News from Voters with Facts
Wisconsin Institute For Law & Liberty
Posted: Tuesday, October 14, 2014
The Wisconsin Institute For Law & Liberty (WILL) issued a press release Tuesday, October 14, 2014 with the following title: "LEGAL CHALLENGE TO CITY OF EAU CLAIRE’S UNWARRATED EXPANSION OF TIF DISTRICTS".
An excerpt from the press release follows:
"Will Letter Puts Eau Claire City Council on Notice That Action on TIF #8 and TIF # 10 May Violate Wisconsin Law
October 14, 2014, Milwaukee, WI - Tax Incremental Financing Districts cost the government revenue and grant special treatment to a favored class of taxpayers, all in the hope of spurring development that might not otherwise happen. Because the line between crony capitalism and the public welfare is thin, TIF Districts can be lawfully created only based on certain facts and under limited circumstances. It is unclear that these facts and circumstances exist with respect to certain existing and proposed TIF districts in Eau Claire.
On behalf of Voters with Facts, an Eau Claire volunteer organization, the Wisconsin Institute for Law & Liberty (“WILL”) today sent the attached letter to the Eau Claire City Council, the City Plan Commission and the Eau Clare Joint Review Board. The letter calls into question the propriety of their recent actions under the Wisconsin statutes that regulate the creation of TIFs."
To read the full press release, click here.
The Muffin Top Parking Ramp -
Posted: Friday, October 3, 2014
Public Hearing – September 22, 2014
Andy Miller of Walker Parking presented his North Barstow Parking study to the City Council. His report was not complete, as he needs to finish a similar study on South Barstow. In addition, the information he presented was based on data collected in June prior to either JAMF’s occupation of its building or the completion of the new 52-space Forest Street parking lot. Mr. Miller indicated that there were a total of 705 off street spaces, of which a maximum of 446 or 63% [his report indicates 72%, however, that percentage is erroneous if one uses the reported numbers] were in use during the day (90% is considered full). Several of these lots are privately owned, however, spaces would presumably be available for rent. There are also 184 on-street spots. His report included no statistics for on-street spots, beyond a statement that those near River Terrace spots were used heavily, while the balance were not. Presumably 63% or less of these are in use, as well during peak daylight times.
His analysis disregarded the open parking in the district and focused strictly on the ramp. He did mention that it was his understanding that much of the surface parking would be used for development. He concluded that the proposed ramp itself fell short by 30-40 spaces of the number of spaces needed to support JAMF, RCU, and the two proposed liner buildings. Moreover, to even reach that shortfall, he had to drop JAMF back from the contracted minimum of 210 to 180 spots and RCU from 230 to 220 – a further shortage of 31-39 spots. That brings the total 12.4% to 13% short of spots needed or expected.
After stating that a parking engineer would conclude that the ramp was far too small even for the three buildings, much less any planned growth, Mr. Miller indicated that he was an urban planner and looks at things differently. He believes that the City should do everything in its power to discourage driving. It should instead offer more public transit and put rules or incentives in place that will encourage people to carpool, bike, walk, or work from home.
Putting aside the fact that the ramp as designed is too small, the representative did not provide key data like comparable rental rates and budgeting of capital, staff and operating costs, to assist the Council in determining the wisdom of building a ramp versus providing surface parking.
Although the representative did answer council members’ questions during the hearing, he was instructed to not answer the public’s questions. One of the volunteers of Voters with Facts tried to ask questions to secure the missing economic data. Kerry Kincaid, the President of the Council, would not allow it. She stated that the City would take the questions down and send answers to the constituent at a later time. When the constituent pointed out that the whole point of asking the questions was to obtain information Council needed to enable it to vote intelligently the following day, the President insisted that she would not during a “public” hearing, allow the consultant to answer questions from the public.
CONFLUENCE - OPEN MEETING
CONFLUENCE PROJECT STATUS/BOARD OF REGENTS:
NORTH BARSTOW PARKING RAMP:
SPECIAL INTERESTS, POLICIES THAT PROMOTE THEM, AND
The next subject was the design of the ramp itself and whether the City should spend $180,000 more to complete the design through bid packages. The City Engineer stated that the size of the ramp was constrained by the budget – the proposed ramp was the largest one that the City could afford. As proposed, the ramp’s foundation would not allow for a fourth floor. The cost of the fourth floor was estimated to be $3-$3.5 million. Budget constraints also led to the failure to include screens or other decorative means to hide parked cars from view. In terms of operating costs, neither staffing nor capital was included in the annual budget. The comment was made that the person, who sweeps the little-used ramp on Farwell twice a year, could sweep out the new ramp twice a year as well.
Six Voters With Facts volunteers questioned the wisdom of the ramp, pointing out the following:
a) Contrary to assertions made by staff and the press, there is no contractual obligation to build a ramp or even surface parking for JAMF and RCU. There is also nothing that obligates JAMF or RCU to park in the ramp or on the surface parking if either is built. Click here to read the statement.
b) The ramp as planned is inadequate on its face to handle the needs of JAMF, RCU, and the proposed liner building. It also provides no parking for the planned development on Block 7 (the big parking lot on the corner of Barstow and Wisconsin). The speaker reminded the City Council that the justification for the ramp at the time it was first proposed was the development of that Block, which presumably included parking for the occupants.
c) The benefits of developing Block 7 are more than offset by the cost of the ramp. Building the ramp was compared to the following very bad deal and found wanting:
An “investor" is asked to provide $100 with the understanding that the sum will be repaid over a one hundred year period at the rate of $1.00 per year beginning in 2030. Click here to read the analysis.
d) Questions as to why certain citizens seem to be treated “more equally than others – parking is a cost normally borne by the business that occupies the lot; not by the taxpayers.
e) A picture display (to view, click here), illustrating that the eastern half of Barstow and the blocks between Barstow and Wisconsin are now in a slum-like condition and will only get worse without some kind of code enforcement. Instead of jamming in a parking ramp and yet more buildings on the western side, why not truly develop the neighborhood by enforcing the City’s appearance ordinance.
f) An analysis of who benefits from the ramp. The district is not one of the beneficiaries. For more, click here.
After the Voters with Facts volunteers had completed their presentations, Randy Beck, corporate risk manager of RCU expressed consternation that the ramp was so small, indicating that his personnel drive to work and expect free parking. He also expressed concerns about the amount the City would be charging the bank to rent spaces in the ramp. Beck stated that he has a business to run and was concerned that he could afford the cost of ramp parking. Finally, when asked how much he planned to charge the City for the property on which the ramp will stand (that which is now RCU’s parking lot), he indicated the figure was still being negotiated.
City Council Hearing – September 23, 2014
As happens so often during City Council hearings, substance was sacrificed to procedure. The meat of the parking ramp issue – "does it make economic sense?", was barely touched beyond a statement by the City attorney (contrary to the plain language in the contract) that RCU and JAMF were obligated to rent a minimum of 440 parking spots. Not only does this statement contradict the plain language of the contract, it also flies in the face of the parking study. Per the parking expert, the contracted quantities are not needed and will not be available if the liner buildings are built. The City Manager then stated that the comparable price for a similar facility was $50.00 per stall per month, even though he has neither the expertise nor the authority to determine that figure.
There was a great deal of discussion around the fact that, as planned, the ramp is too small. Many on the Council concluded that was a good thing, while a couple of others believed strongly that it was unwise to build a ramp that would foreclose growth. The City engineer had, in the interim, secured more precise figures on the estimated price of the fourth floor. The cost to build the ramp so that it had a foundation that could hold a fourth floor was an additional $220,000; while the additional cost (with the larger foundation) for a fourth floor would be $2.2-$2.4 million rather than the $3-3.5 million cited the day before.
Council Member Emmanuelle was particularly enthusiastic about building an undersized ramp, equating it to a “muffin top” – a word used to describe the situation in which a person can no longer fit into her jeans. When she tries to zip them up, her belly protrudes over the waist band like the top of a muffin. To Council Member Emmanuelle, trying to force herself into clothes that no longer fit is a good thing, as it provides an incentive to lose weight. She maintained that, in the same fashion, the City can dissuade people from driving their cars by building an inadequate ramp. Council Members Duax, Larson, and Mitchell all echoed her enthusiasm.
Despite the fact that the borrowing allowed under the amended TIF No. 8 would be insufficient to support a building with a fourth floor, as well as statements made by the more vocal Council members that they would not support a larger ramp, the Council voted ten to one to continue the design process and require the design firm to design and secure bids on both a three and four-story ramp. Only Councilman Von Haden voted against continuing the design effort.
As a result of the vote, the City will spend another $180,000 on this project, beyond the $160,000 to $180,000 already spent. These expenditures are being made before it determines whether or not it makes economic sense to build a ramp.
Note: An additional $361,000 will be spent to build a path between JAMF and the new neighboring apartment building and tear out and replace existing cement curb and gutter to move the River Terrace Street crossing opposite a path that will run between JAMF and the new Lego parking building. The path will be constructed of pavers that match those found in Phoenix Park. Because the contract with JAMF gave the developer the right to specify the location and materials for the path, the City has no choice but to build that which JAMF has specified. JAMF will hold an easement to the path. As a result, the City and its taxpayers will not only pay for the path, but also be obligated to maintain it.
PUBLIC HEARING ON NORTH BARSTOW PARKING RAMP DESIGN PROJECT –
Posted: Saturday, September 21, 2014
After spending somewhere between $160,000 and $180,000 on “preliminary” designs, the City Council has finally scheduled a meeting to determine whether or not a parking ramp is actually needed. It will then decide during its Tuesday meeting to do one of two things:
1) Continue the design program and spend an additional $224,000 to $244,000 for a complete bid package for the ramp and a temporary $361,000 path from JAMF to the new apartments and the corner of Barstow and Wisconsin
2) Drop the idea and rely on surface parking instead.
Click here to see the Tuesday packet material.
The Parking Study appears to have been done hurriedly and was not properly vetted by the City; a staff. As a result, parking numbers are inconsistent (e.g., RCU’s parking lot sometimes had 88 spaces and other times 110 (the actual quantity in the lot is in fact 88); differ from official City numbers; or are simply missed (Forest Street Parking Lot). By using statistics to determine needs, the study concludes that JAMF does not need the number of spots under its contract with the City, and reduces the quantity allotted from 210 to 180. Even so, the spots that it indicates are required for JAMF, RCU, and the liner building, exceed by 30 to 40 stalls those BWBR has provided in its proposed three story ramp. To enable the ramp to meet the needs of the three buildings, the study recommends adoption of plans to encourage their employees to leave their cars at home: either unrealistic (aggressively encourage employees to do more car pooling and biking) or expensive (offer enhanced transit service in North Barstow or free or discounted transit passes) alternatives. Moreover, even if those solutions worked, there would be no ramp parking for the public during weekday business hours or for the hoped for $8.5 million development on the corner block of Barstow and Wisconsin. Currently a 200-spot parking lot occupies that block. The ramp was intended to be the means to open that block for development. If built, the question arises, where will the occupants of the new development park? The ramp is simply too small, even if a fourth floor were added.
The ramp design consists largely of pictures. The real substantive information needed for decision making is missing. There are no projected revenue figures; no indication of public parking fees, if any; and operating costs are both minimalistic and unrealistic (capital costs are missing and there are no charges for personnel). There is also no information on the price of the RCU parking lot that the City intends to purchase for the ramp. Absent as well are the promised projections for expansion, ie., the cost to build four floors versus three floors now and a fourth floor later. Finally, there is no information on the cost to build the ramp before or after the liner building is in place.
CITIZENS FILE SUIT AGAINST CITY OF EAU CLAIRE AND ITS CITY COUNCIL TO ENFORCE STATE OF WISCONSIN’S OPEN RECORD LAW
Posted: Saturday, September 20, 2014
Sixteen citizens, many of whom are Voters with Facts volunteers, filed a suit September 16, 2014 against the Eau Claire City Council and the City to enforce Wisconsin's Open Meeting law. These citizens had previously filed complaints with the District Attorney asking him to enforce the Open Meeting law. The District Attorney declined. Under Wisconsin law, closed hearings are the exception rather than the rule and are not allowed except under narrow exceptions such as the “required for bargaining” exemption. The complaints and lawsuit pertain to two of the three meetings on the Confluence Project scheduled since the April 1st Referendum. One occurred on April 21 and the other on July 7. Both concerned an unspecified development agreement for the Confluence mixed-use and performing arts center projects, and both were closed to the public.
After the complaints were filed, the City attorney disclosed that both sessions pertained to something other than negotiation. The session instead pertained to a developer's request for a $5.9 million contribution to a proposed student housing building at the Confluence site.
In response to questions, John Hibbard, attorney for the citizens, provided the following explanation for the suit. "Thomas Jefferson’s stated, 'An informed citizenry is at the heart of a dynamic democracy.' My clients fully concur. They believe that open meetings are a key civil liberty and have concluded that it is critical that they take action to safeguard this very important right. Only through open meetings are citizens able to intelligently advise their representatives and participate in meaningful public discussions. Without open meetings, they cede all authority to their representatives.”
A copy of the lawsuit is available by
clicking here. For additional details see
VOTE ON TIF NO. 8 AND CONFLUENCE, INC. September 9, 2014 CITY COUNCIL Meeting
Posted: Saturday, September 20, 2014
Very few of the points made by the public on Monday evening were discussed during the September 9, 2014 City Council Meeting.
In terms of TIF No. 8, there was general discussion on blight, although no discussion of the specific properties that had been deemed "blighted." The City’s Finance Director used Superior Auto (a property that was not actually on the blighted list) as an example of blight, stating that auto body work is undesirable in the downtown area as envisioned by the City's Comprehensive Plan and thus a nonconforming use. That sparked questions, given that Superior had recently purchased neighboring property for expansion. The City Manager stated that Superior should be happy that it is in a TIF district as it could seek funds from the city through the TIF to complete its development (despite the fact that it had planned to finance the development itself, rather than at taxpayer expense). Councilman Duax responded that if its use was non-conforming, Superior Auto should not be allowed to expand. Council Member Lewis thought it odd that a business that was doing something positive for the community would be pushed out. Attorney Nicks stated that being deemed blighted under the TIF statute did not in and of itself trigger eminent domain [that is true, however, under Wisconsin case law, it can be used as the basis for the implementation of eminent domain, and both blighted and non-blighted properties are taken - Grunwald v. West Allis, 202 Wis. 2d 471].
Only a handful of members expressed support for the TIF. Like their counterparts on the Plan Commission, most were silent. Councilman Duax questioned the blight concept and wondered if the original TIF 8 was lawful. He concluded that, as the Council was half way through the “muck,” it should continue on its current course. He also indicated that a TIF is just a plan and that voting for the TIF did not actually authorize the projects. Council member Emmanuelle focused on the Confluence, only, despite the fact that it is the minor portion of the TIF 8 amendment plan (only $2.5 million [$1.5 million for the performing art center and $1.0 million for the park] of the $12.9+ million proposed expenditure), maintaining that the public voted for Confluence (actually, it voted to entrust the vetting process to Council) and that the Council needed to honor the vision of the big picture. Councilman Larson applauded the TIF statute because the Council had been given such broad discretion and effectively could do anything that it wanted. He commented that he trusted the city attorney’s advice on the subject.
Ultimately, the vote was eight to three. The three council members who voted against it were Lewis (she did not believe in expansion of TIFs, particularly in this instance when the planned projects had no relationship to the new area), Von Haden (he questioned the fact that there were no dollars planned to remediate the new “blighted” area), and Strobel (who questioned the feasibility given that the financing was premised on the construction of new buildings that no one was offering to build).
The substance of Confluence, Inc. was never discussed. Instead, three Council members tried to amend the resolution to defer the City’s proposed subsidy of the student housing building until the Confluence performing art center was fully funded. Each effort was unsuccessful. The resolution was then tweaked in a number of non-substantive ways with Councilman Duax advising everyone that this was just one more small step that was not meaningful. In contrast, the City Manager maintained that the Council’s agreement to become a board member of Confluence, Inc. was crucial. Without the City’s participation, the State would conclude that the community was not truly behind the Confluence performing art center and would not fund the project. Ultimately, the vote was nine for and two against the resolution to make the City a board member of Confluence, Inc. Only Von Haden and Strobel voted against the measure.
SECOND NORTH BARSTOW PARKING RAMP OPEN HOUSE 9/11/14
Posted: Saturday, September 20, 2014
The final rendition of the proposed parking ramp was shown at the September 11, 2014 open house. The open house was thinly attended – only fourteen people came, which included members of the press.
The proposed ramp is shown in a sketch below. It consists of three floors - ground, second, and an open roof. Parking on the roof will be comparable to parking on any open lot. The cars there will be exposed to snow, rain, and sun.
As planned, the ramp will have about 560 parking spots (a number between 550 and 570). It is 340 by 176 feet or 59,840 square feet and at its highest point (top of the glass walled elevator) is 38 feet. The elevator is located at the corner facing the JAMF and RCU buildings. An elevator user (typically an individual with a disability or family with young children), will need to walk an additional 176 feet to reach the Farmer’s Market. But for that walk, the distance would be equivalent to the current walk from the 200-space lot on the corner of Barstow and Wisconsin.
As shown below, those driving south on Barstow street will see a brick wall with multiple openings ending in the liner building (when and if it is built). The liner building will provide the walls for one corner of the ramp, enabling occupants and customers to access it directly from the ramp.
Project Manager, Richard Stuerman from BWBR (the Minneapolis architect firm designing the ramp) provided the following information at the open house:
1) No Weekday Parking from 8:00-5:00 For Farmers Market Customers and Other Members of the Public - Once the hoped-for liner building is built and occupied, the intent is to close the ramp on weekdays to the public during business hours. That means the only convenient place to park for the Farmers Market on Wednesdays and Thursdays will be the 52-car lot on Forest Street.
2) JAMF's and RCU's Parking Needs
Per the BWBR representative, 440 stalls are needed for RCU and JAMF. The reason the proposed parking ramp has so many stalls is that it is being placed on top of RCU’s/JAMF’s existing parking. Not only will the City plan on providing the 330 requested spots, but it must replace 110 spots lost to the ramp for a combined total of 440 stalls. It is possible the 110 figure is overstated and it should be 88 instead, as the actual existing number of spots is 88.
Question: How much will RCU/JAMF be charging the city to purchase the existing parking lot that they own? The charge for that space is not in the Tax Incremental Finance plan. At one time, there was talk of a trade – the land in exchange for no-charge parking.
3) No Parking Planned for the Block 7 Development – the hoped-for $8.5 million building on Block 7 will be responsible for its own parking. The number of spots planned in the ramp is intended to cover only the liner building and the revised needs for JAMF and RCU.
Question – is it reasonable to expect a future owner to fund both an $8.5 million building and its own parking ramp? Neither JAMF nor RCU were willing to invest in all of the parking they said they needed. Instead, they asked the City to cover the cost as a condition to constructing their buildings.
4) A Ramp With Free Staffing Costs? – Per BWBR’s Project Manager, the City is applying zero staffing costs to the parking ramp, as it is hoping that its existing personnel can service the ramp and still perform their other duties. That is not realistic; other city services will no doubt suffer if personnel are not added. The Project Manager described the snow removal process, which is far more complicated than clearing snow at surface level with a plow, due to the need to plow the third story. The snow must be gathered on the roof top, thrown off the roof, and placed in vehicles below. It thus requires more people and equipment than a surface lot. Separate cleaning is required to handle the snow/sand/salt tracked in by cars parked on the ground and second floors. There is also day to day maintenance, emergency maintenance and security, all which require staffing.
5) Origin of Punitive Response to Post Office's request for a six month extension – The project manager stated that his firm was the author of the $390,000-$600,000 estimate of the additional cost to the City if the Post Office remained at its current address on Barstow until March, 2015. The RDA (Redevelopment Authority) used the estimate to justify the penalties it is charging the Post Office if it fails to move by September 30 – double rent ($10,000) during October and $3,000 per day beyond October 31. The $3,000 per day is truly punitive. It equates to rental of $90,000 per month – 18-times the normal monthly amount. In a period of two days, rent exceeds the historical fee for a full month. Click here to read more about the penalties imposed on the Post Office.
How accurate were these estimates? According to the Project Manager, the figures were provided hurriedly in response to an emergency phone call from the City's staff and were largely inflation costs based on Minneapolis' current annual 6-8% construction industry inflation rate. He himself questioned the relevance of the estimate, explaining that Minneapolis is currently seeing a flurry of construction. He added that local Eau Claire information, to which he did not have immediate access, would have been a far better basis for the estimate. The other factor included in the estimate was the assumption that it was critical that the ramp be completed in 2015. That need has yet to be demonstrated. If the project were delayed six months, it would not be ready until December 2015. November/December cold slows construction and increases costs.
The current plan is to tear down the Post Office in November and prepare the site for construction. Actual construction would begin in March, which is likewise cold. The ramp would then be completed in October rather than December.
Update - Because of the harsh penalties, the Post Office will be moving on September 30, after all. There will be no downtown Post Office until the new location (Charly's grocery store and the space next to it) is ready. Post office boxes will be available at the less than convenient location on Hogarth Street. Customers may also purchase stamps and mail packages at the grocery stores or go to Altoona.
6) What Will The Charge Be To Use the Ramp? - No decision has been made on the fees to be charged either to the businesses during the day or the public during non-business hours. Another consultant has been working on that aspect. Revenue is an important figure in judging the net cost to the City to operate the proposed ramp.
7) Extra Cost if Ramp is Built Before the Liner Building - The liner building is intended to form a portion of the ramp’s walls. If no one has come forward to build it, extra cost will be entailed in providing additional finished walls for the ramp and the requisite structural support.
8) Design Charges – BBWR will be charging the entire amount budgeted for the first three phases ($146,664), expenses and $15,000 for Market & Johnson’s assistance to date. According to the project manager, it has actually gone beyond budget in each phase, but it does not plan to charge the excess to the City, even though it technically could under the contract. To view the contract, click here.
9) Rush to Hold a Public Hearing on 9/22 for a Vote on 9/23 - Despite the fact that the final traffic/parking study will not be available, BBWR has been instructed to rush the completion of its final drawings and deliver them to the City on Wednesday, 9/17, with the understanding that the drawings will be placed in the Council packet that goes out late, Friday, the 19th. The public hearing would occur on the following Monday (9/22), with possibly an oral traffic/parking study presentation. The City Council’s vote committing the City to the project would occur the next day.
Given the amount involved and the questions that need to be raised and answered, this compressed notice/hearing/vote timeframe is a huge concern. It guarantees that there will be no meaningful public dialogue. In fact, the media will barely have time to inform the public (if it does so at all (note the 9/8 TIF discussion which occurred after 9:00 p.m. and never was reported by the television media)) before the Council voted.
The key question has yet to be addressed. Why would the City spend $9.6 million on a ramp that is intended to benefit at most three businesses, two of which are already present - RCU and JAMF. That liner building could be built on a section of the Post Office, regardless of whether the ramp is added or not. The ramp merely opens Block 7 for an $8.5 million building. That building would provide property taxes that would pay for the ramp in 170 years (if one assumes, contrary to fact, that there will be no cost to operate or maintain the building). It would be one thing if Block 7 were the last open space in the City. It isn't. In contrast, the surface parking is already in place. Alternatively, the City could use a portion of the Post Office lot for parking at a far lower cost. It could actually demolish the Post Office and replace the building with a parking lot for less than the design cost of the ramp.
Despite contrary statements by City staff and the media, the City has no contractual obligation to build a parking ramp for JAMF and RCU. The contracts with JAMF and RCU provide the City with the option to use best efforts to provide surface or ramp parking. Click here to see the contract and click here to read an analysis of the contract.
For more information see also http://voterswithfacts.com/#June18
THE LONG AWAITED CITY COUNCIL MEETING
Posted: Sunday, September 14, 2014
After months of dodging issues like the $5.9 million gift to a developer or the $404,000 contract to design a yet to be approved $10.3 million parking ramp, it appeared that these important issues and other Confluence-related issues would finally be open for public discussion at Monday’s (September 9) City Council meeting.
Technically, they were open, but in practice they were not. The evening’s agenda was jam-packed. One Voters with Facts volunteer had emailed the Council President shortly after she viewed the agenda, pointing out that by the time the items of particular interest were reached, the hour would be late and the television and public would have left. She recommended that some agenda topics be deferred for a later meeting or that the agenda be rearranged to cover these important items first. Her request was denied.
The volunteer’s predictions proved correct. Public discussion on these important issues did not begin until after 9:00 p.m. Although the press did stay for the discussion, the late hour precluded any meaningful coverage until after Tuesday’s Council Meeting vote. At that point, the discussion was considered yesterday’s news and was not reported. Most members of the public left long before the meeting ended. Council members themselves were exhausted and fighting sleep. Council adjourned after midnight. This was a public hearing in name, only.
There were two items on the September 8th agenda pertaining to Voters with Facts concerns. They were:
Concern 1 - the hearing on TIF #8 and TIF #10. Click Here for the City Council public hearing packet on the TIFS and Here for Tuesday’s planned Council Action. For an analysis of the issues, see the following write-ups:
Student Housing Aesthetics: Click Here
Building Confluence in a Flood Plain: Click Here
All Other Issues: Click Here
The Council President at the outset attempted to reduce the public statements from the normal five to three minutes and in fact cut off one of the volunteers from Voters with Facts. She relented when a speaker that favored the TIFs (The County Board Commissioner, Stella Pagonis) was unable to complete her statement in three minutes and returned the speaking time back to the normal five minutes.
The discussion on what is “blight” was particularly revealing. One of the Voters with Facts speakers, who is an attorney, provided an analysis of “blighted area” as defined in the TIF statute (click here to read that analysis). She had learned that the City was taking the words,”or otherwise, substantially impairs or arrests the sound growth of the community”, out of context, enabling the city to label any property as blighted. Those words in the statutory definition apply only to open areas.
Stella Pagonis of the County stood up and stated that she disagreed, maintaining it was perfectly acceptable to take the words out of context. The City attorney, Stephen Nick did not advocate any specific interpretation, but instead advised the Council members that as a legislative body, they could interpret “blight” any way they pleased, as the courts do defer to them. He maintained that unless they acted outrageously, citing a case in which the legislative body had classified a brand new subdivision as blighted, the courts would not question their judgment.
Thirteen other volunteers with Voters with Facts spoke at the meeting. All did an admirable job of covering the significant issues.
Concern 2 - The hearing on “Confluence, Inc.” - Confluence, Inc. is the proposed owner of the Confluence Performing Art Center and the entity that will be applying for the $25 million of non-state agency grant money from the State of Wisconsin. The developers proposed that two City representatives be placed on the Confluence, Inc. Board and the City become the operating backstop. Click Here for the Agenda packet, Here for background information, and Here for a comparison of the proposed structure to the actual Green Bay Packer structure.
Four Voters with Facts volunteers spoke to these issues, providing the information found in the background and Green Bay write-ups. The attorney for the developers did state that the Green Bay model was not feasible given the high cost entailed in the sale of stock.
Waterways & Parks Commission Postpones Decision On Proposed Student Housing Building
Posted: Sunday, September 14, 2014
During the August 27, 2014 Waterways & Parks Commission, Commonweal’s Dan Clumpner offered a new rendering of the proposed student housing building, He apologized for the renderings found in the commissioner’s packet. Click here to see the applicable portion of the packet. The new rendering, shown below, was met with little enthusiasm due to its appearance (a full block, six stories-high version of the Lego buildings on North Barstow), the use of metal trim and vinyl siding, the excessive height, the absence of the promised historical features, that fact that it does not fit in with existing buildings, the narrow and poorly designed pathways, the close setback to the river, and the absence of “green” energy-saving features. Two commissioners indicated that they did not oppose the esthetics of the design, with one stating, “What can you expect – it’s a dorm.”
The developer did attempt to persuade the Commission to approve the design as is and to trust that it would be submitted to the Plan Commission in two weeks in a more finished and acceptable state. The Waterways and Parks Commission voted unanimously to defer its decision until the commissioners could review the actual plans.
HISTORICAL CONFLUENCE PROPERTIES WERE NOT IN THE FLOOD PLAIN AFTER ALL
Posted: Sunday, September 14, 2014
During the August 27, 2014 Waterways & Parks Commission, Owen Ayres & Associates advised that the Student Housing Building will be built at approximately the same elevation as the historical Confluence buildings.
Ayres applied for a Letter of Map Change (LOMC) (click here to see the LOMC) from the Federal Emergency Management Agency (FEMA). FEMA granted the request, reducing the historic 100-year flood plain to an elevation below the ground floor levels of the historic buildings. The change enables Haymarket to build the proposed student housing building at approximately the same elevation as the historic buildings. In response to questions about the potential for flooding, the Ayres representative stated that the building’s entrances and the opening to the parking garage would be above the modified flood plain. Only the basement and parking areas would be below the flood plain. Flooding is expected, however, current warning systems are sophisticated, and students will have plenty of time to remove their cars from the underground parking garage before they are submerged.
What does this mean? It means that if the exception that Ayres secured had been in place in 2012, the historic Confluence buildings would probably not have been deemed “blighted.” That label was applied in large part due to occasional basement flooding. It would appear that the same occasional flooding is planned for the proposed student housing building.
CONFLUENCE, INC – Eau Claire’s Answer to the Green Bay Packers?
Posted: Sunday, September 14, 2014
The Green Bay Packer model for doing business is amazing. There are 363,948 shareholders who own a total of 5,020,523 shares. During the most recent offering in 2011, the stock sold for $250 per share. What does $250 buy? Not much. The stock does not pay dividends and it cannot be sold. Transfer is limited to lineal descendents at the cost (payable to the Green Bay packers) of $25 per share. Owners don’t even receive game tickets or priority on season tickets. The owner’s only right is his or her ability to participate in the annual stockholders meeting and cast votes for the seven-member board of directors. The owner also receives a certificate and can buy special Green Bay merchandise. That is it. In addition no shareholder is allowed to own more than 200,000 shares. That insures that no owner has control.
Although the Packers are organized as a not-for-profit company, their earnings are taxed at both State and federal levels. The City of Green Bay is not an owner. It also does not backstop operations. For more information see http://shareholder.broadridge.com/packers and http://news.medill.northwestern.edu/chicago/news.aspx?id=178245
A September 2, 2014 Leader Telegram article ( http://www.leadertelegram.com/opinions/editorials/article_e020c994-2f04-11e4-87ec-0019bb2963f4.html) touted a proposed new Confluence plan under which the Packer model would be adopted to fund and operate the Confluence Performing Art Center. That would be very good news for the citizens of Eau Claire if it were true.
Based on the information available, however, it is anything but:
Per the August 26, 2014 letter of invitation to the City written on Confluence stationary, but signed by the principal of the developer, Commonweal (click here to see the letter) and the City Manager’s letter explaining the structure (click here to see that letter), the differences are profound and are as follows:
a) There will be no stock offered and thus no shareholders.
b) Only the City, the developer, the University Foundation and the five-ten major donors will be on the board and will have a voice on decisions.
c) The City is expected to stand behind the operations – the invitation letter indicates that the new structure holds an advantage over the previous model, under which the City was expected to agree to than open ended guaranty of the local share of operations (that’s news to Voters with Facts and contrary to the terms of the City’s $5 million pledge) to one in which it can negotiate an annual cap on its exposure.
d) The City through its representatives on the board would be involved in the approval of annual operating budgets and major capital expenditures, establishing policies, and monitoring the performance in the manner in which the corporation conducts its business.
Well, this certainly isn’t the Green Bay Packer model. Nor is it a one-time $5 million payment using TIF money towards the Performing Art Center. It is instead a permanent presence of our City in funding the operations of what will be a major money losing venture. Note that we as citizens will lose all control, as the corporation is a private entity. That means, for us, none of the State protections of open meetings and open records apply. Our City Manager is on record on a similar organization, the Confluence Council, avoidance of these citizen protections:
The Confluence Council is its own community organization,” said city manager Russell Van Gompel, who is among the new group’s members.
The Confluence Council is not tied to the same open meetings and public notice laws local government bodies must abide by. Interaction between the City Council and Confluence Council would be limited to when key documents such as a proposed budget are released, Von Gompel said
And look at the representation on this Board – the interested parties are in control – the developer effectively has four seats at the table, through their own direct participation and Blue Gold Realty (university foundation - one of the three partners of the developer, Haymarket Concepts, LLC). One has to wonder who the “large donors” will be. Will those be donors who have actually donated money or simply provided pledges?
What other concerns should the public have with this structure? There are no independent controls in place. The people in control are the ones who stand to profit the most on this project, in particular the developers. Just what is the $50 million going to purchase – the developers will control the specifications and the construction. Effectively, they can deliver whatever they want and pocket the balance. This is the pinnacle of crony capitalism.
In contrast under the program with the Board of Regents, the developers were not in control of the specifications and were placed in the same position as any other construction company in bidding the project. That won’t happen under this structure.
If the developers wish to go forward with this structure, they are free to do so. The City, however, should not be a party to Confluence, Inc. Likewise, it should not now be offering to be a backstop to operating costs, either capped or uncapped. Based on its pledge and the understanding of the citizens, that was never a part of this deal.
$25 MILLION NON-STATE AGENCY CONFLUENCE GRANT FROM THE STATE - Likely Or Another Pipe Dream?
Posted: Sunday, September 14, 2014
As a result of the community’s failure to meet the University System’s Board of Regent’s five guiding principles for the funding of the Confluence Performing Art Center, the university removed its request from the 2015-2017 budget. Instead, it asked the Board to recommend that a different source be used to fund the project - non-state agency grant funds. The Regents did endorse the use of the non-state agency grant vehicle. By doing so, they are assured that the project will not impact their future budgets.
The Non-State Agency Grant process, like most State procedures is a lengthy one. Click here for the Department of Administration’s summary of the process.
There are, two immediate hurdles:
1) Size of the grants – The grants come out of the State’s capital budget, most of which is used to fund State and University-system projects. That leaves limited funds for requests for local projects like Eau Claire’s Performing Art Center. As shown in Table 2 of the summary, such projects typically receive funding at the $300,000 to $500,000 level with a maximum shown of $6 million. That is a far cry from the $25 million that the community is seeking.
2) Matching Requirement - The Community must match these dollars and may have to provide guarantees for the match as of March 2015. To date, we have multi-conditioned pledges from the county of $3.5 million and the city of $5 million. We also are counting on $3 million of Federal market tax credit money. County, city, and federal money total $11.5 million. That leaves $13.5 million in private donations to reach $25 million. The federal program expired on 12/31/13, however, so an additional $3 million must be raised. The City pledge is conditioned on the raising of a $2.5 million endowment fund. That too must be raised. This brings the total figure for private donations to $19 million ($13.5 million + $3 million+ $2.5 million). Approximately $5 million in pledges have been made to date, some payable over multiple years. Since pledges are gifts made without consideration, they can be cancelled at any time. The $14 million gap between these cancellable pledges and the total required is sizable, particularly given the fact that more than two years have elapsed since the fund raising began.
Would the City guarantee the $14 million and borrow the funds directly in the hopes that charitable donations would be forthcoming in the future? That seems doubtful. The program was sold to taxpayers as virtually free and increasing and servicing debt at this level is anything but free.
Seems to Me: STOP UNSUSTAINABLE LOCAL DEBT
Posted: Sunday, September 7, 2014
We worry about high federal debt but conclude that there is nothing we can do. Unfortunately, our city is following the path of our federal government. Annual city property tax receipts ($30.7 million) no longer even cover routine street repairs. Instead, the city borrows the funds. Total city debt is almost 3x annual property tax receipts.
Unlike federal debt, your voice can have an impact locally. This is your city. Perhaps it’s where you were born, attended school, or where your parents and grandparents lived. Maybe too, it’s where you hope your children or grandchildren will live.
On Monday, the City Council is holding a hearing on borrowing $23.5 million (78% of annual property tax receipts or $356.69 per resident) through two blighted TIFs. You can stop this new debt, but only if you attend.
To paraphrase one of Eau Claire’s most respected municipal attorneys:
Projects financed in TIF districts are usually determined by the:
The proposed blighted TIFs (Amendment-3 to TIF-8 and overlay TIF-10) are excellent examples of ingenious developers and gullible local officials. Our Plan Commission recently approved the TIFs with only the scantest of review. Unless we citizens object during Monday’s hearing, the TIFs will surely pass the City Council.
These proposed TIFs ignore the purpose of blighted TIFs: To use incremental tax dollars to redevelop truly blighted properties like those found in slums. Instead, they divert dollars away from schools and municipalities to bondholders and developers. TIF-10 actually proposes a $5.9 million contribution to the developer. Because these are blighted TIFs, the diversion of taxes can last 27-30 years.
The properties included in the two TIFs are not blighted. State TIF laws define “blight” as an area in horrific condition conducive to:
None of the proposed “blighted” properties meets the definition.
TIF-8’s proposed “blighted properties" are: the Green Tree Motel (under construction as a boutique hotel opening in 2015); two lots adjacent to Superior Auto (recently purchased for Superior’s expansion); rented residential properties on Wisconsin and Dewey (blight-free per the owners); and the city’s Barstow/Farwell parking lot.
TIF-10’s proposed “blighted” properties include: the remodeled Ramada Hotel (scheduled to reopen in January as the luxurious – I assume blight-free – Lismore); a private parking lot on Barstow; the Kresge building (home of Lutheran Social Services and Playmakers Bar & Grill); and Hope Gospel Mission.
The Confluence Properties (Graham/Eau Claire/South Barstow) are in both TIFs. All “blight” will be remediated shortly. The properties were purchased by a developer (Haymarket Concepts) in 2012 and 2014 at significant premiums (3.5x the assessed land value). The Confluence buildings were gutted by their owners immediately prior to sale. Haymarket is razing them, as required by law, and will either develop or seed the lots. Either way, the properties will not be “blighted.” Classifying them as blighted in TIF-10 is disingenuous.
TIF-10 only redevelops the Confluence properties, while TIF-8 redevelops the Confluence, post office, and the Wisconsin/Barstow parking lot. As for the newly added “blighted” properties, zero redevelopment dollars are planned, which is not surprising, as none is needed. The private redevelopment of key properties (Green Tree and Lismore Hotel) is scheduled for completion in early 2015. But for the proposed TIFs, taxes from their increased valuations would begin flowing into municipal and school funds in 2016.
Not only do the municipalities and schools lose out on the increased values of the “blighted” properties, they also receive nothing from increases in valuation of non-blighted properties in the TIF district. Boundaries in TIF districts include the furthest blighted point. If the Green Tree is added, Volume One and Superior Auto automatically become part of TIF-8. If the remodeled Ramada is included, half of downtown is added to TIF-10. Tax increases from increased assessments of the non-blighted properties, even those due solely to inflation, go into the TIF. There will surely be inflation in a 27-30-year period. Both TIFs assume as a revenue source inflation of 1% per year. Inflationary increases merely compensate for losses in purchasing value. Giving inflationary taxes to bondholders and developers reduces the existing tax base for schools and municipalities.
As taxpayers, we’re the last line of defense. You cannot afford to be passive. Please join me at Monday’s City Council meeting. Let’s tell our elected representatives that we oppose unsustainable indebtedness. For additional information, see http://voterswithfacts.com/#Aug20-2
Farewell, Historic Eau Claire
Posted: Thursday, August 28, 2014
Do you remember being told what horrible condition those South Barstow Street historic buildings were in?
Are we remembering what we have been told for the past two years – are unsafe and in a state of disrepair – our historic South Barstow Street. Oh, no one should step inside for fear of their lives!!!! Read More
Update - AUGUST 18, 2014 PLAN COMMISSION MEETING - Commissioners approve both Confluence related TIFS
Posted: Tuesday, September 2, 2014
Eight Voters with Facts volunteers, as well as the owner of several of the newly proposed blighted properties, appeared before the Plan Commission on August 18. Each questioned the proposed Amendment to TIF No. 8 and/or the overlay TIF No. 10.
Despite the limited time that the Commissioners had to read and digest what is complicated material (they received the packets late on Friday, August 15 and were asked to make a decision on the TIFs on the following Monday, August 18) and the fact that the information provided by the volunteers and owner did raise important questions, the Commissioners voted eight to one to proceed with the TIFs. After the meeting, several Commissioners expressed concern about the lack of adequate time to review the materials and the fact that many of the points raised by the owner and volunteers were significant. At that point, however, it was too late.
AUGUST 18, 2014 PLAN COMMISSION MEETING– TWO CONFLUENCE-RELATED TIFS UP
Posted: Wednesday, August 20, 2014
What municipal governments choose to do with industrial development activities and the tax increment district law is usually determined by:
On August 18, 2014, the Eau Claire Plan Commission will review proposals pertaining to two Tax Incremental Financing (TIF) proposals. One expands an existing TIF District (TIF No. 8) and the other creates a new TIF district (TIF No. 10) that overlaps TIF District No. 8. Both are intended to finance projects that have yet to be discussed in open hearing or approved by the Council:
Amendment 3 to TIF 8 has only one stated purpose – provide a portion ($1.5 million) of the City’s $5 million-multi-conditioned pledge to the Confluence Performing Art Center. The amendment also proposes that the boundaries of the TIF be expanded to include additional property – 2/3rds of which is alleged to be blighted. There is no redevelopment planned, however, for the "blighted" property under the proposed TIF. Moreover, if the nine conditions to the City’s pledge are not met, the $1.5 million is not needed.
TIF No. 10 primarily provides the means to make a $5.9 million gift to Haymarket Concepts, LLC, the current owner of the west side of the Confluence Block. To date, this matter has been the subject of closed hearings. For details, click here. Several of our volunteers did question the proposed gift at the August 11, 2014 City Council Meeting – for more information click here. TIF No. 10, like TIF 8, also funds a part of the City’s $5 million pledge for the Performing Art center and part of the $2.0 million to develop the Haymarket parking lot into another city park.
Of concern are the following:
1) Putting the cart before the horse - TIF documents are complicated and take considerable time and resources to prepare. Notices are required as are hearings, requiring the expenditure of yet more time – by city, county, K-12 school and vocational school officials, as well as citizens on the Plan Commission and members of the public who are concerned about their city. Surely, it makes more sense to determine whether the Confluence project is feasible prior to putting these complicated funding vehicles together.
Who would plan a major project around a Performing Art Center that requires $50 million of funding, very little of which has been or is likely to be secured? To date the community has been unable to raise more than a fraction ($5 million in pledges) of the $19 million of funding required. (Click here for the calculation of the $19 million private donation requirement.)
No State funds are budgeted. Contrary to expectations, the Board of Regents recently decided not to include the project in the 2015-2017 University budget. That leaves the non-State agency grant vehicle as the only possible remaining source. At a minimum, whatever funds are provided through the grant would need to be matched by the community. Application for such a grant has yet to be made. Submission of an application is planned for September 12. At this point in time, the entity that will be submitting the application, a 501(c)(3) trust, does not exist and won't be formed until after the application has been filed. The trust's planned assets are the same pledges that proved inadequate for the University of Wisconsin Board of Regent's budgeting process. Means to cover operating costs are, at this point, unknown.
The so-called private housing project is also a doubtful venture. Beyond the fact that a $5.9 million gift is planned to the developer, just how feasible is it? This isn’t just a dorm, but is high-end university housing that will be unaffordable to many students. A similar project in St. Cloud State has led to nothing but losses due to low occupancy; literally millions have been lost each year. One concerned city council member described the situation as “financially hemorrhaging.” Even at the hoped for 80% occupancy this year, the St. Cloud facility is slated to lose over $900,000. For more information, click here. The newly built private housing for students, Metro Crossing, is having similar issues, as 14% of its facility is unoccupied. In fact, it could house all 35 students that the University has placed in hotels. The students in hotels are paying dorm rates, however, rather than the higher apartment rates.
2) Property is not Blighted
What does it mean to be “blighted”? There actually is a statutory definition of blight. The statute is 66.1105 Tax increment law. Subsection (b) (1) provides the definition of “blighted area” as follows:
An area, including a slum area, in which the structures, buildings or improvements, which by reason of dilapidation, deterioration, age or obsolescence, inadequate provision for ventilation, light, air, sanitation, or open spaces, high density of population and overcrowding, or the existence of conditions which endanger life or property by fire and other causes, or any combination of these factors is conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, or crime, and is detrimental to the public health, safety, morals or welfare [emphasis added]
Are the sites the City has designated as blighted in the proposed TIFs, truly blighted under that definition? Have they deteriorated or are they so obsolete that they are “conducive to “ill health, transmission of disease, infant mortality, juvenile delinquency, or crime?” You judge. The buildings fall into one of three categories [click here to see a list of the buildings]
Category One – property that is currently owned and used by or rented by their owners. These properties include the Wisconsin and Dewy Street rental units, Hope Gospel Mission, Playmakers’ Bar and Grill, Lutheran Social Services, and the City’s “railroad” and Haymarket parking lots. Surely, if these were blighted as defined, the City would have shut them down or required changes. These are not abandoned buildings or run by “fly by night” operators. They are established businesses, non-profits or city facilities.
Category Two – Property that has been recently purchased by developers for development. These include the three blocks of buildings on the first blocks of South Barstow Street and Graham Avenue, and the second block of Eau Claire Street. The developer, Haymarket Concepts, LLC (partnership of Commonweal, Market & Johnson and the University of Eau Claire Foundation), purchased this property recently at a significant premium. One of the Haymarket partners, Commonweal, also owns all of the blighted property in the second block of Graham, which it likewise bought concurrently with part of the Haymarket purchase. Haymarket is currently in the process of razing the three blocks of buildings it owns. With the damage done by the former owners (presumably with Haymarket’s blessing) in extracting everything of value (floors, ceilings, wiring, furnaces) and the razing process itself, the property is unquestionably blighted, however, that condition will be temporary. The developer will either build something on the site or seed it as a green space, as required by law.
Category Three – These include properties that are being completely refurbished: the Green Tree Motel, purchased last year by downtown entrepreneurs and scheduled to be opened in late 2014 or early 2015 as a boutique hotel, and the former Ramada hotel, a structure that is currently being modified and is scheduled to open on January 1, 2015 as the Lismore hotel. Recently, the City Council approved a liquor license to the Lismore for its remodeled restaurant, bar, and coffee shop. Surely, neither intends to open blighted facilities, i.e., facilities whose condition is conducive to ill health, transmission of disease, infant mortality, juvenile delinquency, or crime, and is detrimental to the public health, safety, morals or welfare. Likewise, surely the City Council would not have approved a new liquor license for a blighted building.
None of these properties meet the statutory definition of blighted.
3) Development would occur without the TIF
Given the fact that the "blighted" properties are either in use or are owned by developers who are in the process of developing their properties, or by owners who are in the midst of significant and well publicized remodeling projects, it is very clear that a TIF is not required to develop these properties. They will be developed, and soon, regardless of whether the City creates or does not amend or create the TIFs. Further, it should be noted that, other than the three blocks owned by Haymarket Concepts, there is no plan in the TIFS to redevelop any of these “blighted” buildings. As such, there will be no redevelopment even with the TIFs.
4) Contrived boundaries to expand TIF district beyond development area
Three properties appear to have been added to the TIFs which serve to expand the geography of the boundaries and that will shift tax dollars that would otherwise be paid to the city, county, schools etc to the bondholders/developers. Those properties include the following:
TIF 8 – It would appear that the new TIF 8 “blighted” properties were added in order to draw contiguous borders that would include what will be the newly remodeled Green Tree Motel. Property taxes on the motel's refurbishment cost of $650,000 are actually identified in the document as a TIF increment, i.e., as an increase in property value that would not have occurred but for amendment 3 to TIF No. 8. This project has been in the works since December 2013, long before the proposed TIF amendment. Property taxes for the project were anticipated to assist in the overall tax burden to support the city, county, schools. If the property is placed in the TIF, the taxes generated on the improvements will be paid to the bondholders/Haymarket. Through 2030 those taxes will be approximately $215,700.
TIF 10 – Kresge Building (120 South Barstow) – the placement of this building which houses Playmarket Grill and Lutheran Social Services in the “blighted” category was surprising, not only because the building does not meet the definition, but also because it is not part of the Confluence block. Its addition, however, in combination with the remodeled downtown hotel enables the district to expand its borders to encompass sizable amounts of unblighted property.
Lismore Hotel (former Ramada) – adding this building along with the Kresge Building enables the TIF 10 district to encompass more than half of downtown, very little of which is “blighted”. With the Lismore and the Kresge Building, the boundaries extend from South Farwell to Graham Avenue up to Grand Avenue, as well as one additional block on the west side of Graham to Main Street. Non-blighted buildings include the Wells Fargo Bank building, the U.S. Bancorp building, the Strobel building, and the east side of the historic Confluence block, which includes the Barnes Building. There could be significant additional taxes in the form of inflation on these buildings over the 27-period that begins in 2014 and ends in 2040. For a full list of the buildings in TIF 10 which are not designated as blighted, click here.
5) Bad Policy – The major investment in TIF 10 is the subsidy to Haymarket Concepts of $5.9 million to build a private-for-profit student housing building. There are others who have built or plan to build such housing in the City, e.g., Metro Crossing, the student apartments at 522 Water Street and the proposed four-story student housing building at 228 Water Street. The City is not subsidizing these facilities, why would it subsidize Haymarket’s?
Beyond fairness, there is an appearance issue which has the potential to sully our City’s reputation. The subject of the $5.9 million gift to this developer has been handled 100% behind closed doors, suggesting that the City officials are engaging in backroom deals with favored citizens. It leads to speculation as to whether the developer has some kind of hold on City officials and key members of the City Council. Fostering special interests always leads to more special interests, and in turn the waste of resources and accompanying moral decay.
6) Central Planning – seldom works
Contrast that to the Phoenix Park area, where the pressure for development has turned what was a charming park and bank building into an area that is crammed with buildings with the plan to jam in yet more; where the same Lego apartment design, initially whimsical, is repeated over and over; where parking is an issue due to an apparent failure to plan. The proposed parking ramp is not economical. Nor is it even viable if the additional buildings materialize. There will be no place for the new tenants to park. If the buildings don’t materialize, TIF 8 will fall short, leaving the Eau Claire taxpayers to cover the cost of infrastructure. For more information about the ramp, click here and here.
Or contrast it to the proposed student housing on the Confuence block where a developer must receive $5.9 million in property tax payment in order to earn a return for private investors, and even then, the project is marginal.
7) Contrary to law, TIF 8 is being used to foster the destruction of historic property on an after the fact basis:
The State of Wisconsin has a policy of preserving historic property. In defining costs that can be charged to a TIF, it specifically excludes the costs to demolish historical property. These costs are not allowed as a TIF project cost (Wisconsin Statute 66.1105(2)(f)(1)(a)). Yet in this instance, the City is attempting to do just that by effectively covering the developers' high cost to purchase ($2.5 million) and demolish the buildings. The TIF device becomes a device to foster destruction of historic properties by compensating the owner after the fact. That is contrary to the policy of this State.
8) Other Issues of a Technical Nature
TIF No. 8
a) TIF 8 indicates that there was originally $3.4 million available for a parking structure in the original TIF. That is incorrect. There was $2.5 million available for a plaza and $185,000 as a parking contingency. The additional dollars provided for the parking structure were diverted from other projects that were either under run, moved to TIF 10 or dropped.
b) Removal of $1,052,000 from the tax increment for razing of the Haymarket buildings is inappropriate and effectively provides Haymarket with a discounted property evaluation. Haymarket was aware when it bought the land that the buildings were gutted and would have to be razed. The market value of the land it purchased presumably was what it paid - 4.5 times the assessed value. Haymarket should pay property taxes on this sum, not a discounted value.
c) Parking Ramp Revenue – Including $248,000 per year ($3.7 million for the entire period) from the parking ramp as TIF revenue seems highly questionable. The plan, per the developer, Commonweal, is to rent the stalls out to RCU and JAMF at the City’s current market value of $32 per month. If 100% of the stalls are rented, the revenue is approximately $200,000 per year, not $248,000. Realistically, all stalls will not be rented. Moreover, there are major costs associated with running a parking ramp. The City will be doing well if the rentals offset the operating costs. For more details, click here and see Response 5(c).
d) Assumptions that two major buildings will be built are just that – assumptions. Property taxes provide $3.1 million of revenue if they materialize; zero if they do not.
e) The repayment plan uses the full 27-years available under a blighted TIF. Given the speculative nature of the prospective buildings, the assumption of sizable parking ramp rental incomes, the questionable addition of the remodeling costs of the Green Tree Motel and the revenues anticipated from inflation that is highly risky. Those questionable sums total $8.4 million – 4.5 years of TIF bond payments.
f) The plan is to repay the city’s $3.2 million advance toward the project at the end of the TIF without interest.
TIF No. 10
a) This TIF is the vehicle for funding the $5.9 million gift to the developers with half paid up front and the other during the final seven-years of the TIF (currently planned for twenty-three of the allowable twenty-seven years) .
b) The incremental value used for the student building is $22.5 million. With the million written off under TIF 8, that is effectively a $21.5 million increment. Given the plan to place a building with a value of $26-$28 million on land purchased at $2.5 million plus the cost to raze the existing improvements, the cost of the building is easily $30 million. $30 million less the base value of $2.2 million for the land is an increment of $27.8 million, not $21.5 million. Effectively, the citizens of Eau Claire are providing Haymarket with a tax break equal to property taxes on $6.3 million or $149,500 per year or $3.75 million over the TIF period.
c) The City is expected to advance money interest free for this TIF as well - $250,000.
d) The increment should be reduced by the value of the property under the Performing Arts Building which will become tax exempt – its assessed value was $999,100, which will reduce the taxes by $23,700 per year or $593,000.
e) This TIF runs for nearly the entire statutory period (23 of 27 years), which on its face seems risky. It is premised on the building of two relatively low cost buildings ($1.4 million of taxes) with total increment of $3 million and also assumes the 1% inflation factor ($370,000 in taxes).
Street Cost for Confluence Block $1.35 million
*Given the fact that all streets other than the first block of South Barstow have been recently redone at considerable expense as part of the return to two-way streets, this is surprising.
Seems to Me: Hope and Wait
Posted: Wednesday, August 20, 2014
Back on October 5, 2012, the Board of Regents approved the Confluence theaters, subject to the program meeting five guiding principles. To date, only one principle has been met: “the state's investment in the art's facility portion of the Project must not exceed $25 million.” Nonetheless, the project is once again before the Regents for a vote on August 21, 2014. Given the failure to meet the principles after the passage of 22-months, we can hardly expect the Regents to include the project in the 2015-2017 budget.
The Confluence project has caused considerable harm to Eau Claire and to UWEC, in part because of the ongoing "hope and wait" approach that began in May 2012. At that time, Eau Claire had three downtown blocks by the river on Graham, Eau Claire and South Barstow that were filled with tenants. There were also wonderful private plans to revitalize the first block of Barstow that were abandoned once the project was announced. One of Eau Claire’s long-time destination businesses also has been destroyed as we "waited and hoped". The land has since been sold to a developer who hopes to develop and construct the Confluence project on the site. With the developer’s knowledge, the prior owners gutted the historical buildings, removing everything of value. Nevertheless, the developer paid a hefty $3.65 million for the three blocks - 3.9 times the land’s assessed valuation. Now, the buildings must be razed and the land moved out of the flood plain before it can be developed, an expensive proposition.
Where we once had regular campaigns to maintain and upgrade our historic State Theatre (one of the few vaudeville theaters left in the Country), the State is now disparaged as a wreck unworthy of either funds or effort. It’s hard to find willing volunteers or raise funds in such an environment. And with considerable amounts of available charitable dollars being sucked into multi-year pledges for the Confluence, area philanthropic causes are concerned. Where will funding come for future capital needs and operations? In the case of UWEC, maintenance and expansion of the Haas Fine Arts facility has been delayed as UWEC “hopes and waits” for the Confluence theaters.
Are we close to meeting the Regent’s other four principles?
We fail on principles 1 and 2 which require first, proof of an independent guarantor or surety of the financial and operational obligations of the owner; and second, an operating agreement assuring the State that it will not be liable for more than its prorated share of operational costs. At this point, there’s no owner, there’s no one that stands behind the unidentified owner’s ability to either finance or operate the theater, and there’s no operating agreement.
Principle 3 requires us to raise a matching $25 million. The amount raised must be auditable. We are not even close.
To date, we have multi-conditioned pledges from the county of $3.5 million and the city of $5 million. We also are counting on $3 million of Federal market tax credit money. County, city, and federal money total $11.5 million. That leaves $13.5 million in private donations.
But, the federal program expired on 12/31/13. An additional $3 million must be raised. But, the City pledge is conditioned on the raising of an additional $2.5 million endowment fund.
That brings the total figure for private donations to $13.5 + $3 + $2.5 or $19 million. Approximately $5 million in pledges have been made to date, some payable over multiple years. But pledges are unenforceable promises to give. Because pledges are not enforceable, they are not auditable.
Principle 4 requires fair competition and transparency which means that the entire project – development and the land itself – must be thrown open for competition. Given the developer’s financial interests –the sale of the land it purchased plus profits from development and construction work – the project is neither competitive nor transparent.
For additional details, see http://voterswithfacts.com/#June1
If after 22-months we cannot meet the five principles, it is highly unlikely that the theaters will be funded. It’s time to move on. Let’s do a real feasibility study on the State Theatre in conjunction with its neighbor, Hope Gospel Mission. As for the University, with the 25-acre Sonnentag gift, it is no longer land locked. Let it build the facility it wants and needs as an expansion of Haas or on the new property. Then open both theaters to joint community and university use.
Instead of “hoping and waiting” let’s place our energy in realistic projects that will actually benefit residents and students, alike.
Published under the title “Regents Should Pull the Plug” http://www.leadertelegram.com/opinions/letters_to_editor/article_52f75dc3-59d8-5f60-aebf-fddcfdb2800f.html
PLAN COMMISSION HEARING ON TIFS TO FUND $5.9
MILLION STUDENT HOUSING SUBSIDY AND
Posted: Friday, August 15, 2014
The Plan Commission has scheduled a public hearing on Monday, August 18 at 7:00 p.m. in the City Council Chambers at City Hall to approve the amendment of the North Barstow TIF district (TIF 8) and create a new 28-year overlapping district (TIF 10). The decision to create an overlapping district is an admission that TIF 8 on its own will fail.
The public is still awaiting hearings on:
a) Whether or not the $5.9 million gift should be made to the developers and
b) Whether the North Barstow parking ramp should be built.
Nonetheless the Commission is holding a hearing to fund these yet to be approved projects through the proposed TIFS. Incremental property taxes from an expanded TIF 8 district and the new overlapping TIF 10 would be used to pay bondholders. The source of the taxes is from a combination of inflation, building improvements that are already in progress (including those from the Green Tree Motel, a building that is currently not in the TIF district), and new buildings that the planners hope will be built.
The public is invited to comment.
You can find the agenda here:
You can find the two TIF Documents and a list of the properties that are to be included within the TIF by clicking on the following:
For TIF 8 – Amendment No 3:
For TIF 10 – Creation of Overlay TIF:
For a List of Properties within the new TIF Boundaries: http://voterswithfacts.com/PROPERTY_IN_NEW_TIF_Boundaries_8-1-14.pdf
The City will contend that at least 50% of these properties are blighted and must be destroyed, even though most are going operations:
Stay tuned for updates as volunteers with Voters with Facts analyze the TIF documents.
UPDATE ON AUGUST 11 and 12, 2014 CITY COUNCIL MEETINGS: RESOLUTION TO DEFER CONFLUENCE STUDENT HOUSING SUBSIDY
Posted: Friday, August 15, 2014
Seven volunteers from Voters With Facts provided comments during the August 11, 2014 City Council Meeting. The subject of their comments was a proposed resolution pertaining to the Confluence project. If passed, that resolution would, among other things, defer the requested $5.9 million subsidy to the developer to build private student housing until the State released $25 million for the proposed Performing Art Center. Click here to read the actual resolution. Implicit in the resolution was that the City Council would grant the $5.9 million subsidy, despite the fact that the City had yet to hold a public hearing on the subsidy or discuss it in anything other than closed meetings. Most of the volunteers addressed the implied premise. They questioned whether a private for profit venture like the proposed student housing building should be publicly funded at all.
President Kincaid made it very clear at the outset that comments had to relate specifically to the resolution and to general information that the new City Finance Director, Jay Winzenz, would be presenting on the process and timing for proposed amendment 3 to TIF 8 and the new overlay TIF 10. During his presentation, Mr. Winzenz not only provided procedural information, but also substantive details, including the plan to fund the $5.9 million contribution and related infrastructure. By relating the detail, he opened the subject for discussion and the public was able for the first time to discuss and question the proposed $5.9 million gift to the developer, as well as the related donation of infrastructure.
The speakers covered the following topics. To see the text of each speech, click on the topic.
During the Council meeting on the following day, Councilman Von Haden withdrew the resolution, stating that he did so based on the information presented the evening before. Presumably that means he concurs that the first question that needs to be addressed is the propriety of the developer’s request for a $5.9 million gift. He also indicated that there were wording issues and that the resolution was not as clear and concise as it should be. Finally, he suggested that a corrected resolution would be brought forth in the future.
August 11, 2014 City Council Hearing: Confluence Housing Subsidy without Performing Art Center?
Posted: Sunday, August 10, 2014
The City Council confluence-related agenda items for the August 11 and 12, 2014 meetings are a classic case of placing the “cart before the horse.” Click here to see the August 11 agenda packet and click here to see the August 12 packet. It is akin to the Council’s recent decision to spend some $180,000 to begin the design of a parking ramp, before making a decision on whether the parking ramp should be built. Rather than holding a hearing on the real issue – one that the Council has now discussed twice behind closed doors (Click here to read more about the closed sessions) - whether city taxpayers should subsidize a private developer’s plans to place a residence hall on the historic Confluence block - the plan during the August 11 meeting is to discuss the timing for the development of the funding vehicle (TIF Nos. 8 and 10) and the addition of a condition to the subsidy. Under the condition, no subsidy is to be paid unless the performing art center is fully funded. Clearly, both subjects are moot if the decision is made to let the private sector do what it normally does – develop private property it owns without city subsidies.
Logic dictates that the basic question be the first one addressed at the public hearing: Should the citizens of Eau Claire subsidize the student housing? Because of the closed hearings, we do not know the particulars of the proposed subsidy. Thus we cannot specifically comment on the subsidies the City has offered to the developer beyond the fact that the amount is substantial. Per the Tuesday Council agenda, the City is planning to fund $5.9 million in direct developer subsidies plus $3.6 million to replace existing infrastructure (“related to street improvements”) or a total of $9.5 million. That does not include $2 million for the plaza (previously funded from North Barstow TIF property taxes) or $5 million for the performing art center.
Before finalizing any subsidy, the following should be considered:
Consideration 1 - The developer, Haymarket Concepts, LLC (a partnership of Commonweal Development, Market & Johnson and the University of Wisconsin Foundation) is a private for profit venture. The purpose of the housing project was ostensibly to construct and operate a facility that that will rent apartments to performing art students. A small part of the space would be used for retail, e.g., restaurants that theater goers could use. If that purpose is truly the best use for the property, Haymarket should be willing to risk its own funds and make the investment itself, as have other private entities that have recently built student housing, e.g., Metro Crossing and the apartments at 522 Water Street. The public should not be forced to be an unwilling partner. In this instance, the citizens are being asked to borrow money to subsidize the project. Effectively, they are being given the opportunity to bear all the risks, with none of the rewards.
Consideration 2 - Haymarket plans to place the student housing building on the historic Confluence block and must first demolish what many consider to be an important part of Eau Claire’s heritage. As a private property owner, it is free to do so. That is not something the City or the State can do. By law, neither the City nor the State can be party to demolishing property like the Confluence block that is on the National Register of Historic places, particularly with the use of TIF money. Offering a subsidy for this purpose would appear to be an effort to do indirectly that which cannot be done directly. Likewise, it calls to mind the City Council’s removal of the Kline building’s local landmark status. That decision was based on claimed owner hardship. Subsequent information (click here to read about those events) suggests that there was no hardship.
Consideration 3 - If the public is to be an involuntary investor in this project then, at the very least, it is entitled to details and input into the investment decision. To date, everything has been behind closed doors. Most investors would insist at a minimum on:
a) Reviewing building and floor plans;
b) Estimated costs to build;
c) Investors’ personal guarantees - preferably that of the partners and the individuals behind the partnership. The guarantee of Haymarket Concepts, LLC, a company with limited assets formed solely to construct the Confluence project is not adequate.
d) Competitive bidding should be required – it is the most effective means of controlling costs.
e) Consideration of other locations. The proposed location is less than ideal. It would appear that Haymarket grossly overpaid for the property in question, investing $2.58 million or 4.5 times the value of the land. Click here to see a comparison of the assessed values versus the prices paid versus the prior owners’ costs. Haymarket knew the buildings that it was purchasing had been literally gutted by the prior owners, who removed everything of value – wiring, floors, ceilings, furnaces, piping etc. Due to the condition of the buildings, it now has no choice but to raze them and, in order to develop the land, it must also bear the cost of moving the property out of the flood plain. As a result, existing infrastructure must be 100% replaced. Surely, there are other far more economical properties on which to place the housing, for example the 25 acres gifted by the Sonnentags to one of the three development partners (University of Wisconsin Eau Claire’s Foundation) would be a preferred site.
f) Guarantee that the project will not be turned into a tax exempt venture for at least a 50-year period beyond the TIF time frame to insure property tax payments to the city at least equal to the amount of the investment;
g) Operating details including planned annual rental and its affordability (annual charge is expected to be high, limiting the number of potential occupants), estimated operating costs, assumed occupancy rates and occupancy break even rates;
h) Property tax assessment – will the building and land be fully assessed at market or will the developers be assessed at a reduced value, resulting in another form of subsidy? The $21.5 million tax increment discussed in the past suggests that there will be a sizable discount.
i) Adequacy of bank or other financing sources planned and impact of interest rate changes;
j) Pro forma income statements should be provided of anticipated profitability to determine potential for faster payback, as well as profit sharing with taxpayers.
Consideration No. 4 - As a City, do we really think student housing will revitalize downtown? It does not provide a stable base for business. During at least three months of the year, the facility will be empty. Moreover, students typically do not have much discretionary spending money. Water Street provides a case in point. Businesses that are thriving are relying on adults, not students as their customer base. Statements have been made to the effect that the housing could be designed to also meet the desires of adults. Realistically, the facility must be one or the other. If it is going to service a transient population like students, it cannot be available for year around rental to adults. If it is intended for adults, a request for a $9.5 million city subsidy is even more dubious given the current owner of the property. It bought land for development and has the experience and wherewithal to complete that development without resorting to the charity of the Eau Claire citizenry.
Consideration No. 5 - It seems odd that the building that was supposed to be providing the $5 million required to fund the Confluence Performing Art Center is now requiring significant subsidies itself to build. Likewise, the plaza that was supposed to have been fully funded through the property taxes flowing from the North Barstow TIF district has been added to the list. In short, the “free” $5 million has now turned into a new TIF totaling $16.5 million – $5.9 million of direct subsidy for the student housing building, $3.6 million for related infrastructure, $2 million for the plaza, and $5 million for the Confluence Performing Art Center. That is a significant sum. To put it in perspective that is 53.6% of the total annual Eau Claire city tax levy ($30.7 million).
There is only one circumstance in which it might make some logical sense to place student housing on the site and that is if the proposed Community Art Center/class rooms are built. At this point, that seems highly doubtful given the community’s failure to meet the Regents’ Five Guiding Principles that are a condition for state funding. It has been almost two years since those principles were enunciated. Reasonably, given the passage of time, the Regents would expect compliance before placing the project in the 2015-2017 budget. Instead only one condition of the five has been met - the one that requires the community to limit its request to $25 million. Click here to see those principles and the status as of June 1. Little has changed since June:
There is no defined owner. Nor has proof been provided of an “independent guarantor or surety of the financial and operational obligations” of that owner;
The required operating agreement that is to assure that the State will be liable for no more than its prorated share of operating costs is not in place. At this point, there is no agreement, period.
The value of the public component (the $25 million the community is supposed to raise) is neither directly proportional to the proposed state investment nor auditable. That component consists of a series of pledges which have not been met and/or have not been funded. As of this writing, the private donations pledged remain at around $5 million, far short of the $19 million of public funds that must be in hand to be enforceable and in turn auditable -
There is no plan for fair competition or transparency. Such a plan requires that the entire project – development and the land itself – be thrown open for competition. Given the developer’s financial interests – maximizing profits from the sale of the land it owns, performing the development work, and constructing the building – the project is anything but competitive or transparent. It is in fact the opposite – a sole source “take it or leave it” demand.
In short, if the Regents do observe the five guiding principles they enunciated, no funds will be provided for the 2015-2017 period. Much was made over Governor Walker’s visit and his apparent enthusiasm for the project. What was missed, however, was his reiteration that the principles had to be met before the State would move forward with funding.
Given the status of the State funding, it is highly unlikely that the Confluence theaters will ever be built. Subsidizing student housing on the site of the historical Confluence block benefits no one other than the current land owner and developer.
MEDIA REJECTS OPEN MEETING LAW (published in Leader Telegram It Seems To Me)
Posted: Sunday, August 3, 2014
There is something unsavory about local elected officials meeting behind closed doors to give away taxpayer-backed, borrowed money to a select citizen. What makes this practice even more abhorrent is when leading local media outlets not only fail in their critical role to monitor and expose these actions, but instead choose to defend them.
It took seventeen local citizen complaints to the District Attorney for Eau Claire city leaders to decide to disclose the subject of two closed city council sessions pertaining to the Confluence.
Prior to this pressure, city leaders wouldn’t tell us whether the meeting pertained to the Confluence theaters or the student housing unit and certainly did not identify the specific aspect(s) that were to be or were in fact discussed. In fact, they said very little. Only after citizen pressure did we learn that the subject of the closed sessions was a proposed $5.9 million gift to the developer of the housing unit. That unit is intended for performing art students using the proposed Confluence theaters. Our city attorney, Stephen Nick, in his response to questions about these citizen complaints rightfully called these gifts “contributions.”
Leader-Telegram editor, Don Huebscher, said in his July 20th lead editorial that Wisconsin’s Open Meetings law includes an exemption to allow closed meetings when the city council is deliberating on an “incentive package for companies considering moving to a municipality.” There is no such exemption in either the statute, or the Milton case which interprets the statute.
The exemption does allow a closed session for that part of a meeting (and that part only) where privacy is “required for bargaining.” There is neither bargaining nor a need for secrecy in the subsidizing of the student housing building. Why? Because there is nothing to bargain and no reason for secrecy.
The developer (Haymarket Concepts) plans to build the housing on land that it owns – the western side of the historic Confluence block. The fact that it grossly overpaid for the land is something that it did with its eyes open. Prior to taking possession, it allowed the then owners to remove everything of value (wiring, furnaces, floors, ceilings, elevator shafts, etc.), leaving worthless hulks that by city ordinance must be razed. It paid $2.58* million for these wrecked buildings despite the fact that the value of the land on which they stand has an assessed value of only $577,400, approximately one-fifth of what it paid. Moreover, removing the gutted building and bringing what was grandfathered property out of the flood plain will be very expensive.
Haymarket’s bad bargain should not be visited upon the taxpayers. Contributing $5.9 million is also arguably an effort to do by indirect means that which the City could not by state law do directly, i.e., fund the destruction of national historic landmark property. Additionally, weren’t the property taxes from the student housing building supposed to fund the $5 million city pledge for the Confluence theaters? Why then are taxpayers expected to back a $5.9 million subsidy instead? Likewise, weren’t the theaters and housing supposed to go hand in hand? A residence hall is not going to revitalize the downtown. This is not the project that the city leaders promised. Why has the media failed to raise these concerns?
Regardless of what the city does, the land will be developed. That is what developers do. Their choice is either to seed it and mow it and continue to pay taxes or to develop it. The so-called "incentive" to develop the property is at this point a gift.
Our elected officials have the right to give away borrowed money that we taxpayers are responsible for, but thanks to Wisconsin’s Open Meeting laws, they do not have the right to discuss such actions behind closed doors.
It appears that the Fourth Estate in Eau Claire is unwilling to stand up for citizens' civil liberties or keep us informed. That is both regretful and dangerous. None of us can expect government at higher levels to reform when such dealings occur at the local level. Most alarming is that those entrusted to cast sunshine on backroom government dealings have failed to perform their critical roles.
Dave Wood is a resident of Eau Claire and a spokesperson for Voters with Facts. Voters with Facts is a grassroots organization established to protect taxpayers and inform voters on local government issues.
Click Here to view the letter on the Leader Telegram website.
*The figure found in the original article of $2.8 million was in error and has been corrected.
KLINE DEPARTMENT STORE SOLD FOR $450,000 – A PROFIT OF 80%
Posted: Monday, July 21, 2014
The Kline Department Store Building, one of Eau Claire National Historic Monuments is scheduled to be razed this week. The building was an outstanding example of late gothic revival architecture and was designed and built by local talent: Charles Pear and the Hoeppner Bartlett Company, respectively. Beyond its beauty, the building was highly functional - some truly wonderful local commercial establishments conducted their business within its walls, e.g., the Fashion Store and Ferings Interiors to name two. It also was part of the historic Confluence Block, a block of buildings that is likewise on the national registry of historical places.
On December 22, 2011 it appeared that the Kline Building would be entering a new phase of its existence. On that date, Lois Heymans, owner of the Acoustic Café purchased for $250,000 the company that had title to the Kline Building, 6 Barstow LLC. She planned to remodel the building as a restaurant and move the Acoustic Café to it in 2015 when her lease on 505 Barstow, the current location of the Acoustic Café, would have expired.
That was not to be, however. In February 2012, Haymarket LLC, the Confluence developers, were contemplating purchase of the west side of the Confluence Block. A single individual (John Mogensen) owned all of the property on the block except for the Kline Building. The partnership offered Ms. Heymans an opportunity to sell the property that she had just purchased. The offer was such that she placed her remodeling plans on hold.
Town historians became alarmed that a historic treasure would be destroyed. The store was the subject of a Landmark Commission review in October 2013. The Commission conferred local landmark status on the building then. Landmark status insures that a building cannot be demolished for an 18-month period during which the owner and the Commission determine whether it can be saved. The owner appealed the decision. Her lawyer, Stuart Schaefer of Commonweal Development, one of the Haymarket LLC partners, and John Mogenson, owner of the other Confluence block buildings, whose sale depended on the transfer of the Kline Building, testified that the building was in horrific condition, in particular the basement, which per Schaefer would cost millions of dollars to repair. The Council believed the testimony and concluded that, under the circumstances, the eighteen month review period imposed a significant hardship on the owner, as the building was tantamount to unusable. At the same time, the Council found that there was no “self-created hardship or expectation of increased economic return.” If either of those were present, the Landmark Commission’s decision could not be overturned. No one on the Council, however, asked Ms. Heymans the amount of the proposed purchase price.
On March 15, 2014, the Kline Department Store was auctioned off in pieces (windows, doors, floors, ceilings, wires, pipes, electrical boxes, banisters, paneling, elevator shaft etc.) prior to its sale to Haymarket. As a result of that auction, the building had been all but destroyed before Haymarket’s purchase. Considering that the majority of the assessed value ($154,000 of the $228,000 or 62%) was attributed to the improvements, the apparent decision to allow the owner to destroy the building in advance of the sale seemed odd. Click here to see a picture of the building taken on May 28, 2014, thirty days before it was sold.
During the auction, the store was opened to members of the public who observed that the interior was beautiful and in mint condition from the spacious lower floor with its beautiful-thick Douglas fir floors, to the sweep of the dramatic stair case to the elegant second floor complete with a tin-roof ceiling. Click here to see a picture of the ceiling. Most surprising was the basement that supposedly required millions and millions of dollars to repair. The area of damage was a relatively small spot located in a small alcove separate from the rest of the basement. Click here to see a picture of the damaged area taken on March 15 by one of the Voters with Facts volunteers. The size and severity of the spot is such that few would bother to fix it. A visiting contactor commented that he could replace the cement in the alcove in an afternoon. The cost to replace would be less than $10,000 – hardly “millions.” The balance of the basement floor appeared to be in excellent condition like the rest of the building. An additional surprise was the fact that the building was asbestos-free as reported by WQOW. Click here to read the article. Remediation had occurred in the late 90’s, presumably at the time the building was rewired for Invisible, Inc., a technology business that occupied the premises after Ferings.
Haymarket completed its purchase of the property on June 26, 2014. Click here to see the Kline Building’s recent sales and assessment history. The Price paid was $450,000. In terms of a return assuming that proceeds from the auction covered the prior owner’s expenses (property taxes of $14,848 per the assessment records found for 6 Barstow at http://eauclairecowi.wgxtreme.com/property and utilities of approximately $12,000), the owner secured a $200,000 profit on her $250,000 investment. That is a return of 80% for the two and a half years the Acoustic Café’s owner possessed the building or a sizable average annual rate of return of 32%. That return compares favorably with current interest rates of less than 1% per annum.
It would appear that the City Council was grossly misled in several fashions by the very developers that are currently seeking a $5.9 million handout to complete the destruction of the historic block and property and to build student housing on the site. First, by the developer’s misleading representation of the building’s condition and the cost to remediate that condition; and second, by the failure to point out that the offer made to the owner would result in an 80% return on her investment. That return is certainly an expectation of a very substantial “increased economic return.” The reversal of the Landmark Commission’s decision was not justified under the law.
Update: Closed Sessions – Subject of the April 21 and July 7 Closed Meetings Revealed
Posted: Wednesday, July 16, 2014
During an interview with the Leader Telegram (click here to read the story), City Attorney, Stephen Nick, revealed the subject discussed at the two closed City Council Meetings. He confirmed as fact that which Voters of Facts had surmised through a process of elimination – the subject of the closed meetings was the private developer’s request for subsidies (or as he put it a “contribution”) to build student housing downtown. The attorney defended the decision to discuss the matter behind closed doors based on negotiation of other aspects of a development agreement, which the newspaper quoted him as describing as:
“Timing of that contribution, the project’s schedule, when the private building would start paying taxes and other points are part of negotiations”
With the possible exception of the unknown “other points”, there is little there that falls into the category of “required for bargaining”. Timing of the subsidy is hardly a point of negotiation, but is at the option of the City. The project’s schedule is up to the developer, subject to it meeting various existing requirements, like securing a building permit. Tax payment timing is already defined by the laws and regulations of the City and does not require a special term, unless the plan is to offer deferred property tax payment along with the requested assessment concession. The developer had asked the City to assess the building at a value of $21.5 million rather than its market value of $26 million. Both are like the requested $5.9 million “contribution” – gifts from the city to a private for-profit entity that, by their very nature, do not require bargaining and the discussion of which in a closed setting is a violation of the State of Wisconsin's Open Meeting laws.
Closed Sessions - Citizens File Verified Open Meeting Law Complaint
Posted: Tuesday, July 15, 2014
As promised in our July 12, 2014 post on Closed Sessions, volunteers with Voters with Facts did review available procedures to insure that future City Council meetings are open to the public. The best option was a Verified Open Meeting Law Complaint procedure under which the District Attorney is asked to enforce the Open Meeting law. Several volunteers along with other citizens who believe strongly in the principles of representative government each filed a Complaint on July 14. Additional complaints are expected to be filed in the next couple of days. Click here to see a sample of the complaint filed. Click here to read Voters with Facts' July 14, 2014 press release, which provides additional details about the procedure.
Another Closed Session on Confluence - July 7, 2014 City Council Meeting
Posted: Saturday, July 12, 2014
In response to the July, 7, 2014 VoterswithFacts Press Release that challenged the legality of the proposed closed City Council session on the Confluence (click here to read the release) and the email from a VoterswithFacts Volunteer to the Council’s President, Kerry Kincaid (click here to read that email), the City attorney provided an emailed memo. Click here to read the entire memo. In that memo he contended that the closed session on the Confluence was perfectly proper, because there had been previous hearings and media coverage of the Confluence project and the city had provided notice of its plan to conduct a closed session. That response flies in the face of the State ex rel. Citizens for responsible Dev. v. City of Milton case (found here) that had been cited in the press release, the companion website post referenced in the VoterswithFacts press release (click here to read that post) and the letter from the volunteer. Click here to read Voters with Facts response to the City Attorney’s memo.
During the City Council Meeting, the members voted 9 to 1 to enter into the closed session without any discussion. The sole “no” vote was from Councilman David Strobel. Councilman Duax did not attend.
Of concern is the City Council’s denial to Eau Claire citizens of their rights to representative government. Since the April 1 election, there have been only two sessions on the Confluence project, both of which were conducted as closed meetings. The City Council President actually removed from the public hearing agenda, contrary to the City Council’s own procedures, a hearing on the expenditure of a sizable sum to design a $10.3 million parking ramp, despite the fact that the ramp has not been approved and the fact that no funding mechanism exists that would pay for the ramp if it were approved. Normally, the media would be protesting the Council’s actions. With the exception of talk radio, in particular WOGO and WWIB, there has been virtually no coverage.
The stated policy of the Open Meeting Law is as follows:
In recognition of the fact that a representative government of the American type is dependent upon an informed electorate, it is declared to be the policy of this state that the public is entitled to the fullest and most complete information regarding the affairs of government as is compatible with the conduct of governmental business. [WIS. STAT. § 19.81(1) ]
Volunteers with Voters with Facts believe that it is vitally important that the City’s representative form of government be maintained. Accordingly, available procedures to enforce the Open Meeting Law are currently under review. Unless some action is taken soon, it appears that representative government in Eau Claire will cease to exist.
North Barstow Parking Lot Update – Public Input and Contract
Posted: Monday, July 7, 2014
Despite the fact that the public was promised an opportunity to participate in the design of the proposed North Barstow parking ramp, it appears, at least as of this date, that requests for input have been limited to the groups who have a financial interest in the development of the ramp. Click Here to see the invitation for the Open House on the project to be held at the RCU during the cocktail/dinner hour from 6:00 to 8:00 p.m. on Thursday July 10. Since members of the public have a stake in the project as taxpayers, farmers market patrons or vendors, and/or as visitors to the area, Voters with Facts encourages anyone who is likely to park in the Phoenix Park area to attend the Open House.
Voters with Facts have also secured a copy of the ramp design contract that the City entered into with the design consultant, BWBR. Click here to see the contract.
Of concern are the following:
a) The City staff stated that the total contracted design cost was $404,200, when in fact there are several additional items that are not included in that cost. Certain additional items are spelled out in the contract, like reimbursable expenses and the design of an enclosed parking garage. With these items, the cost increases to $451,900. To the extent there are other designs requested, these will further increase the cost. One desired item mentioned during the Council hearing, the design and estimate for a fifth floor, is not listed in either the base assumptions or in the list of known additional costs. Presumably, the cost to design the fifth floor will become an extra.
i) Expenses are not included in the $404,200 price. Per the contract, any expenses incurred will be billed at cost plus 10%. The estimate in the contract is $6,000-$7,000 of reimbursable cost. There is, however, no limit either in items deemed as expenses or the amounts charged. Costs like food and beverages served at the open house and the three multi-day workshops with citizens (five days worth) will presumably be covered as expenses (See Attachment C to the contract – page 1 - Compensation).
ii) As written, the contract appears to cover only the design of a four story structure, despite the fact that the Council was advised that a fifth story addition would be included as part of the design project and estimates would be provided both to build the structure with and without the extra story. If the contract needs to be modified for the design of an additional story, the design cost will increase. (See Contract Articles III(C) and V, and page 1 of Attachment C - First Assumption).
iii) There is an additional $40,000 of contract management fees that the City staff failed to include in the cost summary found in the City Council packet distributed prior to the June 10, 2014 meeting. Click here and go to page 236 to see that cost summary. BBWR broke the contract management cost into two parts - $40,000 if the city chose to handle the project internally or $40,000 plus an additional cost of $15,000 if it asked BBWR to provide the service. BBWR disclosed that it would use Market & Johnson, to handle that portion of the project. The $15,000 was included in the City’s cost summary, but the base fee of $40,000 was missed. (See third Assumption – Attachment C)
The total cost based on the contract is thus not $404,200, but $451,900. (the figure of $404,200 found in the summary plus the missed $40,000 contract management cost plus reimbursable expenses of $7,000 plus 10% of those expenses). And that does not appear to include the design of the 5th story.
b) The City Council was led to believe that the design contract was divided into phases and that the contract could be cancelled after each phase; once cancelled, the amount charged would be the amount shown in the contract for the phase or phases completed. That is incorrect. The costs associated with the phases in the contract are simply estimates. The contract is in fact based on hours spent at the consultant's billing rates. The $404,200 contract price is simply a maximum for the base effort (it does not include either expenses or the additions mentioned in a, above). If the City were to decide not to build the ramp, the consultant under the terms of the contact would apply the billing rates listed in the contract against the actual hours spent on the task. The charge could very well be significantly higher than the estimate for the phases that had been completed. Had the Council members understood the actual terms of the proposed contract, they may very well have refused to authorize the City staff to enter into the agreement.
i) The contract was quoted on an hourly basis up to a maximum of $404,200 plus additional services as outlined in Attachment C. Items included as additional charges in Attachment C are expenses and the $40,000 cost to design a closed in parking garage. See Article V of the contract.
ii) Termination for Convenience requires the City to compensate BWBR not at the phase value, but “for just and equitable compensation for any satisfactory work completed.” See Contract Article VII(B). BWBR’s hourly rates are provided in the contract, presumably for this purpose. See Attachment C, page 2 - Billing Rates.
iii) Specific phases were not actually priced even though they appear to be in the summary provided in the packet. Note the quotation of a separate lump sum fee for BWBR’s contract administration ($55,874), which will be utilized during each phase of the contract. Likewise, contract management (CM) services will be utilized through all phases, and they too are a lump sum ($40,000). See Attachment C – Compensation.
Eau Claire City Council Plans Another Closed Session on the Confluence Project during its July 7, 2014 public hearing
Posted: Sunday, July 6, 2014
Despite a promise to provide transparent vetting of the Confluence Project, the Eau Claire City Council has not had a single open meeting on the project since the April 1, 2014 Referendum. It plans to hold another closed session on Monday, July 7, this time “to provide direction regarding terms and conditions of a development agreement for the Confluence mixed-use and performing art center projects.” To see the material from the City Council Agenda/Packet, Click Here.
As with its April 21, 2014 session, the justification for this closed session is based on Section 19.85(1)(e), the negotiation exception to the State Law requiring open meetings:
e) Deliberating or negotiating the purchasing of public properties, the investing of public funds, or conducting other specified public business, whenever competitive or bargaining reasons require a closed session. [Emphasis added]
Surely, deliberating or negotiating is premature in this instance given that:
a) There has been no hearing on the nature of the development agreement, which has not been identified.
b) There has been no determination of whether the type of development agreement contemplated is needed or desired.
c) There is presumably, as it has not been identified, no funding to support the development agreement.
Moreover, case law indicates that a closed hearing at this juncture is not legal. See State ex rel. Citizens for responsible Dev. v. City of Milton, 2007 WI App 114 in which the court stated the following:
The use of the word “require” limits the exception to those situations where the government’s competitive or bargaining reasons leave no other option than to close meetings. Thus a government may have a valid reason for desiring to close its meetings that nevertheless fails to establish closed meetings are required. While a private entity with which the government is negotiating might request confidentiality, and such a request might provide a reason for a government to desire holding closed meetings, that request does not require the government to hold closed meetings to preserve the government’s competitive or bargaining interests. [Emphasis added]
That Milton [the City] fears the possible disruption of its plans is no reason to avoid public debate through secret meetings. Indeed contentious issues are those most in need of public discussion. [Emphasis added]
By a process of elimination, VoterswithFacts in its analysis of the April 21, 2014 closed meeting (Click here to review that analysis) concluded that the subject of the closed hearing had to be Haymarket Concepts, LLC’s request for a $5.9 million subsidy to build the proposed student housing building. Haymarket Concepts is a partnership made up of Commonweal Development (the principal developer of the North Barstow project), Market & Johnson (the principal construction contractor of the North Barstow project), and the University Wisconsin Eau Claire’s foundation. In a public meeting held on September 10, 2013, Dan Clumpner, one of the principals of Commonweal, described the student housing project and indicated that there was a group (presumably the Haymarket partners themselves) prepared to invest in the project. He stated that with a $5.9 million city subsidy, investor returns would be marginal despite the plan to charge students at a rate that exceeded traditional university housing rentals. Per Mr. Clumpner, without the subsidy, it would not be able to find investors for the project. Mr. Clumpner is also on record proposing in lieu of or in combination with a direct city subsidy from the TIF, the use of a “pay as you go TIF.” Under that type of TIF, the developer would cover all or a part of the $5.9 million subsidy up front. In future years, the city would reimburse it for the portion of the subsidy that it fronted along with interest. The source of the payments would be property taxes from the buildings in the TIF district. Effectively, the developer becomes a bondholder. From the taxpayers’ point of view, it is still general obligation debt that must be repaid and it is still a subsidy.
The subsidy raises the following concerns:
a) Why would the City subsidize Commonweal, Market & Johnson, and the University Foundation to build private apartment-style housing, at rental rates that the average student cannot afford? The private sector is already building this kind of housing without city subsidies among which are Metro Crossing and the apartments at 522 Water Street. Why should Haymarket receive subsidies when its competitors funded their properties without city assistance? Subsidies provide Haymarket with a competitive advantage over its competition, which seems to be neither fair nor wise if the City truly desires future economic development from the private sector.
b) Property taxes from the student housing building are supposed to be covering the $5 million city pledge for the proposed Confluence Performing Art Center. With the $5.9 million subsidy in addition to the $5 million pledge, the City would be expecting property taxes on a building assessed at $21.5 million to subsidize $10.9 million dollars of debt plus interest. At a 2% property rate and a 3% interest rate, it would take 36 years to repay that kind of debt from property taxes. That is hardly a sensible fiscal proposition.
c) Just how marginal is the return to the private investors? What kinds of assumptions are being made in terms of occupancy rates to maintain a return that presumably is barely adequate? If margins are too thin, the payment of the property taxes upon which the project is premised may not materialize.
d) Given the purpose of the facility (to provide university housing) and the fact that one of the principals (UWEC Foundation) has close university ties, how long will this property actually pay property taxes? If the returns are in fact marginal, will the University purchase the building once the TIF has run, making it a tax exempt property? That would mean the entire three block area (first blocks of South Barstow, Eau Claire Street and Graham Avenue) will have been transformed from an area paying property taxes to one that is tax exempt. The typical City development agreements in TIF districts require that the property remain taxable during the period of the TIF, however, there is no requirement that it remain taxable once the TIF expires.
e) Will the partners of Haymarket LLC be asked to co-sign the deal? In other recent transactions, the City Redevelopment Authority has accepted the signature of a limited liability company like Haymarket. For example, in the case of the JAMF building, the contract is with Pablo Properties, not its principals (JAMF and Zach Halmstad). Haymarket LLC is a corporation formed to handle the Confluence, only. As such, its balance sheet will be very limited and it may not have the wherewithal to handle its debts and obligations should the partners ultimately decide to walk away.
Eau Claire City Council Considers and Approves 2014-2016 Economic Policies and Priorities as well as $7 Million of New General Obligation Debt
Posted: Monday, June 30, 2014
The City Council scheduled a public hearing on Monday, June 23 to discuss the proposed 2014-2016 Economic Policies and Priorities. Click here to see the agenda item and the supporting packet material. As proposed, the draft policies and priorities is a laundry list of nine separate categories with a total of 61 projects, many of which contain sub-projects. The draft supports a second major downtown development (E2 – the DECI/Barstow BID Master Plan located on Farwell and East Grand and Graham - http://www.downtowneauclaire.org/pdfs/downtown_masterplan_FinalNew.pdf ) and the replacement of downtown surface parking with more parking ramps (E6 - above and beyond the proposed $10.3 million ramp on North Barstow). The draft also advocates a variety of expenditures which includes City investment in target industries (B3), expanding the availability of state of the art communication technologies, including fiber optics, throughout the community (C1 and D1), pursuit of more public/private partnerships to build arenas, and convention centers (H4), and support for RDA in its ongoing purchase and destruction of private business property (D3 and E5). It also contains such unconstitutional objectives as discriminating in favor of minority entrepreneurs (C6) (specifically calling out women and ethnic groups). Two council members (Catherine Emmanuelle and Kathy Mitchell) thought that discrimination was important to “bridge the achievement gap for women and people of color”. If you are a white male, which specifically includes a disabled white male (Council made it crystal clear that the disabled were not part of the favored group), you are excluded from favor. Likewise, the only post secondary school graduates that the city considers it a priority to retain or invite into the community are those from UWEC or CVTC (G1).
During Monday’s public hearing, volunteers with Voters with Facts provided their concerns about the draft policies. The first speaker commented on the high level of debt and, in turn, increases in property taxes that would result for functions that could and should be handled by the private sector (for the text of the complete statement, click here ). A second speaker provided an in depth analysis of the fostering of special interests that occur whenever government takes a hand in economic development (for the full statement, click here). While reviewing the proposed Confluence-type projects for Farwell Street, Graham and East Grand Avenues, a third speaker described the unfortunate consequences of fostering special interests that resulted from the promises of State and City subsidies to the Haymarket Partners, which has in turn led to three full blocks of empty buildings on South Barstow Street, Eau Claire Street, and Graham Avenue. All of the buildings on the first block of Barstow and one of the Eau Claire Street Buildings now need to be razed (for the complete statement, click here ). A fourth speaker addressed specific concerns about Redevelopment Authority Expenditures and the loss of private business stemming from the RDA’s actions to date (for the complete statement, click here ). A fifth speaker when expressing alarm about the draft's preference for parking ramps over surface parking in downtown Eau Claire used the proposed North Barstow parking ramp to illustrate the impact of special interests. In the case of the North Barstow ramp, after receiving an emailed letter from the major developer in the North Barstow area (click here to read the email), the Council decided that it would spend the dollars for a design of the ramp through the design drawing stage (estimated at more than $200,000) before holding a public hearing to decide whether or not to build the ramp (for more details click here ). Council President Kincaid cut the speaker off and did not allow her to complete her presentation. To read the text of the full statement that she had planned to deliver (which she subsequently provided to the City Council’s clerk) click here. A sixth speaker questioned the logic of the City’s downtown planning, pointing out that costs entailed are unsustainable. For the text of his statement, click here.
During the City Council Meeting on the following day (June 24, 2014) the Council discussed and then voted on the Economic Policies and Priorities. Other than a few very minor amendments of the wordsmithing variety, the Council approved the policies as written. There was no discussion of the concerns identified by the volunteers of Voters with Facts beyond a blanket statement without explanation by Catherine Emmanuelle that she disagreed with them and a statement by Bob Von Haden that “support” does not necessarily mean that the Council would be funding these initiatives, in particular with respect to E6, “support for parking ramps over surface parking, where appropriate”. He was later contradicted by the city Economic Development Administrator, Mike Schatz, who indicated that he deemed the list to contain the policies and priorities of the Council, which he would “encourage to happen”. The Council passed the Economic Policies and Priorities as amended 10 to 1. Only Monica Lewis voted against the measure.
During that same meeting, the Council voted unanimously, without any substantive discussion, to increase the City’s general obligation debt by an additional $7+ million dollars. Click here to see the agenda item and supporting packet material covering the new debt. Without this increased debt, the City is unable to handle basic government functions, like the street, storm sewer, building, and public equipment improvements for which the new debt is being issued. The need to service increased debt, will provide the basis for and will result in an additional city property tax increase in 2015.
PARKING RAMP UPDATE – June 10, 2014 City Council Meeting
Posted: Wednesday, June 18, 2014
Several of the Eau Claire City Council members had made it clear that they considered it irresponsible to enter a $400,000+ contract to design the proposed $10.3 million North Barstow parking ramp prior to making the actual decision to build the ramp. Two members placed the matter on the June 9 public hearing agenda. Under Council rules, either the Council President or the City Manager may remove any agenda item, however, cannot remove an item that has the support of two council members. Nonetheless, the Council President disregarded the rules and removed the agenda item from the public agenda. The item remained on the Tuesday (June 10) Council hearing agenda. To see the Tuesday agenda item and the supporting packet, click here.
There was considerable pressure on the Council to avoid a public hearing, in particular from the major developer of the North Barstow construction, Commonweal. In fact, Commonweal, not only advocated entry into the contract without a public hearing, but also the elimination of public hearings on any development matter. Click here to read the email from Commonweal’s Principal to each Council member that was sent on the day of the meeting.
Discussions on talk radio and two Leader Telegram articles indicated major community concern about both the Council President’s refusal to allow an item to be heard publicly and her decision to remove an item from the agenda contrary to City Council rules. Likewise, 265 petitions that volunteers with Voters with Facts collected from Farmers Market patrons expressed preference for surface parking versus ramp parking and opposed the building of the proposed ramp, the removal of the existing surface parking, and the proposal to pay over $400,000 to design the ramp.
Why then did the very Council members, who had attempted to secure a public hearing put forth and second a resolution during the Tuesday, June 10 meeting agreeing to proceed with the first half of the design project without the public hearing? If the two council members thought that it was irresponsible to expend $400,000+ to design a ramp prior to deciding whether to build it, why would they suddenly conclude that it was appropriate to proceed with a design contract at half the cost? Either sum ($400,000+ or $200,000+) is a significant amount of money. Of note is the fact that their resolution did include a provision which REQUIRED A PUBLIC HEARING on the basic issue (whether or not to construct the ramp) once the $200,000+ was expended. That requirement was not a part of the Council City Council President’s proposed resolution for the $400,000+ design project. Did the Council President plan to bar as well a public hearing on the basic question - the construction of the $10.3 million ramp? Such a plan would be consistent with the developer’s emailed request and would supply the rationale behind the resolution put forth by the two Council members.
Tuesday’s council meeting consisted largely of discussions of whether the lesser sum had been budgeted; whether the breakout by year found in the TIF budget had any significance; and whether the bid would need to be amended or could be handled via a phased approach. The actual merits of the ramp itself were not discussed, despite the fact that there are many significant questions, in particular the absence of the parking that would be needed for the alleged purpose of the ramp – to support the employees, clients, and customers of the hoped for $8.5 million office and the 2.5 million retail buildings. After RCU's and JAMF's needs are met, the ramp provides only 49 additional parking spots, 22 more than the available surface parking provided by the existing RCU parking (141) the additional spots from the corner of Hobart and Wisconsin (200), and the Post office (157).
Click on the links below for the developer’s paper and sketches advocating the ramp:
Click here for Voters with Facts' response.
In describing the services of the parking ramp design firm, the city engineer did indicate that the plan was to involve both potential users and the community in the specific details of the ramp, e.g., location of doors, stairwells, and elevators. As a result, there will not only be a significant sum spent (potentially over $200,000) for the design, but also a significant amount of staff and community time invested. This time and money will be expended despite the fact that no public hearing has been held or decision has been made to determine whether a ramp should be built. With so much time and treasure invested in the project, can it be viewed objectively at the point in time the hearing is held to determine whether it makes sense to proceed?
The Council members voted 10 to 1 (Monica Lewis was the lone holdout) to proceed with the first three and some portion of the 7th and 8th phases (which are part of the earlier phases included in the design of the parking ramp). Click here for the text of the actual resolution, the phases, and the dollar amount associated with each phase.
Update on June Board if Regents Meeting
Posted: Wednesday, June 25, 2014
As anticipated, there was no announcement after the Board of Regents' June Meeting on the status of the Confluence Project. Discussions on the items included in the proposed 2015-2017 capital budget will remain confidential until the August meeting. In the interim, discussions between the Regents and the administration will continue.
Board of Regents Will Meet on June 5th and 6th to Preview and Discuss the 2015-17 Capital Budget, Which Includes the Confluence Project
Posted: Sunday, June 1, 2014
ISSUE: Has the Community met the guiding principles the Board of Regents set forth as conditions to funding the State’s half of the Confluence Project?
Background: On October 5, 2012, the Board of Regents approved the concept of the Eau Claire Confluence Project, however, with the proviso that the development must follow five guiding principles if the UW-Eau Claire and the UW System Board of Regents were to be involved. Click here to see the resolution.
The $25 million of State money is critical to the project. More than a year and a half has passed since the resolution was approved. Despite the passage of so much time, only one of the five principles has been met.
The guiding principles and their statuses follow:
The entity or entities that will own and operate the private components of the Project's arts facilities must provide satisfactory proof of an independent guarantor or surety of the financial and operational obligations of the entity or entities.
a) There is no defined owner at this time of any of the space beyond the classrooms, set and costume rooms. These are designated for UWEC. The ownership of the rest of the building is unknown beyond a draft document prepared on March 21, 2014 (“the March 21 Draft”) that was obtained through a volunteer’s open records request to the City – click here for the draft.
b) There is no actual financial obligation for the community’s $25 million share of the capital for the project. Instead, there are pledges that are either unenforceable or subject to major conditions:
i. The City’s pledge of $5 million is subject to multiple conditions, many of which are subjective in nature, making the pledge illusory. Click here to see the pledge.
Note the following in the pledge document:
- The 2nd condition requires that non-city (which includes the County pledge below) and non-state funds provide not only $17.5 million of capital funds, but also a $2.5 million endowment fund -- a total of $20 million. Additional funds are to be available to maintain operations thereafter.
- The 6th condition requires that a sustainable operating revenue stream be implemented and approved by all parties involved. The City, the entity providing the pledge, is in a position to void the pledge simply by making the subjective determination that the revenue streams are not “sustainable.”
- The 8th condition requires a guaranteed tax incremental valuation for a proposed $21.5 million mixed-use [student housing] building. The annual property taxes from the building, which itself requires a yet to be approved City subsidy of $5.9 million, is the source of the $5 million the City is pledging for the performing art center.
- The 9th condition requires the approval of amendments or creation of a new TIF district to enable the tax incremental funding referenced in condition 8.
- There is no guarantee here - merely an indication that the City does not have the means to provide the requisite funding. The City is seeking guarantees as well, and has imposed conditions for its involvement.
ii. County’s Pledge of $3.5 million is subject to many of the same conditions found in the City's pledge. It also requires the City's payment of at least $3.5 million of its $5 million pledge. Click here to see that pledge.
iii. U.S. Government’s New Market Tax Credit of $3.0 million – the New Market Tax Credit program expired on 12/31/13 and, as of this date, has not been renewed. Click here to view the law. Bills to extend the Credit were introduced in the Senate in June of 2013 and House in April of 2014 and were referred to the applicable committee. Click here for the Senate bill. Click here for the House bill.
iv. Private Donations of $16.5 million – Publicly announced pledges to date are just over $5 million (see http://communityfortheconfluence.org/confluence-arts-center-reaches-5-million-in-pledges/). Several are multi-year pledges, e.g., the largest from RCU is $200,000 per year to be paid over a five-year period. Pledges are not guarantees, but merely an intent to fund. Circumstances may change and the contributions may not materialize.
c) There is no assurance if the facility is built, that the requisite operating funds will be available. No organization at this point exists to run the facility beyond the nine person “Confluence Council” appointed by a City Task Force. The Council is intended to operate outside the public arena. Several of the members have conflicts of interest. None of the Confluence Council meetings or actions will be subject to Wisconsin’s open meetings or open records laws. The Task Force has cloaked the Council with authority and provided as suggestions a draft set of bylaws, a mission statement, and a list of duties. Click here to see the Task Force's handoff to the Confluence Council.
d) The authority of the City Task Force to itself create and appoint the Confluence Council is an open question that VotersWithFacts is in the process of investigating via a volunteer's open record request to the City that, at this point, has only been partially fulfilled. Click here for the document which created the Task Force and describes its duties.
e) There is no operating funding or source of funds for the Confluence Council, beyond the assumption in the March 21 Draft that $200,000 of room taxes (that do not exist) will be appropriated on an annual basis. The draft budget also assumes the continuity of funding provided by existing city room taxes that currently support the Eau Claire Arts group and Visit Eau Claire.
The Project's operating agreement must ensure that neither UW-Eau Claire nor the Board of Regents will be liable for more than their prorated share of operational costs.
There is no operating agreement at this point in time, only draft bylaws for an organization with a questionable legal status, i.e., the Confluence Council, described above.
The value of the public component of the Project's arts facilities must be directly proportional to the amount of the state investment in that component, as confirmed by independent audit.
At this point, the public component is, at best, conditional or simply not there. There is nothing to audit. Here is where it stands:
$5 Million City Pledge is subject to nine conditions, many of which are triggered by the City’s subjective determination. Even the funding for the pledged dollars is subject to conditions as it is to be sourced with tax incremental funds requiring the building of a mixed-use building of at least $21.5 million (8th condition) and the amendment of an existing or creation of a brand new TIF (9th condition).
$3.5 Million County Pledge is a bit more secure in that the funds will be borrowed and the bonds will be a direct general obligation of the county and its taxpayers. It too, however, is subject to some of the same conditions as the City's pledge. In addition it requires the City's delivery of at least $3.5 million of its $5 million pledge.
$3 Million Federal New Market Tax Credits – As mentioned above, the New Market Tax Credit program no longer exists. It expired on December 31, 2013 and may or may not be extended. That is up to the United States Congress. If Congress does extend it, there are conditions under the program which must be met in order to secure the loans. Thus, this portion of the funding is subject to Congress' decision to extend the credit and the ability to meet the conditions.
$16 Million of Private Donations, i.e., the $13.5 million of philanthropy along with the $2.5 million endowment required by the City's conditions - As indicated above, there have been public announcements of pledges of more than $5 million of the requisite $16.0 million (or requisite $19 million if the New Market Tax Credit is not extended). Many are paper pledges only, and several are premised on payment over multiple years. These are not contractual commitments.
The Project's development process must be conducted in cooperation with the State Department of Administration and in compliance with all project delivery requirements relating to fair competition and transparency.
Given the desire to place the project on a specific private tract of land owned by a private entity, the project does not meet the "fair competition and transparency" requirement. By its very nature (in a flood plain), the land is less than ideal for the proposed purpose and it is inherently more expensive to build on it than a tract that is further from the river, e.g., land that the University currently owns. The City and University would both prefer to use a specific developer (Commonweal – one of the Confluence Council members with a potential conflict of interest) and building contractor (Market & Johnson). The preferred developer and building contractor together have a two thirds interest in the land. The University of Wisconsin Eau Claire’s Foundation owns the remaining one-third interest.
The state's investment in the art's facility portion of the Project must not exceed $25 million.
The University of Wisconsin Eau Claire and the Eau Claire Community have respected the cap that the Regents set and are requesting the maximum $25 million of State funding for the project. This is the sole principle that has been honored.
CONCLUSION: More than a year and a half after the Regents provided the guiding principles for moving forward with the Confluence Project, only one of the five principles has been met.
City Council Vote Postponed for Spending $404,200 on Design for Uncertain Parking Ramp - May 13, 2014 City Council Meeting
Posted: Wednesday, May 14, 2014
The decision to spend $404,200 to design and prepare bid packages for a North Barstow Parking ramp has been deferred to the June 10, 2014 City Council Meeting. The majority of the Council appeared ready to make the expenditure, despite the fact that it had not discussed nor reached a decision on the basic question of whether or not the ramp itself should be built. The concerns raised below by Voters with Facts were not discussed.
The Council voted 6 to 5 to check to see whether there was money in the budget to cover the $404,200 design fee before making a decision. Council members voted as follows:
To check the budget first: David Duax, Eric Larsen, Monica Lewis, Dave Strobel, Bob Von Haden, Andrew Werthmann
Click here to see the Tuesday, 5/13/14 agenda and packet material on the ramp.
Questions that should be raised:
1) Why would the City spend $404,200 to design and secure definitive costs on an parking ramp that has yet to be discussed by the City Council, much less approved?
2) Is $404,200 a significant sum to our City? In terms of annual city property taxes ($8.72 per $1,000 of assessed value) it is equivalent to:
a) 322 homes (assessed at the median value of $147,200), which at 12 per block is almost 27 blocks of homes.
b) $47.5 million of assessed value – almost $10 million more than the entire amount of incremental assessed value of the property currently in the North Barstow Tax Incremental Financing District.
c) 84% of the taxes paid by Oakwood Mall – the highest property tax payer in Eau Claire.
3) Does the City have the dollars to fund the entire project? The short answer is “no” – click here for more information.
Why then would it spend $404,200 to secure a design and firm quotations on a ramp that it does not have the funds to build?
4) What are the stated reasons for constructing the ramp and are they valid?
Reason 1: The ramp is required to meet the City’s contractual obligation to JAMF and RCU to build a parking ramp:
Truth: There is no such contractual obligation:
a) Click here to see the JAMF (Pablo Properties) building contract. See page 4 section 5(d) – there is no obligation whatsoever to provide parking because the parties signing the contract, RDA and the City Manager did not have the authority to obligate the City. That fact was acknowledged in the contract by virtue of the promise to use “best efforts” to acquire the post office and obtain the necessary approvals. Moreover, the “best efforts” were for either a ramp or surface parking and the number of spots was 210.
b) RCU Contract is in the form of an amendment included as Exhibit A to the JAMF Contract. The City’s obligation can be found in paragraph 5(A) and was limited to that which the RDA and the City manager have authority to provide - the paving of a temporary surface parking lot on Block 7, the lot next to the Post Office across the street from the Livery on the corner of Barstow and Wisconsin. In the contract it agreed to provide RCU with 120 parking spots on that lot. Section 5(B) of the contract contained a similar “Best Efforts” clause to the one in the JAMF contract concerning securing the land and providing surface parking or a ramp. The Block 7 lot was been paved and the City’s actual obligation has been met.
Reason 2: JAMF and RCU requested 520 stalls.
Truth: The number of spots requested by JAMF was 210 and for RCU was 120 – that totals 330, not 520.
Reason 3: Contract or no contract, because JAMF and RCU are important citizens, the City nonetheless should help JAMF and RCU and build the ramp as it is required to accommodate their needs.
Truth: The premise behind the reason is highly questionable as it suggests that it is appropriate to provide preferential treatment to some citizens over others. That premise, however, does not need to be discussed as there is already plenty of available parking – Block 7 (paved lot across the street from the Livery on Barstow and Wisconsin) holds 200 cars; the Railroad Lot directly across the Street from the RCU between Farwell and Barstow holds 75, and the Post Office’s South parking Lot or the Haymarket Square Parking lot each can easily accommodate an additional 55 vehicles, to reach the 330 figure. Moreover, JAMF’s requirements are based on estimated needs over a five-year period. As with any five-year plan, it is just that, a plan, which may or may not materialize.
Reason 4: The Parking Ramp will be needed to support the Confluence Project.
Truth: It is true that Confluence project did play a significant part in the parking ramp discussion. Note, for example the following passage from the RDA Minutes from the February 20, 2013 meeting when the parking ramp idea was first broached:
Phase 4a (option) – Create a structured parking ramp at post office site and mixed-use building, the Block 7 could be further developed without concern for parking issues. This parking ramp would also help with the parking issue regarding the Confluence Project
Click here for the full February 20, 2013 RDA minutes.
There are many sizable hurdles that that must be overcome before the Confluence project can go forward: the August vote by the Regents authorizing the project; State appropriation of $25 million for the 2015-2017 period, which will not occur until May 2015 at the earliest; and the raising by private donation of $19 million.
*Includes $3,000,000 of funds that were to be secured from the Federal New Market Tax Credit Program. That program has expired and it has not been renewed by Congress.
**Raising a $2.5 million endowment fund is a condition of the City's Pledge. Click here to see the City Pledge
Would it not be wise to postpone design and final costing, at least until those hurdles are overcome?
Reason 5: Without the Parking Ramp, Block 7 (corner of Barstow and Wisconsin across the street from the Livery) cannot be developed and its full value realized.
Truth: A rational investor would conclude quickly that the corner of Barstow and Wisconsin should continue as a parking lot, as the cost of the parking ramp (projected at $10.3 million) plus the annual cost of operating the parking lot (not yet disclosed) far exceed the value of developing that corner – the city had hoped that a person would build an $8.5 million building on block 7 [see Section III, page 6 of the TIF #8 budget - click here to view].
If the $8.5 million building were built, the lot would generate for the city property taxes of $72,300 per year beginning in 2033, resulting in a return on the City’s investment in the parking ramp of 0.7%. And that assumes zero operating cost for the parking ramp as well as zero future capital costs for the ramp. Both assumptions are contrary to fact. As far as the cost to pave the corner of Wisconsin and Barstow ($185,000), it has already been expended and cannot be recovered.
5) What will happen to the Farmer’s Market? To pay for the parking ramp and the other infrastructure costs, every open space in the area will need to be covered with a building. The current plan is to offer the fourth floor of the parking ramp to the public (at a fee during the week). That is hardly convenient when carrying bags of produce, bakery goods, jugs of syrup, potatoes, fruit, or meat. For additional information click here.
Update: CLOSED Confluence Discussion at the April 21, 2014 City Council Meeting
Posted: Wednesday, April 23, 2014
Council members (David Duax, Monica Lewis, David Strobel, and Bob Von Haden) asked that the first update on the Confluence Project be discussed in the open, recommending that only those portions of the update that dealt specifically with bargaining or competition be handled behind closed doors. The Wisconsin open meeting statute does provide an exemption from the open hearing requirement in cases in which the Council needs to discuss bargaining and competitive bids. There was a fair amount of discussion during which the other Council members indicated their belief that the entire discussion should be behind closed doors to enable the Councilmen to be good stewards of the citizens' tax money. The Chair stated that she had received many comments that she was intepreting as approval to conduct the Confluence discussions in secrecy, as those citizens stated that they had full trust and confidence in the Council.
The city attorney, Mr. Nicks, indicated that he expected that closed sessions like this one would become a regular feature of future council meetings until the Confluence Project was completed.
Mr. Von Haden also asked that adequate time be provided if and when the Council had concurred in proposed terms on the project to enable the public and Council members to do a full review (i.e., something other than the standard Friday afternoon release followed by a discussion on Monday and vote the next day) of the proposed terms. There was no response to his request.
A vote was then taken. Kincaid, Emanuelle, Klinkhammer, Larsen, Mitchell, and Xiong all voted for a closed session; Duax, Lewis, Strobel and Von Haden voted against the closed session. The closed session was held and the meeting was not reopened to the public. As a result, there was no summary of the results of the closed session or of those portions of the discussion, which covered items other than bargaining or competitive bids.
Despite the fact that the session was a public meeting, it was CLOSED to the public based on exception (e) to the Open Public Session law, which pertains to the need for privacy due to bargaining or competitive reasons (section 19.85(1)(e).
To the Closed Session portion (p. 129) of the 04-21-14 City Council Packet click here.
There has also been very limited press coverage of the decision to handle the first update of the Confluence Project since the election behind closed doors. The television reporters left at 9:00 PM, before the Confluence discussion began and, as a result, did not report on the discussion during Monday's evening news. Channel 18 did provide a short piece the following evening, speculating that the negotiations pertained to which responsibilities and costs would be covered by the City and which by the developers. The Leader Telegram reporter provided a couple of Tweets on the discussion on Monday evening and did write a story the following day, however, that story although accessible through Google online, was not published in either the newspaper or the official online version of the newspaper.
Confluence Related Expenditures Discussed at the April 7, 2014 City Council Meeting:
Posted: Saturday, April 12, 2014
The City staff is proceeding with plans for a 520-stall parking ramp at the site of the current post office. It hired a consultant (Walker Parking Consultants) to put together a concept. The plan is to finish the design in 7 months, allow 2 months to bid the work and 11 months for construction, with the intent to complete the ramp in March 2016. Projected cost: $9.7 to $10.3 million – that’s $2 to $2.6 million higher than the original estimate referenced on www.confluencereferendum.com.
To view the portion of the 04-07-14 City Council packet related to the Parking Ramp, click here.
1) Why now?
This information was obtained from http://www.eauclairewi.gov/departments/public-works/parking/parking-lots-ramps
Performing Art Center - $5.0 million
Student Housing - $5.9 million
Plaza - $2.6-$4.1 million
Parking Ramp - $9.7-10.3 million
Total City Confluence Debt - $23.2 to $25.3 million
To pay off this new TIF debt along with that which has already been incurred, a total of $80-$89 million of incremental construction is required. Where will this come from, as there has only been $40 million committed to date?
2) Who will pay?