By Shereen Siewert
A group of duplexes in Wausau that relied on $299,000 in taxpayer funding is being sold for the second time since the city transferred property to a builder for $1 in 2018, this time for more than $3.9 million.
The duplexes were built between 2018-2020 along the west end of the Thomas Street corridor on remnant parcels after a major road reconstruction project. City officials in 2018 approved a proposal from Blenker Construction/Aedifix Holdings that included the property transfer plus a $299,000 no-interest, forgivable construction loan plus a $150,000 loan at 2 percent interest for five years. In their proposal, Blenker stated that the city’s participation to help offset the cost of the land would allow the project to become feasible and keep the costs of the project in line with the current market.
The initial agreement for Blenker/Aedifix, crafted by then-Wausau Economic Development Director Chris Schock, also called for three homes to meet tenant affordability for 10 years based on HUD guidelines. But that requirement was ultimately dropped after the developer declined to use Community Development Block Grant funds for the project, Wausau Business Specialist Sean Fitzgerald said.
“Blenker was offered but did not take advantage of the $150,000 HOME funds, so there are no restrictions on who they need to rent to as tenants,” Fitzgerald said.
Rental rates were, at the time of the proposal, projected at approximately $1,100 per month, with lower rents in what would have been income-restricted units. According to online property listing documents, current monthly rents for each duplex start at $1,350.
Each of the 10 units is appraised – though not assessed -at between $390,000 and $410,000, according to the listing information.
Members of the previous City Council were largely in favor of the development, in part to ensure affordable housing in the neighborhood. When the plan was first introduced, then-member of the city’s Economic Development Committee Romey Wagner praised the project as a way to bring residents who lost their homes to the Thomas Street construction project back into the neighborhood.
“The people who really wanted to live on Thomas Street but were displaced by the construction, this would give them the ability to jump on the list for one of these,” Wagner said, in 2018.
City leaders were also enthusiastic about creating property tax revenue with the development. Larger tax collections will materialize in the future, but so far just five of the 10 parcels have been reassessed, Wausau Assessor Rick Rick Rubow confirmed this week. That means the owners paid just $2,595.01 in property taxes for 2019 and have been billed for $27,932.37 for 2020 on the property now being sold for $3,945,000, according to the Marathon County Land Records System. Five of the 10 properties are still assessed at between $10,500 and $12,500, bringing a total assessment for 2020 of $1,462.34.
Rubow said all real estate transactions are verified for “arms-length” and reported to the Department of Revenue, as they establish the equalized values based on arms-length sales. An arm’s length transaction is one that takes place as if the two parties involved had no pre-existing relationship. If two people are at arm’s length from each other, they aren’t too close for the sake of a fair deal that is priced in line with market expectations.
“These sales were verified by assessment staff and found to be non-arm’s length and were considered to be an investor-to-investor package sale,” Rubow told Wausau Pilot & Review. “These parcels have not been listed for sale in the open market nor had any sold individually prior to the current listing.”
According to city documents, six of the 10 duplexes were built at the time that Vestednest Property Group, LLC, purchased the property.
In an email to Wausau Pilot & Review, Wisconsin Department of Revenue Communications Director Patty Mayers pointed to the state’s 2021 guide for property owners that states, “if the property owner started new or remodeled improvements before January 1 (the assessment day) and finished after January 1, the assessor must find out how much was completed as of January 1 and assess the existing improvements as of January 1.”
Under state law, the assessment must be based on the market value of the improvement, the DOR document explains. The assessor looks at how much the total value of the building and land changed due to the improvement. The cost may not be the true measure of any change in market value. However, under many circumstances, a “prudent property owner will calculate the change in value due to remodeling approximates the cost of such work . If there is an increase in market value, it should be reflected in an increase in assessed value.”
Wausau ultimately agreed not to exercise the city’s right of first refusal to purchase the property from L. Wyatt 529, LLC, J.H. Rearden 529, LLC, and J.J. Taggart, LLC, the three limited liability corporations formed when Blenker/Aedifix acquired the remnant parcels, giving the green light to Vestednest. The Council approved the sale, and the transfer of financial elements of the developer agreement, in October 2019.
See the full property listing here.