By Shereen Siewert
A taxpayer-funded assistance application for a proposed $44 million Wausau development makes significant claims about the potential impact of the project, but lacks key details including a financial needs analysis, project summary, cash flow projections and other documentation required by the city.
T. Wall Enterprises, the developer Wausau Opportunity Zone selected for the former Wausau Center mall redevelopment site, envisions a five-story building along a portion of Washington Street that includes 154 apartments with mixed-use commercial space on the ground floor.
In a July 12 memo to City Council members, Wausau Development Director Liz Brodek wrote that the TIF application aims to help the city determine the “necessary amount of public participation for the project to go forward.” But the document itself does not spell out those details, nor does it explain how the project would bring $10 million “in disposable incomes to support the local economy,” as the developers promise. The application does not promise any local job creation.
T. Wall, in its application, says assistance is necessary and meets the statutory “but for” requirement for TIF spending because of an increase in construction prices over the past three years. “The project cannot occur but for TIF because our construction costs have increased incrementally by 90.5% since prior to COVID,” the application states. “We used to build multi-family communities for $105,000 per unit in 2019 and now construction costs are exceeding $200,000 per unit.”
According to information provided by the national construction cost database Gordian, multifamily building costs have risen, but nowhere near the 90.5% rate quoted in T. Wall’s TIF application. Nationally, the price to construct an 8-24 story apartment building, as of February 2022, has increased approximately 8.3 percent. For 4-7 story apartment buildings, the price of construction increased by 10.4 percent, and it increased 17.5 percent for 1-3 story buildings. While the cost of some materials continues to increase, other elements of construction pricing, such as plywood and construction lumber, are down from a year ago, according to Gordian.
The other numbers specified in the document list an array of figures that do not add up to WOZ’s claim of a $44 million investment in the project in any obvious way, nor do they include the required percentage of total use of funding. The application shows building construction and renovation at $36,695,000 and “contingency” funds of $2,210,000. Under funding sources, T. Wall lists $33,308,000 as a “construction financing” loan, $8,05,900 in “developer equity,” while “other TIF assistance” is listed as a “TIF Loan” earmarked at $0. A separate entry shows a construction loan of $33,308,263 with an additional “TIF Loan” of $6,216,000.
When applicants seek city participation for a project, they must include financial analyses to demonstrate the need for TIF assistance. Applicants are required to submit two analysis – one with and one without TIF assistance, indicating the minimum return necessary to proceed with the project. But no such document appears to have been submitted.
Applicants are also required to provide a summary of the project in the form of a letter addressed to the city of Wausau that includes a description of the project itself, profitability projections, an overview of financing, a summary of increment projections, total development costs, an amount of TIF assistance requested and a statement regarding why TIF is essential and why the “but for” provision will be met. Failure to clearly provide the “but for” explanation “will delay action on your application,” the document states.
No such document was included.
A set of required pro formas, identifying income and expense projections, appears to have been passed on to a third party, Ehlers, rather than uploaded to the city’s submission system. Ehlers Public Finance Advisors was hired to perform an analysis of the gap funding required for the project, at a projected cost of $5,000, a move that took some council members by surprise.
“I understand that T. Wall sent pro forma numbers directly to Ehlers (not to the City) to avoid further delay of the gap analysis,” Brodek told Wausau Pilot & Review.
The Tax Increment Financing application, which was withheld from public view until late Tuesday evening, was submitted to the city in May. Wausau Pilot & Review received the document as part of an open records request.
In a follow-up email, Wausau Pilot & Review requested the actual amount of TIF assistance being requested along with documentation to support the claims made in the application, but Brodek referred those questions to T. Wall representatives. “As for many of your other questions, I think they are best answered by Terrance or someone on his team,” she wrote.
Mr. Wall has not responded.
In a disclosure statement for The Foundry on 3rd Development, LLC, Terrence Wall acknowledged that he secured a construction loan from Wells Fargo in 2008 for a Mesa, Ariz. development that resulted in court action. In 2009, Wells Fargo requested a re-margin of the loan for the full loan amount, foreclosed on the security in January 2011 and sold the properties “at a time when economy was near a low point,” Wall said. A judgment of roughly $2.7 million was filed against Wall, who said the judgement was appealed and fully satisfied. Wisconsin court records do not show an appeal, but do reflect a foreign judgment for that amount in a case that was satisfied in 2016.
Dist. 10 Alder Lou Larson said he and at least one other council member are requesting a Committee of the Whole to discuss the development in more detail, citing concerns over lack of transparency in the process.
“To much is happening without our approval,” Larson said.
