By Shereen Siewert
Members of the Wausau City Council remain divided over how much the public should pay to help private developers transform the former Wausau Center mall space downtown, with projected taxpayer-funded incentives already topping $5 million.
Wausau taxpayers could be on the hook for millions more as plans for the ambitious redevelopment continue. Wausau Development Director Liz Brodek released two different sets of numbers this week to clarify public and private participation in the project, after Dist. 3 Alder Tom Kilian asked for an accounting of money spent. In the most recent set of numbers, uploaded Monday to the Wausau City Council’s May 24 meeting packet, Brodek lists participation by Wausau Opportunity Zone, Inc. as between $20-40 million for one of the blocks under development, but unclear is how much of the tab will be paid by taxpayers.
Brodek, in an email to Wausau Pilot & Review, said she expects “with near certainty there will be a [Tax Increment Financing] request” moving forward.
“The amount will be negotiated,” she said. But even a ballpark range has not been publicly disclosed.
A renegotiation – and many unanswered questions
Wausau Opportunity Zone, Inc. in February 2022 finalized the purchase of the financially troubled Wausau Center mall from Rialto Capital Management. The purchase was funded by a pair of local foundations, the Dwight and Linda Davis Foundation and the Judd S. Alexander Foundation, along with with taxpayer-funded incentives that initially 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, and the land and air rights to the property. Under terms renegotiated by Mayor Katie Rosenberg, the city’s loan amount decreased to $660,000 and is no longer forgivable but is interest free with repayments beginning this year. The renegotiated agreement also carries the caveat that WOZ will pay guaranteed real estate taxes based on an assessed value of $7 million beginning Jan. 1, 2024, regardless of construction. Dist. 7 Alder Lisa Rasmussen praised Rosenberg’s efforts and said Wausau cannot afford to sit back and do nothing.
“The Mayor spent the better half of last summer renegotiating the WOZ agreement to the benefit of local taxpayers, yet nobody is talking about that,” Rasmussen told Wausau Pilot & Review. “Had we not partnered with WOZ, we would likely have a hedge fund from the east coast making our decisions for us, which would likely have generated a very negative outcome for Wausau in terms of new tax base downtown.”
But the amount of public participation in private development continues to be a thorny issue – not just in Wausau, but in communities nationwide.
Proponents say that TIF promotes public-private partnership as real estate developers, neighborhood groups, and local government officials work together to deal with fiscal and structural problems in the community and restructure otherwise deteriorating neighborhoods.
But TIF is prone to several pitfalls. In practice, TIF often captures some revenues that would have been generated through normal appreciation in property values, even without the TIF-funded investment. This over-capture of revenue diverts resources away from public services citywide, according to Will Jason, of the Lincoln Institute for Land Policy. Cities also sometimes exploit TIF to obtain revenues that would otherwise go to overlying government entities such as school districts, he said.
In addition, Jason said, TIF can make cities’ financial decisions less transparent by separating them from the normal budget process. In Chicago, for example, $660 million — nearly a third of the city’s property taxes — go to TIF districts, making public scrutiny of these funds more difficult and preventing elected officials from re-prioritizing the spending. And according to Good Jobs can divert huge sums of property taxes from schools for long periods of time.
Wausau leaders have not said at which point they’ll reach a ceiling on public involvement for the project.
“As far as when to say when on any project, that number in my mind depends on what the return on the investment is and what the timeline looks like,” Rasmussen said. “If the ask is too much, and the return takes too long, that’s when we tap the brakes in the [Economic Development] Committee and direct the staff to negotiate for better terms, or select another plan.”
Operational numbers released, but questions persist
The project numbers released this week ranged from environmental cleanup costs to professional fees and included more than $2 million in “additional expenses” paid by WOZ, figures that are not broken down but include items such as legal fees, mall tenant relocation, consultant fees and more, Brodek said. But Brodek did not include Wausau’s outside legal fees or staff time as part of the memo.
Wausau Pilot & Review this week requested those numbers from the City Attorney, who responded with a figure of $112,114.30.
“Note this is a TIF eligible expense,” wrote Legal Assistant Lisa Parsch.
Initially, Brodek listed a $1.9 million expense for WOZ as an “operational loss termination,” a number she said reflected the “savings…that the city is no longer paying WOZ per the first agreement.” That number has since been removed.
The list also includes more than $1.9 million for street dedication, but that amount is not cash paid to the city, but a property transfer that Wausau will then pay more than $2.6 million for street design and construction.
Kilian, who represents the district in which the former mall property lies, said he is unimpressed with the memo and is encouraging more transparency in the process.
“I am very concerned about the taxpayer investment in this project. The numbers change — in a matter of hours, it seems, according to the meeting packets — on the public and private commitment of dollars to date,” Kilian said. “If that is the case, how much of the related financial information given to the local public is actually credible and legitimate? Very little, apparently. If this memo would not be passable as high school homework, how is it enough to justify millions in taxpayer-dollar involvement in a redevelopment project?”
Lou Larson, who represents Dist. 10, said the numbers in the memo are “fantasy numbers” designed to lead the public in a one-way direction. Larson also objects to a provision being voted on Tuesday that would allow WOZ to purchase the downtown parking ramp on the property for $1.
Rasmussen said Wausau must continue to make forward-looking decisions and accused people, “some elected and some not,” of actively working to cause projects like the mall plan to fail “under the guise that they are looking out for taxpayers.”
“We compete with other communities for developers and projects and we need to be at the forefront of securing viable projects that will increase the number of people living and working downtown if we want to have a successful local economy,” Rasmussen said. “The city and the council knew from day one that the goal was to consider projects block by block to re invigorate the former mall area and that there would likely be public/private partnerships needed on parts of it, just like the mall had. The mall succeeded because decision makers had vision and courage and their decisions paid dividends for Wausau for decades.”
Some members of the community and council have also questioned the overallvision for the former mall property, which includes a mix of residential, office and retail spaces, considering the massive changes in worker habits and finances prompted by the COVID-19 pandemic and its fallout. According to the National Center for Construction Education & Research, the pandemic redefined the ways in which business is conducted and commercial properties are used. Many organizations are now in limbo, trying to decide how far to go between staying remote and moving back on-site. With dozens of empty office spaces and storefronts downtown, critics question the viability of adding more.
Rasmussen conceded that the look of the “right development is changing.”
“Wausau has studied the market and determined that there is need and desire for people to live downtown and that the market can support many more living units there at a variety of rent rates,” she said. “We cannot focus solely on low income or market rate, but we must multi task and help create options at all rate levels so that a diverse mix of residents will have options. The council cannot afford to have tunnel vision for one issue or one demographic. We are elected to serve them all and help create a variety of things that many groups can appreciate, which requires a broader vision than just filling one need or addressing one market.”
To review the numbers, click this link and scroll to page 41.
