projected by city staff.
The July 20, 2017, minutes of the Board of Public Works concluded with the following statement:
Lindman moved to approve the developer payment to Baker Tilly Capital, LLC, in the amount of $68,884 and to Ayers [Associates] in the amount of $13,500. Groat seconded [it,] and the motion passed.
Of course, as pointed out in Tuesday’s Wausau Pilot and Review story, neither Baker Tilly nor Ayers are the “developer.” These payments are bypassing the developer’s LLCs and going straight to the subcontractor. This muddies the waters on who is working for whom and who is liable for future payments. The city has a procurement policy. It should not be paying people hired by someone else.
There are a couple more troubling observations. Note that Baker Tilly’s financial projections for FCI were available for a review by Ehlers in June of 2016. This debt appears to be more than a year old. Also, the payment to Ayers is only $13,500. That is not a lot of money, and still it went unpaid.
In the end, it seems that the fall-out from Mike Frantz’s Northland Hotel Project in Green Bay was crippling, especially to Frantz Community Investors, LLC. Based on the evidence reviewed, I believe city officials knew it and went out of there way to secretly help Frantz pay his bills and allowed him to go through a series of re-incorporations to save face over the flawed selection process. I also believe that city officials have been less than candid with the council and the public about what they knew and when they knew it.
In my opinion, the chronology of this project suggest that the city council has been ill-served by the senior staff and the mayors who were supposed to supervise them. When the city put out an RFP and only got two responses, staff represented it as a huge success. Despite problems with his project in Green Bay, Mike Frantz was allowed to present to the city council with no background check or caveats from staff.
When Frantz hired Mudrovich Architects to do the building plans and Baker Tilly to do the business plan, the city ended up paying both bills after they went unpaid for months. The staff then tells the council that this is a normal “pre-development loan” and nothing to worry about.
In August 2017, Frantz introduces Barker Financial as his new partner and dissolves Frantz Community Investors. On September 5, 2017, Community Development Director Chris Schock suggest it might be good idea to add Barker to the developer agreement now that they are partners (which was a really good idea since the city now had agreement with a non-existent entity). A swift seven days later there is resolution before the council to replace FCI with Barker in the developer agreement. Another bullet is dodged.
But it seems that Barker is just a placeholder. In five months, Mike Frantz is ushered back with a new limited liability company, Quantum Ventures, to replace Barker. The change in LLCs is represented as a normal “finalizing” of the capital structure, and the role of Barker is described as having been a “bridge financer.” The city’s senior staff affirm the representations, urge a yes vote, and breath a sign of relief when they get it. They’re back in business.
Clearly, nothing about this saga is normal. I predict that things are only going to get worse until the city council drops its go-along-to-get-along mantra and starts confronting the executive branch about its failings and lack of candor. Checks and balances do not work if the legislative branch just get rolled.
The council needs to get smart. To effectively counter-balance all the expert staff that report to the mayor, the council should hire an administrator who reports directly to them.
Editor’s Note: This is one in a series of opinion editorials by Keene Winters on 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 [email protected].
