By Shereen Siewert

A deal to create a mixed-use space on waterfront land in Watertown fell apart this week after council members voted unanimously to pull the project from the development team, which is also spearheading Wausau’s Foundry on 3rd apartment complex.

Both projects have been plagued by delays, prompting concerns from some members of the Wausau City Council.

“My understanding is the Watertown project was approved August 2021 with multiple requests for extensions,” said Wausau City Council President Becky McElhaney. “This is clearly one more red flag concerning this developer.”

T. Wall Enterprises of Middleton earned approval in 2021 for Riverhouse on the Rock in Watertown, a luxury multi-family development that also includes commercial and retail space. In Wausau, the Foundry on 3rd project was approved in September 2022, creating 154 market-rate apartments and commercial space in downtown Wausau with roughly $10.8 million in public assistance.

In Watertown, T. Wall had a deal to build a combination of residential and commercial space including about 100 market-rate apartments and about 2,800 square feet of commercial space. Project planners envisioned a restaurant overlooking the Town Square to the north with waterfront views to the east, according to municipal documents.

The Watertown agreement required a minimum value of $8.5 upon completion and relied on Tax Increment Financing in a pay-as-you-go structure, much like the way The Foundry’s subsidies are built in Wausau. Main Street Watertown LLC, the T. Wall entity that received the property from the city, would have paid taxes with the city reimbursing about 77 percent of them, officials confirmed. T. Wall estimated the project cost at the time as between $18 and $19 million, an amount less than half of the cost of the Wausau development.

Watertown sold T. Wall the waterfront property for $1. Now, the city wants the parcel back.

Wausau Dist. 3 Alder Tom Kilian, who has asked pointed questions about the T. Wall project from the beginning, said what happened in Watertown should certainly prompt additional concern here. Kilian has been under fire from Terrence Wall, who formally asked that he and Alder Gary Gisselman be prevented from voting further on the development. But Kilian is not backing down, and in an email to Wausau Pilot & Review said there were sufficient concerns and red flags even before the Watertown deal to make rejecting Wall’s proposed extension the responsible decision for the council.

“It should also serve as an example and model of what appropriate municipal governance looks like when valid contractual commitments are not met,” he said. “Perhaps a coachable moment for Wausau.”

Parking and cost concerns

One snag in the plan for Watertown centered on parking and costs. In May, developers sought alternative ways to provide parking spaces for future residents as a cost-cutting move. T. Wall Enterprises Development Analyst Nick Patterson approached the Watertown Library and asked if his firm could rent between 10 and 60 parking stalls at $10 per space per month. But the library itself only has 42 parking spaces, most of which are often filled by library employees and patron vehicles.

According to a Watertown Daily Times report, Patterson told the library board that development costs increased by more than 30-40% since the firm began working on the project. In order to complete the development and keep construction on schedule, the team wanted to remove one level of parking as a cost-cutting move.

“The development currently has two levels of parking — a lower level and first-floor parking,” he said, according to the WD Times report. “If we were to eliminate one of those levels of parking then we would be in a better position to start construction in September 2023. That’s why we’re looking for those additional spaces.”

Library board members were skeptical that anyone renting a luxury apartment would want to park their vehicle outside in the cold and snow when they’re paying for a luxury apartment. They also openly questioned why the city approved the development knowing there wasn’t sufficient parking for it – and asked Patterson to come up with an alternate plan.

But this week, the parking issue became moot as the Watertown City Council unanimously voted to pull the T. Wall project and see their waterfront property returned. The council voted – enthusiastically – to scuttle the project after entering closed session Tuesday.

In Wausau, the Foundry project remains stalled. Here, as in Watertown, rising construction costs have been blamed in part for the delay. But unlike Watertown, the deal in Wausau has a third party – Wausau Opportunity Zone Inc. – which owns the property and chose the development team.

McElhaney, in an email to Wausau Pilot & Review, is questioning that choice.

“The mall site absolutely needs to be developed as soon as possible,” she wrote. “Due to a myriad of reasons, I do not believe the current developer is the right choice for the city to partner with for the next 20 years.”

A vote on the project looms in Wausau

One of the sticking points for the Foundry project is the question of who will pay for fees incurred when Chuck Ghidorzi, on behalf of WOZ, halted environmental cleanup at the site. McElhaney said city staff is securing a written agreement with WOZ concerning those costs, with a council vote set for Oct. 12.

Dist. 4 Alder Doug Diny said if the project needs a reset, WOZ “should backstop that decision and so far, they are signaling confidence.”

Still, Diny said his responsibility as an alder is to ensure no additional taxpayer money is put at risk moving forward.

“The project is central to Wausau strategically, my short term responsibility is to make sure no additional taxpayer money is put at risk moving forward,” he said. “I will be asking for a formal notice to proceed from the developers before the city commits resources to the site excavation and clean-up in spring; a ‘notice to proceed’ should make it crystal-clear that the developer is ready and takes financial responsibility for city costs if they aren’t.”

In Wausau, T. Wall is seeking an extension on the now-defaulted development agreement that would delay groundbreaking until spring 2024 and opening to 2025. That vote will happen next week.

Wall, in an email to Wausau Pilot & Review, said request for an extension in an Oshkosh project passed “without any drama” and said Watertown has a “much larger gap in existing market rents vs. rents needed to cover the cost of new construction and higher interest rates than Wausau.”

Dist. 7 Alder Lisa Rasmussen said given market conditions, she is not surprised by the Watertown situation but believes if the agreement with WOZ to cover costs is finalized, the council should be able to safely grant an extension until June.

“But, I also think we have been clear, and proven in the past, we are not afraid to move on when we’ve reached the end of our tolerance,” she said. “In this situation, I think everyone is clear that if we grant one extension and come June, if there is not a building underway, we are not likely to grant another one. Based on our comments in meetings that all involved have attended, we’ve been clear on that both in public and with our development staff.”

But Kilian, who has held the same position and cast the same vote as the Watertown City Council recently did, is not as confident and has said that the costs of the delay are far greater than just the money owed to the environmental cleanup contractor. In September, Kilian pointed to the lost property tax revenue, significant attorney fees, and staff time and calculated that the delay could cost the city as much as $1 million.

“As the alderperson for the district in which this project sits, it is worth noting that I lead the way in highlighting concerns over the extension, and opposing it, in both the relevant Economic Development Committee and the relevant Common Council meeting,” he said. “As time goes on, I believe that it becomes clearer and clearer that this is the responsible and protective decision for our community.”