By Shereen Siewert
City officials in Wausau are considering a plan to borrow $4.7 million to fund the first step in a sweeping plan for what is now Wausau Center mall, a property no longer owned by taxpayers.
The new incentives push the city’s expected participation in the mall project to more than $6.3 million.
This is not the first incentive from Wausau, and the project’s managing director said publicly that the ask would “probably not” be the last chunk of funding required to achieve the final vision for the property. The Wausau City Council in October approved a proposal by WOZ to purchase the Wausau Center with $1.6 million in taxpayer-funded incentives that included a $1 million forgivable loan and transfer of city-owned assets to the LLC for $1. Those assets include the former Sears building, which the city purchased in 2017 for roughly $650,000.
The official plan, unveiled in July, includes building hundreds of residential and office units, more than 80,000 square feet of retail space, a public market, outdoor beer garden and a spiral bridge connecting the mall property to a year-round farmer’s market on River Drive.
If the plan moves forward, the mall will shut down Jan. 31 with demolition beginning shortly afterward, according to city documents.
Wausau Opportunity Zone, Inc., or WOZ, in February purchased the financially troubled Wausau Center mall from Rialto Capital Management. The acquisition does not include HOM Furniture or the two parking ramps connected with the mall, in downtown Wausau.
Wausau Finance Director MaryAnne Groat, who is also a voting member on the governing board of WOZ, said the city will likely borrow the funds on a shorter-term basis, funding a $3.5 million demolition grant and $1.2 million in street improvements in 2021.
“This would provide the financial resource to pay the bills,” Groat said.
The first payment on this shorter term financing would be in due in 2022. The city would structure debt retirement payments to match the expected increment from Tax Increment District 7, which currently is operating in the red and is not expected to make a profit until 2023. At that time, TID 7 would become a “donor district” to retire the debt that year, Groat said.
The initial agreement between WOZ and the city also included projected future annual $327,000 developer payments. Those those annual payments would be eliminated when the $3.5 million developer grant is finalized.
Perceived conflicts and a tough sell to taxpayers
City officials could face an uphill battle when selling the idea to taxpayers, many of whom have expressed concern about Wausau’s role in financing such a project, given that no developer dollars are on the table. Concerns are also building about a potentially overbuilt luxury market, as well as the impact TID project funding would have on operating budgets already deeply stressed by the coronavirus pandemic and related economic fallout.
Keene Winters, a Wausau financial consultant who spent two terms on the city council, said this is the “wrong time” for WOZ, which is backed by two local foundations, to be asking for money.
“The money in TIDs is segregated local property tax dollars. It comes straight out of the operating budgets of the city, the county, the technical college and the school district,” Winters told Wausau Pilot & Review. “If, instead of staying open to fund WOZ’s proposal, TID 7 closed and returned $1 million annually to local operating budgets, the city, the technical college, the county and the school district would each receive about $390,000, $50,000, $190,000 and $370,000 each respectively.”
Those amounts, Winters said, would go a long way toward filling holes in local budgets caused by the Covid-19 epidemic.
“Cutting services or raising taxes will be required if TID 7 if WOZ gets its way and TID 7 becomes a ‘donor TID’ though 2025,” Winters said.
Wausau Mayor Katie Rosenberg said any gap the Wausau School District would see from the TID is made whole by the state. Wisconsin is also facing staggering budget deficits in the wake of the pandemic.
“COVID-19 certainly has changed our financial landscape,” Rosenberg said. “More than anything it’s made planning really difficult because of the uncertainties we face with state and federal funding. Both MaryAnne and I have had conversations with other units of government who are affected by TID and those conversations have been generally positive.”
Some city officials have privately expressed concern about perceived conflicts of interest within the project itself. Chuck Ghidorzi, managing director of WOZ, said he could bid on the project himself, a fact that raised alarm bells with at least two council members. In addition, Groat’s dual role with the city and as a voting member of the WOZ governing board is raising eyebrows.
Rosenberg said former Community Development Director Chris Schock, who resigned earlier this year, made the non-standard request to include city representation on the WOZ board.
“Two alders asked me about this, calling it a conflict of interest,” Rosenberg said. “I talked to our attorney who also consulted with the outside counsel. Both said it wasn’t a prima facie conflict.”
Rosenberg said legal advisors also said having an elected official on the board would be a conflict of interest because he or she would eventually vote on the project in their elected capacities. The mayor would also face a conflict because she would vote if there was ever a council tie.
Rosenberg said she has spoken about the role with Groat, who “assures me that she is always representing the city and the city’s best interests.”
“I don’t have any reason to doubt her commitment to the city’s interests,” Rosenberg said.
Public reaction mixed
Wausau Dist. 3 Alder Tom Kilian, who represents the district where the mall is located, hosted an Oct. 1 informational meeting at Riverside Park to allow for resident feedback and participation in the process. During the meeting, which about 50 people attended, an informal raised-hand vote showed most attendees appeared to like the concept – but an overwhelming majority were unconvinced that a private project should be funded by taxpayers already hit hard in a difficult economy.
“My property taxes are going to remain the same or go up,” said one attendee, who was not publicly named during the meeting. “Is this development going to become a TIF district? Then the tax revenue won’t come back to us, the people who are paying the taxes. You keep topping it up and we won’t get it back.”
Some residents remain unconvinced that additional office space and apartments are marketable for the downtown area. One resident said a quick review of a six-block area surrounding the mall showed 45,000 square feet of available office space, with more in the greater Wausau area.
“What kind of guarantees can you give us about sustainability when the city is putting a lot of money into this?” he asked. “How do you expect to sustain it? Without any assurances that you can, how can you ask the city for this money?”
Ghidorzi said the issue has “crossed his mind as well,” but insisted that the downtown location would compete well with other apartment and office space in the community. The goal, Ghidorzi said, is to attract young entrepreneurs and outside businesses to the area interested in the newer space.
“I can’t give you a guarantee,” Ghidorzi said. “I’ve been in business for 50 years. I continue to build office buildings…and we continue to compete.”
Also during the meeting Wausau attorney Jay Kronenwetter was sharply critical of the group’s request for taxpayer funding when no developer investment is on the table.
“Correct me – no one has committed funds, an actual developer,” Kronenwetter asked Ghidorzi, who presented the project during the Oct. 1 meeting.
“Right now no, there’s not a developer in terms of someone who’s come forward,” Ghidorzi said.
Rosenberg, in an email to Wausau Pilot & Review, also stressed the importance of outside investment, though none has yet materialized.
“There has to be outside investment,” Rosenberg said. “That’s a condition for the city’s participation. I am working with WOZ to ensure the city’s interests are protected in the updated agreement and I am optimistic about how those discussions are going. I anticipate having something more shareable in the coming weeks.”
Even if council members approve the funding request, additional taxpayer backing appears likely for the project to come to fruition. Ghidorzi, when asked directly on Oct. 1 if the latest round of funding would be the extent of the city’s contribution to the project.
“Probably not,” Ghidorzi said.