The City of Wausau’s Economic Development Committee on Tuesday approved a waiver to a contract violation by a developer who relied in part on taxpayer funding for a project, clearing the way for continued incentives.
The committee approved the waiver for 1401 Elm St, LLC and its principal, Ronald Lokre, by a 4-1 vote, after Development Director Liz Brodek and an outside counsel hired for consultation leaned toward granting the waiver. Alder Tom Kilian voted against the waiver, noting the city has a pattern of ignoring such violations and not holding developers to account.
The developer agreement required Lokre and the LLC to record the city agreement prior to any mortgage or lease at the property. City officials discovered later that the developer recorded their mortgage first, which would give the lender priority in case of any default. According to city documents, the mortgage was recorded by GreenState Credit Union on Dec. 30, 2019 and the city’s memorandum was recorded on Jan. 16, 2020.
The Tax Increment Financing funding from the city is a cumulative $601,520 spread over eight annual installments for the multi-phase project.
“The City may choose to overlook that noncompliance as a practical matter to get this matter resolved,” Brodek wrote in her memo to the Economic Development Committee. “The building is complete.”
Outside attorney Isaac J. Roang from Quarles & Brady, LLP agreed with Brodek, citing city staff’s information that the building, a luxury apartment complex at the site of the former Mountain Lanes, has been constructed and it is operational.
The 2019 agreement has otherwise been complied with, the attorney said, as he and Brodek sought direction from the City Council and the Economic Development Committee as to whether the council was willing to waive one particular non compliant element.
“So really and truly, the only ongoing obligations going forward are for the city then to pay the development incentives that was promised,” Roang said. “We think the risk to the city is minimal at best because, again, the ongoing obligations are with the city and not the developer.”
Later, answering a question from committee chair, Sarah Watson, the attorney said if the committee chose to redo the agreement, doing so would not be a long-drawn-out process.
Alder Lisa Rasmussen (Dist. 7) strongly defended the waiver option, arguing that the developer had complied with the spirit of the agreement and that there was no risk to taxpayers.
“In the past, we have declared those agreements substantially complete and we have been willing to issue those waivers and work with people,” Rasmussen said. “If a building wasn’t up or half up, I would have a completely different attitude about this, but it’s done, and they fulfilled their end of the bargain. So other than sending people back through a bunch of machinations that really don’t yield a different outcome and then just making people’s life more difficult.”
She then made a motion to waive the filing requirement and declare the agreement substantially complete and complied with.
Alder Kilian disagreed with Rasmussen’s approach and said that in addition to noncompliance, the developer failed to respond to city staff’s attempts to contact them and asked Brodek what that attitude suggested. The development director said the company acknowledged receiving calls.
Kilian said the city has a track record of ignoring violations repeatedly.
“I think there’s been pattern by the city of just waiving that and saying ‘c’est la vie’ (such is life),” said the Dist. 3 alder. “But I do feel it’s important that we actually we start enforcing our contracts and agreements once again for the long-term protection of so that the private sector knows that when we have an agreement, we expect that it’s complied with.”
He suggested that unless otherwise impossible, the city staff should pursue compliance with the agreement. “And if that would be impossible at this stage in the game, I’d understand perhaps and revisit my opinion, but if it’s not, my position would be to comply with the agreement that we have on the table.”
Rasmussen countered that by asking if the city required the developer and the lender to go back and reissue the mortgage or reissue the paperwork, “does that then create an issue between the developer and the lender? If it does, it’s not worth it. It’s just not.”
In her memo, Brodek had noted that if the development agreement was eliminated in the event of the lender starting foreclosure proceedings, “the City would not owe the Developer any TIF payments.”
A TIF is “an economic development technique to expand the property tax base. Property value increases fund site improvements that would not otherwise occur.” TID, on the other hand, is “the actual physical area (whole parcels) designated for improvements using tax incremental financing.”