By Shereen Siewert | Wausau Pilot & Review
A plan to redevelop the former Wausau Center mall site has already cost residents millions, with hundreds of thousands of dollars in outside legal expenses added to the mix.
The more than $200,000 in outside legal expenses does not include work performed by city staff in any department, but adds to the roughly $6.3 million already spent since 2019. That amounts to more than $163 for every man, woman and child in Wausau, with no new apartments breaking ground to date and a highly anticipated project on hold until at least spring.
The expenditures, which come at a time when Wausau’s debt continues to climb and residents grapple with skyrocketing housing costs and tax bills, are frustrating for those who want to see a return on their investment. But that return could be years down the road, if it comes at all, depending how the development is funded in the future.
In August, when Wausau Pilot & Review reported that the Foundry on 3rd project completion date would be extended to 2025, readers spoke out by the dozens. Some called it a “comedy of errors,” while others criticized the city’s decision to add additional money to the pot in developer incentives.
“We get to look at that big slab of concrete a couple more years,” reader Frank Larson wrote, in a comment on Facebook. “Wausau loses again. When will the city council wake up. The city is losing out.”
Dist. 4 Alder Doug Diny said he wants to see monthly in-person updates from the city’s Economic Development department and a dashboard that indicates actual developer activity and movement moving forward.
“Are we half way there? Three-fourths there? Are all permits in place? Are all purchase orders placed?” Diny said. “What’s going well? What’s not? What are we doing to fix it? Liz (Brodek) can make the metric, I just want alders to be able to understand the trend, are we moving in the right direction or not?”
Legal bills mount
Documents obtained through an open records request by Wausau Pilot & Review show the city has since 2019 been billed more than $160,000 for outside legal fees related to Wausau Opportunity Zone, which in February 2020 finalized the purchase of the former Wausau Center mall property. The group’s proposal, accepted by the city, included $1.6 million in taxpayer-funded incentives. The city’s participation, according to city documents, includes a $1 million forgivable loan and transfer of city-owned assets to the LLC for $1. Those assets include the former Sears building, which the city purchased in 2017 for roughly $650,000.
Wausau is also responsible for demolition and street reconstruction through incentives that pushed the city’s expected participation in the project to more than $6.3 million.
The sale of the mall came nearly four years after city leaders approved a $4.1 million plan to help former owner CBL with physical improvements for the mall. Part of CBL’s plan, which never materialized, involved moving what was then Younkers to the space once occupied by J.C. Penney. At the time, CBL representatives said moving Younkers was critical to keeping the anchor store open.
The move never happened, and Younkers ultimately closed in 2018 after parent company Bon-Ton went out of business.
CBL walked away from the mall property, which was sold in July 2017 for $12.8 million to Miami-based Rialto in a sheriff’s sale. CBL was also the subject of a fraud investigation by the FBI.
The $4.1 million in city funding was subsequently used in other ways. In February 2018, Wausau Finance Director Maryanne Groat told Wausau Pilot and Review the $4.1 million loan taken out by the city and earmarked for the mall had since been “repurposed.” The city used $650,000 to acquire the former Sears property and dedicated $750,000 to extend Fulton Street as part of the riverfront project. The remaining $2,740,000 was redirected to the city’s Riverlife project, Groat said. But since that time, the Fulton Street project price tag dropped after the city received grant funding and the project size decreased, freeing up some of those funds.
WOZ initially was reported to be a nonprofit entity, but was not incorporated in that manner, according to the Wisconsin Dept. of Financial Institutions. The group successfully bid on the property, then tapped Middleton-based T. Wall Associates to spearhead The Foundry on 3rd project. The mall was demolished, leaving behind a crumbling concrete foundation surrounded by fencing, while the city waits for action.
In addition to the $160K in fees for WOZ, since March 2022, Wausau has been billed more than $44,000 in outside legal fees related directly to T. Wall’s project. Quarles & Brady LLP estimates the city will have racked up another $7,000 in expenses in September alone, according to an estimate shared by the city.
When asked about the mounting legal expenses Dist. 7 Alder Lisa Rasmussen said it would be far more concerning if the city were still drafting agreements in-house, without outside counsel that specializes in this work.
“That old method was cheaper, but led to a mixture of provisions, some better than others, that did not always protect the city and the taxpayer investment as we may have wanted and were sometimes less consistent where clawbacks and accountability were concerned,” Rasmussen said. “Given the complexity of the project, and we want the agreements and amendments done properly, it is a cost of development that we have little choice on and there are similar outside fees on most development agreements of any size. This has been the case for a number of years and is necessary to insure we have the appropriate language in the contracts.”
Dist. 3 Alder Tom Kilian, who has been a vocal critic of the mall redevelopment effort since its inception, said he does not see this as money well spent and, with the present agreement and plans, does not feel the investment will pay off in the end for the taxpayers of Wausau.
He noted that a portion of the more than $200,000 in outside legal fees are related to the recent coopearative agreement with WOZ regarding a delay caused when its representative, Chuck Ghidorzi, did not allow contractors on site to perform soil work as required by the Dept. of Natural Resources. Wausau is responsible for environmental cleanup at the site.
“Alder Larson and I voted against approving this cooperative agreement with WOZ (it was an 8-2 vote),” Kilian said. “I voted against it, in part, because it did not include items like these additional outside legal fees for the City due to the delay, among other things, like a broader indemnification that would have been more appropriately protective of the City and its taxpayers.”
The fate of the estimated $45 million Foundry project, which also relies on millions in taxpayer incentives, remains to be seen. Earlier this month, the City Council granted an extension to the group’s development agreement.
T. Wall now has a June 1 deadline to break ground and must deliver a completed project by Nov. 1, 2025. The vote came after hours of discussion and pledges by Mayor Katie Rosenberg and City Council President Becky McElhaney that no additional extensions or delays would be tolerated.