News from Voters with Facts

AUGUST 18, 2014 PLAN COMMISSION
MEETING– TWO CONFLUENCE-RELATED
TIFS UP FOR DISCUSSION

Posted:  Wednesday, August 20, 2014
Updated:  Tuesday, August 26, 2014

What municipal governments choose to do with industrial development activities and the tax increment district law is usually determined by:

  • the ingenuity of developers and bond underwriters
  • the gullibility of local officials, and
  • the passivity of the public.
                    John Hibbard on TIFs

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 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 the Haymarket Concepts, the current owner of the west side of the Confluence Block on North Barstow.  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 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 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 identity of the entity that will be submitting the application is not known.

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.

2)  Property is not Blighted
The policy behind the provision of the law which authorizes a 27-year Tax Incremental Finance District is to provide an incentive to communities to redevelop slums.  A really bad area tends to continue to deteriorate, as no one wants to invest capital to develop any single site if it is surrounded by blight.  Under the Wisconsin TIF law, at least 50% of the properties within a TIF district must be blighted to qualify.

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
A TIF is intended to be a device of last resort, i.e., the blighted area cannot be remediated without the City’s intervention.  In fact, before a TIF can proceed, a Joint Review Board consisting of officials from the City, County, K-12 School Board, and Vocational School must state in writing that without the creation of the tax district the blighted property would not be redeveloped.  This is known as the “But For” requirement and is found in Section 66.11054(m)(b)(2) of the Wisconsin TIF Statute.

Given the fact that the propertie that are proposed for the designation of blighted are either in use or are owned by developers who are in the process of developing 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
TIF boundaries must be contiguous.  At the time the TIF is in place, assessed property values in the district are frozen for normal property tax purposes and the City, county, schools will continue to receive taxes on that frozen assessed value.  To the extent the value of the property inside the district increases (including property that is not blighted and is not being changed because of the TIF), the taxes on the increase all go to the bondholders and in the case of TIF 10, to the project developer, Haymarket Concepts.  Changes include not only true increases in value, but also increases due to inflation.  In a twenty-seven year period, there is sure to be significant inflation and in fact inflation is assumed at the rate of 1% per year in the revenue assumptions for both TIFS.  Moreover, there is also a requirement that residential property be limited to 35% of the area of the TIF.  The expansion of boundaries in the case of TIF 10 ensures that this limitation is met, particularly if the property intended as the Performing Art Center becomes yet another student housing building.

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 was added in order to draw contiguous borders that would include what will be the newly remodeled Green Tree Motel.  Property taxes on a refurbishment cost of $650,000 are actually identified in the document as being applied to the TIF.  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 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 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
If there was ever a property that fit the bill as “blighted,” it was probably the 1.9 million square foot complex known as Banbury Place after the rubber company left.  Adjectives like “run down”, “obsolete”, “creepy” come to mind.  Likewise, given its size and layout, it would have been an ideal place for drug exchanges or a criminal hang out.  Instead, the free market (in the form of the late, Bill Cigan and his son, Jack Kaiser, men with amazing vision) took a hand in its development and the building now houses 130 tenants ranging from art studios to manufacturers, which employ about 500 people.  In addition, there are 35 apartments and 315 indoor self-storage units.  There are still places high on the creepy index, but it is only a matter of time before they too are converted.  Parking is not an issue - best of all, no TIFs; no city money.

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), demolish and raise the land out of the flood plain.  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 or $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 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 at $26-$28 million on land purchased at $2.5 million plus the cost to raze and move the land above the flood plain, 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).

 

Both TIFs
For both TIFS there is significant infrastructure in street work that will be required if this project goes through.  The infrastructure cost will be charged primarily to the public.  The City is no longer able to pay for a basic city service – street work – and now borrows the funds.

Street Cost for Confluence Block          $1.35 million
Street Costs all Blocks*                          $2.25 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
By: Maryjo Cohen – Leader Telegram 8/17/14

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
NORTH BARSTOW PARKING RAMP

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:

http://web.ci.eau-claire.wi.us/
city_council/plan_commission_agenda_packet.pdf

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:
http://voterswithfacts.com/01-PROJECT_PLAN_Final_TIF_8.pdf

For TIF 10 – Creation of Overlay TIF:
http://voterswithfacts.com/01-PROJECT_PLAN_Final_TIF_10.pdf

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.

Government Destruction of Historic Buildings Through Private Subsidies

Free Enterprise – Just Let It Be!

City Gifts for the Influential; City Taxes for the Rest of Us

Investment Criteria From The Involuntary Investor (AKA the Eau Claire Taxpayer)

Changed Deal – The Building that Funded Confluence Now Needs Subsidies?

Confluence Funding – Anything But A Sure Thing

Don’t Give Away My Tax Dollars

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:

Board of Regents Principle 1  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;

Board of Regents Principle 2  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.

Board of Regents Principle 3  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 -

Click here for the calculation of the $19 million private donation requirement.

Board of Regents Principle 4  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
By: Dave Wood

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 RAMP JULY 10, 2014 OPEN HOUSE REPORT

Posted: Sunday, July 13, 2014

Attendance at the first North Barstow Parking Ramp Open House was thin.  Publicity had been minimal and was limited the morning of the event to an article placed in a non-prominent position in the Leader Telegram and discussion on the WAYY morning talk show.  Actual invitations appear to have been tendered only to “stakeholders.”

Design consultants provided the following information in response to volunteers’ questions:

1)  GOOD NEWS ON COSTS:

a)  If the City does terminate the contract before the construction bid stage, the consultant plans to charge an amount commensurate with its estimates by phase for the phases completed.  Those costs plus expenses and some contract management costs (for estimating and scheduling) would total approximately $160,000-$180,000.  That is within the City’s 2014 budgeted amount for the design, although still a great deal of money to design a ramp that the city has not decided to build.  Under the contract the consultant could charge for time spent based on his hourly bid schedule.

b)  The additional fee of $40,000 for an enclosed underground garage design is no longer a concern, as the consultants have taken the underground floor off the table due to its inherent high cost.  The fifth floor is also no longer under consideration and will not be an added cost (see 3 below).

c)  The consultants’ design report will include an estimate of the cost to operate the ramp both manned and unmanned.

2)  NO PUBLIC INVOLVEMENT IN DESIGN

Planning workshops were not open to the public, but limited to so-called stakeholders (those who would directly benefit from the ramp or would potentially profit from it – JAMF, RCU, the developers, DECI and the North Barstow BID groups).  On July 9th and 10th, four groups of 12-18 people attended the workshops.  One of the consultants stated that it was his understanding that the stakeholders would be covering the cost of the ramp and was surprised to learn that the party with the true financial stake was the group that was excluded, i.e., the public.  An additional two day session is planned in August.  The public again will not be invited to anything other than a second open house session where it would be provided with another similar update.  Whether there will be as little publicity for the second open house as the first is not known.

3)  SMALL TOWN PARKING RAMP BUILDING EXPERIENCE

The main consultant, Tom Hanley, appears to have no experience in building parking ramps and referred all questions directly related to ramps to the other consultant present.  That consultant seemed to have little experience in designing ramps in small towns with the possible exception of hospital ramps, like the one at Mayo (he had not designed that ramp).  He was unaware of the VenuWorks formula for when and when not to build a ramp based on land value (a minimum of $1 million per acre).  He was also unaware of the issues small town folks have using parking ramps and that the ramp on Farwell was largely empty.  The consultant understood that the City’s plan was to make this particular area one of high density like a major urban area and with that kind of density, a ramp would typically be part of the plan.

4)  RECONFIGURATION

The consultants concur with Voters with Facts that the 130 stalls per floor found in the original plans were inadequate given the justification for the ramp, i.e., to make it possible to develop the paved parking lot at the corner of Barstow and Wilson into an office building and the area around the current post office into a liner building of shops.  Those planned buildings would need significant additional parking, well beyond that afforded by the proposed four or five story ramp.  The plans have been changed.  The proposed ramp now has a footprint of 24,000 square feet, all built above ground with approximately 190 spots per floor – 550 to 575 for three floors and 750 to 775 for four floors.  The liner building has been replaced with an apartment building with its own underground parking.  After deducting the promised 471 spots for JAMF and RCU (330 + RCU's 141 existing parking spots that would be used for the ramp), there would be approximately 279 to 304 spots remaining for the office building and the public.  The consultants are awaiting the information from the traffic study before finalizing this aspect of the design.

5)  LIKELY RAMP HEIGHT PLANNED TO BE ABOVE NEIGHBORING BUILDINGS

With four floors, there would be no issue seeing the parking ramp from the street, as it will be approximately 35 feet and higher than the buildings around it. That is six feet above the original of 29 foot maximum.

6)  MARKET & JOHNSON SELECTED AS DESIGN DEVELOPER

Market & Johnson has been selected as the design project’s contract manager.  For the design-related work alone, if the contract is completed, it will receive $55,000.

7)  FLOOD PLAIN ISSUE

Flooding concerns are minor, not only based on the decision to build above ground, but also due to the fact that the portion of the post office that is below the flood plain is very small.  Per one of the consultants, the fill required to build that area above the plain was minimal and will settle within 30-60 days.  Note the flood plain issue was one of the bases for declaring the Post Office property 100% blighted.

8)  NEXT STEPS AND TIMING

The next workshop will be in August.  The initial design drawings will not be completed until September.  If the Council does decide to move forward with the ramp, the construction drawings would be ready to be sent out for bids in January or February of 2015.

 

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. 

Click here to view an analysis of the applicable contract clauses and calculations.

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.

Hide the analysis.

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.

Click here to view an analysis of the applicable contract clauses.

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.

Hide the analysis.

 

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:

Developer's Paper
Sketch A
Sketch B

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.

 

Request to Place North Barstow Parking Issue on Monday’s City Council Hearing Agenda Denied

Posted: Saturday, June 7, 2014

The City Council is planning on voting on a $404,200 expenditure with no pubic input.

Voters with Facts have two issues with that plan:

1)    $404,200 is a significant amount of money.

2)    The vote is occurring without a public hearing despite the fact that two Council members asked that it be placed on Monday’s (6/9/14) hearing agenda.

The $404,200 expenditure is for the design of a proposed $10.3 million parking ramp in the North Barstow TIF district.  Citizens' concerns that prompted the two City Council members to place the subject on Monday's hearing agenda range from fears that a paid ramp and the loss of surface parking could destroy the Farmers Market to questions about fiscal responsibility.  Why would the City even consider making an investment of a sum of this magnitude on the design of a ramp, when the ramp itself has not been approved?

The subject instead will be placed without public input before the City Council for a vote on Tuesday, June 10.

The decision is an odd one.  Under the City Council’s Handbook, the City Council President and the City Manager do have the authority to strike a proposed agenda item from a public hearing if it supported only by a single member, but not, as is the case here, for an agenda item supported by two members.  Nonetheless, the proposed agenda item has been removed.

$404,200 is a significant sum. To put it in perspective:

In terms of city expenditures:

$404,200 = 4,000 Miles of snow plowing at $100/mile (estimate) – or the ability to plow the City of Eau Claire, 20 times.

$404,200 = $3.6 Million Meals at a Food Bank (http://help.feedingamerica.org/site/PageServer?pagename=giveameal)

$404,200 = 40 summer park workers at $10k each – or 33,300 hours of additional city temporary work at $12/hour (estimate)

$404,200 = 518,000 seedling trees for the City’s forestry department (http://shop.arborday.org/product.aspx?zpid=960)

In terms of city revenues:

$404,200 = Property taxes on 322 homes (assessed at the median value of $147,200), which at 12 per block is almost 27 blocks of homes.

$404,200 = Property taxes on $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.

$404,200 = 84% of the taxes paid by Oakwood Mall – the highest property tax payer in Eau Claire.

 

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:

Board of Regents Principle 1  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.

Status toward meeting principle 1 

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.

 

Board of Regents Principle 2  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.

Status toward meeting principle 2  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.

 

Board of Regents Principle 3  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.

Status toward meeting principle 3  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.

 

Board of Regents Principle 4  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.

Status toward meeting principle 4  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.

 

Board of Regents Principle 5  The state's investment in the art's facility portion of the Project must not exceed $25 million.

Status toward meeting principle 5  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:

checkboxTo check the budget first:   David Duax, Eric Larsen, Monica Lewis, Dave Strobel, Bob Von Haden, Andrew Werthmann

red checkboxTo enter a contract without seeing if the money is available:  Catherine Emmanuelle, Kerry Kincaid, David Klinkhammer, Kathy Mitchell, Michael Xiong

 

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.

Click here for the calculation of the $19 million private donation requirement.

Performing Art Center - cost 50,000,000
State Share 25,000,000
City Share 5,000,000
County Share 3,500,000
   Total Public Share 33,500,000
  Net Remaining for Charity* 16,500,000
City Endowment Requirement** 2,500,000
Total required from Charity 19,000,000

*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

Hide the calculation.

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.

View Voters with Facts concerns Closed City Council sessions 

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.

View Voters with Facts concerns about the Parking Ramp 

Questions     

1)  Why now?

  • Is there a need for a ramp in North Barstow? –the City paved over the lot next to the post office in 2013 to provide parking for RCU and JAMF at a cost of $185,000 (property taxes equivalent to 138 homes [22 blocks]), which along with parking behind the Galloway Grill, the existing parking next to RCU and other area parking, meets the current needs of both businesses.
     
    Here is a list of parking spots available downtown and in the North Barstow area:
  Location   Number of Parking Spaces
    Barstow & Wisconsin     200
    Between Farwell & Barstow     75
    Eau Claire & Graham     101
    Farwell & Gibson     405
    Dewey & Gibson     103
    Farwell & Main     45
    Barstow & Grand     32
    Dewey & Eau Claire     23
    Seaver & Barstow     39
    Main & Farwell     47
    Graham & Gray     65/69
    Farwell & Gray     162
    Total     1297/1301

This information was obtained from http://www.eauclairewi.gov/departments/public-works/parking/parking-lots-ramps

  • Is the ramp part of the Confluence Project, i.e., is it intended as a place for the students in the student housing building to park and then ultimately for the theater goers?  The student housing, if it does proceed, is tentatively scheduled for completion by June 2016, If that is the case, the City should call a spade a spade and include this cost in the project rather than stating that the total Confluence debt is $5 million.

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?

  • The Parking ramp, if owned and operated by the city, is tax exempt and will generate no property taxes.  Tax exempt structures are the last thing that should be placed in a TIF, which is premised on encouraging private property investments.  Under a TIF, the property taxes on new taxable development are intended to pay off the city’s infrastructure debt.
  • Property taxes from taxable property in TIF #8 are not adequate to cover the current infrastructure and the ramp.  If the ramp proceeds, the TIF will fail; bondholders will not be paid off within the maximum 27-year period.  Failure means either that the public pays back the debt through an increased tax levy or the City kicks the can down the road by creating a new overlay TIF.  That TIF then floats new debt to pay off the current bondholders.  During the life of the new TIF, owners of taxable buildings within the district continue to pay the incremental taxes to bondholders rather than the City.  Through the operation of the construction index, property owners outside the TIF effectively pay their own plus an amount equivalent to those incremental property taxes.  That enables the City to provide services to the TIF district, including covering special assessments.  Given the length of time the TIFs will have remained open, major repairs to roads and infrastructure can be expected before the TIFs close, all at non-TIF taxpayer expense.

Other Issues

  • 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, fruit, or meat.
  • What will happen to the Post Office? – It will be moved to the location of the failed grocery store (Charly's Market) and the empty location next door.  Not only is that a difficult spot to reach when driving west on East Madison, but it will also take up additional parking stalls that have historically been used by Farmer's Market patrons.