By Damakant Jayshi and Shereen Siewert
A plan to create 50 affordable apartments on city-owned property will move forward after the council approved new amendments to the plan, under which Wausau will sell the land to a developer for $1.
Project plans for the property, at 415 S. First Ave. and 401 S. First Ave., have twice been scuttled since Wausau acquired the land. City leaders in September 2016 purchased the West Side Battery property for $200,000 using a loan made by the Judd S. Alexander Foundation. The adjoining parcel, the former home of L&S Printing, was sold to the city in 2014 for $190,000, also with a loan from the Judd S. Alexander Foundation. The $390,000 properties are now considered a single parcel for development purposes.
Now, the land will be transferred to Gorman & Co., LLC, the same group that recently completed a $20 million historic rehabilitation of the Landmark Apartments in downtown Wausau. The initial proposal called for Gorman to pay Wausau $100,000 for the parcel contingent upon an environmental investigation for the project, which would generate roughly $2.23 million in annual tax revenue base for the city after completion.
Gorman’s proposal was chosen over a competing idea from Wausau Opportunity Zone, Inc., after a discussion that centered in part on the selling price for the land. WOZ had asked the city to give the land away, while Gorman offered to pay for it. That distinction played a role in some council members’ votes. The City Council formally awarded the housing complex project to Gorman & Co. in December 2021.
But on Tuesday, the council gave its nod to an amended redevelopment agreement that made two changes: reducing the price of the project and a commitment from the developer, Gorman & Company, to pay for the demolition of a building on the site and tipping fees. Tipping fees are paid by those who dispose waste in a landfill site.
The four-story housing project – West Side Lofts – when complete, will feature income-restricted apartments with monthly rent ranging from $375 to $988, with one three-bedroom unit at $1,142 per month.
Community Development Director Liz Brodek, replying to a question from Alder Tom Kilian, said the lower purchase price for the property became necessary to help the developer secure a second round of tax credits through an Affordable Housing Program administered by the Federal Home Loan Bank of Chicago.
“Those tax credits have the ability to save a million dollars in construction costs,” Brodek said.
The company failed to secure the low-income Housing Tax Credits in 2022 from Wisconsin Housing and Economic Development Authority or WHEDA, resulting in a $1 million funding gap, according to documents shared with the council.
According to WHEDA, the Housing Tax Credit, or HTC, “is a dollar-for-dollar reduction of federal income taxes owed by owners/investors in qualified projects for tenants whose incomes are at or below 60% of County Median Income.” The HTCs are “used by developers to achieve lower rents that are affordable for low- and moderate-income households.”
Upon recommendation of the city staff in November last year, the Wausau City Council extended the project’s planning option timeline through December 2023.
The project got a boost after the company secured the HTCs in April this year. However, the city documents point out the funding gap in the project still exist and that the company was seeking additional funding sources to close the project gap. The City Council’s approval of sale of the parcel at $1 was aimed at helping the company close the funding gap, Brodek said.
During the discussion, Kilian said though he understood the proposal had a positive and strategic reason – assist the developer in securing a competitive advantage to get funding source – he could not support the sale of a city-owned land at a dollar because, he added, the city had pivoted from selling its property at $1.
Frustration has built in the community over city-owned properties that are being sold to developers for $1, leaving taxpayers on the hook for hundreds of thousands of dollars. Kilian said he understands some plans require exceptions, but this project, in his opinion, did not meet the “exceptional standard.” And the League of Wisconsin Municipalities discourages such actions as well.
“If a municipal governing body sells property for substantially less than a fair consideration in money or other benefits, it may be found to have abused its discretion,” LWM documents state. “This is especially true if the land is sold to private parties who intend to use the land for purely private purposes.”
Alder Lisa Rasmussen said she was surprised that anyone would oppose such a project despite making public utterances on the need and necessity for more low-income housing in Wausau. She added that significant time and money has already been invested into the project and the city had already extended its timeline to enable the developer qualify for WHEDA tax credits. Given that the developer had agreed to pay for demolition and tipping fees – “which are also incredibly expensive for us” – the lower price of the property seemed like a “fair exchange.”
Kilian told Wausau Pilot & Review he supports the Gorman project but objects to the city pivoting on its policies.
“It seems like moving backwards, in terms of trust with the people,” Kilian said.
Alder Doug Diny said he too is opposed to selling city properties for $1 but asked what the demolition cost would be if the city were to undertake the initiative.
Brodek didn’t have the exact figures but estimated the cost would be a bit less than $100,000 – the original estimated price of the land that the developer had agreed to pay. She said the actual cost will depend on a number of factors like market conditions and the timeline of the demolition that the city is yet to negotiate with Gorman & Co.
Alder Lou Larson also opposed the proposal, saying the project has just dragged on for years. But Alder Sarah Watson said that the project is valuable and the city needs it.
The vote on approving the second amendment was 9-2, with alders Kilian and Larson in opposition.
Wausau and Marathon County are among the places where the affordable housing shortage is prominent. Calls to prioritize building affordable houses for people with low income have been growing in the area.
According to the National Low Income Housing Coalition’s GAP report, the U.S. “has a shortage of 7 million rental homes affordable and available to extremely low-income renters, whose household incomes are at or below the poverty guideline or 30% of their area median income.” To put those numbers in perspective, the NLIHC said “only 36 affordable and available rental homes exist for every 100 extremely low-income renter households.”