By Damakant Jayshi and Shereen Siewert
The City Council on Tuesday approved an extension to a development agreement for The Foundry on 3rd project to build 154 market-rate apartments and commercial space at the site of the former Wausau Center mall.
The approval comes despite a lack of funding details from the team’s development analyst, Nick Patterson, who did not state categorically whether the group has raised enough capital for the apartment and commercial complex to ensure it is feasible. The developer, Terrence Wall, has also been accused of bullying alders, prompting concern by some on the council as well as the mayor.
The project, estimated to cost about $45 million, relies on roughly $10.8 million in taxpayer subsidies. Wausau Opportunity Zone, Inc. owns the property and has contracted T. Wall Enterprises as its developer. Under the new agreement, the Middleton-based developer has a June 1 deadline to break ground and must deliver a completed project by Nov. 1, 2025.
Although the council granted the extension after an hours-long discussion on Tuesday and previous debates that emerged when it became clear that the initial timeline would not be met, Mayor Katie Rosenberg and Common Council President Becky McElhaney both said that no further extensions will be granted, regardless of the excuse.
The final vote was 7-3, with Alders Tom Kilian, Lou Larson and Gary Gisselman representing the nay votes. Alder Dawn Herbst was absent. Alder McElhaney – who said it was a tough decision for her given the attitude and record of T. Wall’s relationship with the city– and Alders Lisa Rasmussen, Sarah Watson, Michael Martens, Doug Diny, Carol Lukens and Chad Henke voted in favor of the extension.
Alder Gisselman joined those seven colleagues in approving the cooperation agreement with WOZ, Inc. that states that WOZ would pay for the additional costs that the city would incur while cleaning up the redevelopment site. A WOZ representative had prevented the cleanup and the city now faces a demand letter from the contractor to pay roughly $155,000 for the missed work, as per their contract.
The extension’s approval came despite the demonstrably poor record of the T. Wall Enterprises in completing projects on time. At least two municipalities – the City of Watertown and Wausau itself – have canceled projects with the developer amid delays. The developer is also running behind schedule for its project in Oshkosh, for which the developer was awarded a contract last year.
The alders who voted to grant the extension defended their choice on the grounds of increasing the tax base for the city, ensuring a much-needed development on the vacant lot in the heart of the city, as well as the ongoing housing needs for the city’s current and future residents and employees.
But Alder Kilian had sharp criticism for the city and said officials were making a wrong decision on the extension as well as sending the wrong message by terminating a contract with Francis Melvin, Inc., the entity tasked with removing contaminated soil from the mall site at city expense. Melvin’s crews were hired for the job, but Chuck Ghidorzi of WOZ, Inc. unilaterally prohibited the contractor from carrying out the work this summer. The company said it lost out on other potential work during the period and is now demanding the full payment for their contract. Wausau terminated the contract under a convenience clause in the agreement. The full costs of that delay remain unclear.
The Dist. 3 alder said that Wausau should honor its part of the contract and pay Melvin what it had committed to, saying the WOZ was responsible for the cancelled work, not the city or the contractor. Kilian challenged the assertion that the developer and its partner are victims, pointing out that they will be receiving millions from taxpayers through Tax Increment Financing.
Alder Lisa Rasmussen defended the extension saying the two agreements – with WOZ and T. Wall – are now tied together and WOZ committed in writing to pay additional costs resulting from its role in delaying the soil excavation. She said the city needs the development, and has to increase its tax base. She also defended the city’s right to cancel the contract with Melvin, citing the clauses in the contract.
She also referred to a commitment expressed by WOZ attorney Joe Mella, who said his client would pay for the contractor costs – if the T. Wall extension was approved.
Alders Diny, Martens, Lukens and Watson – also supported the extension, saying the city needs the development, and needs to expand its housing stock and tax base. Henke voted in favor but did not participate in the debate.
WOZ, Inc. finally agreed to put in writing that they would pay for any additional costs that will result from rebidding the contract to remove soil, an obligation for the city under the Wisconsin Department of Natural Resources requirements. WOZ also agreed to protect the city and all its officials – elected and employees – from any claims and indemnification arising out of the canceled contract.
Kilian said the indemnification scope should have been broader and alleged that it was done to protect WOZ, Inc. from any liability. He also noted that WOZ did not agree to pay for additional outside attorney fees, staff time, lost tax revenue or other financial consequences of Ghidorzi’s decision or the delay as a whole.
Mayor Rosenberg said she viewed the extension as a necessity, some kind of “airbag” and a “shot at survival” and termed it the right decision by the council.
Rosenberg took issues with Wall’s attacks on alders and city officials.
“I will not support being talked to the way we have all been talked to by developer,” she said Tuesday.
The mayor also that the city expects to be kept in the loop by both parties to the redevelopment project.
McElhaney said both she and her constituents do not trust the developer, but she would vote for the extension because of the potential for taxpayer liability.
Despite developers’ commitment, alders fear another default
Several alders on Tuesday expressed doubt whether T. Wall would meet the June 1 deadline to break ground.
Alder Lou Larson again said T. Wall Enterprises has not performed well on projects and criticized Wall’s penchant for “drama” and lawsuit threats. T. Wall threatened a lawsuit against Wausau in a previous Riverlife deal and took aim recently against Alders Kilian and Gisselman, demanding that they be removed from any discussion on the development agreement. Other alders, including council president McElhaney, have blasted the threat against their colleagues.
Alder Diny also expressed concerns about the delay. He wanted a written commitment from WOZ and T. Wall that they provide a written notice, within 60 to 90 days, that they would proceed before the city puts the shovel in the ground to finish the excavation and the cleanup of the site. However, his amendment failed since it was not seconded by another alder.
Diny took the unusual step of meeting privately with Ghidorzi prior to the council’s decision.
“This is the most visible project this city has had in the last decade and Mr. Ghidorzi is running it,” Diny said. “I had some questions from constituents that I couldn’t answer. Our city public works director and I met with Mr. Ghidorzi on August 22 to ask those questions.”
Alder Carol Lukens said she too would like to see some kind of assurance that the work would begin on time.
Kilian said such a notice would be a useless piece of paper since even a legally signed contract could not hold the two entities to account.
How the city vets developers
This developer’s record has invited questions about how the city staff vet the developers while awarding contracts who answer the bids.
In May 2018, city officials overhauled its process, rolling out new safeguards to better vet investors and developers who seek pubic funds for private projects. Those changes were adopted in the wake of a March 2018 Wausau Pilot and Review investigation that revealed a key partner in the city’s Riverlife project had been embroiled in a multi-million dollar fraud scheme in Colorado, a revelation that took city leaders by surprise.
Unlike the earlier application process, the city now asks crucial questions of both developers and shareholders with at least a 20 percent stake in a proposed project. The new application poses questions about current and former bankruptcies, lawsuits, criminal charges and outstanding tax liens and requires applicants to explain those situations in detail before a partnership is approved.
“It’s important for us to know if there have been hurdles before and how they were handled,” Rasmussen said in 2018.
But the city’s agreement with T. Wall is unusual because a third party, WOZ, owns the land and chose the development team. Still, Wall did fill out an application for TIF assistance, one that lacked key details.
The other numbers specified in the document listed an array of figures that did not add up to WOZ’s claim of a $44 million investment in the project in any obvious way, nor did 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.
Those numbers later changed.
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 T. Wall no such document was submitted with the application.
Despite those and other omissions the City Council – though divided – approved the project and moved forward
