Maybe the “business community” doesn’t always know what is best. And maybe this should give us pause to review “deals” more carefully before jumping on board. And maybe look a little harder into unrealistic promises. Sometimes a really good deal might not be as good as it looks. And I don’t think you can blame this on the economy, because for the first 5 years that wasn’t an issue.
This is from the Economic Development Commission yesterday evening. There was a Wisconsin State Journal article on this matter, but here’s a little more detail. Sort of the “rest of the story” about why the deal fell apart and why we have to do this.
STAFF PRESENTATION OF THE ISSUE
Aaron Olver, the Economic Development Director starts off by giving some background for the resolution. The City originally entered into this deal because the City didn’t have land for industrial land, went out and did a study and bought properties. They bought 162 acres, did a RFP (Request for Proposals), selected T wall Properties to market and develop it. The agreement was that the city would hold it and T Wall would take it down in chunks of 23 acres, with an escalating price per acre. T Wall was projecting a rapid absorption, they probably won the RFP because they offered a 10% escalator, in the mean time, city is building roads through the property. Some of the assessments are attached to the property in question, Center for Industry and Commerce/T Wall Properties has 10 years to take down the site and that ends on June 24th. They have only sold 54 acres and purchased 28 more acres, the City still has 72 acres. It is important to know, we have been paid $3.5M, we bought for $1.3M, we paid off the land and made a profit on the project, the challenge facing now is that, if T Wall properties were to honor the agreement they purchase the rest of the property for $6M, they have indicated they can’t pay that and market the land in the current market and the City agrees with that assessment. So the questions is what to do? The City has two options, sue the entity that owes us the money, which is an LLC and try to collect. However, we have been advised we are unlikely to get anything out of pursuing it. The alternative is to negotiate something that provides some value to the City. There is a map, green property is the property city is still holding which is 72 acres. The 24 acres in yellow are paid for once. This resolution proposes that in lieu of payment, we are letting CIC off the hook to buy the land for $6M, and they are foregoing right to develop and giving us back the yellow property they paid for. We can pursue new a new RFP to sell green property not yet paid for, but we have covered the cost and as compensation they give back the yellow property they have pad us for once. So we can sell it again, so what you see here is that once you factor out the assessments, we can get $2M on yellow and then slightly higher amount of money on the green property.
DISCUSSION
Al Zimmerman says it sounds like T Wall’s vision did not work.
Mark Clear says that it was “irrational exuberance”.
Olver says that they promised a 3 year absorption, and now it is 10 years later.
TESTIMONY
Joe Clausius says that this resolution was introduced last night, it will go to the Board of Estimates next Monday and then to council. Its on the fast track, its no secret that ever since he was on the council he tried to work with city and T Wall to re-negotiate it, but it has never taken off. I’m not a bank, but I suspect part of this was the economy and (sorry, couldn’t hear) – we are not competitive, the land is expensive, Dean did a good job summarizing it. $5M in the next 10 years is what we will get for no outlay, there is a big reason we want to get it to go to get it on the tax rolls and create more jobs, he say that people want to build more subdivisions, he wants them to support it, he supports it, this is a pleasant way to end this debacle.
FURTHER DISCUSSION
Joe Boucher asks if this the best possible deal we can get in a bad situation. He says the alternative is that we can go after them but the LLC is dead broke. And we have no personal guarantee or anything.
Olver says that T Wall Properties, a company and its not the person that we are talking about, the company is actually two companies. This one has a partner in new York, the New York partner will default on the agreement and when we pursue them we won’t get anything. Olver says that T Wall properties is being run by out of state investment group. T Wall is just a board member.
Someone is this s subsidiary of T Wall?
Olver says it is separate, but generally it only has these assets.
Mark Clear turns to the chair Joe Boucher and says “To cut through all the baloney, its the stupid LLC law.”
Boucher admits that he helped pass that law and that there are some flaws, but people have to be big girls and boys when they go in to these deals, ten years ago might have looked like a decent deal.
Olver says it has been successful, we paid $1.3M, and we made $2M and we are getting property back to re-market and we an address the industrial shortage. And when we look at growth, we are in a competitive position in manufacturing. Its better, we are growing faster in industrial – manufacturing than residential and commercial. The growth is strong – in the 90ss we identified an issue and succeeded. It would be great to get paid $6M instead of $2M, but it was a success.
Pat Schramm asks what zip code this is in?
Olver says 53704
There is a motion to approve.
Matt Younkle asks what the market value of the property is.
Olver says $3 a square foot, but keep in mind that is essentially what they have to sell it at to cover the special assessments.
Younkle says that is $130,000 an acre, but we paid $89,000.
Zimmerman says they won’t look at anything $25K per acre.
Mark Clear asks if it is currently being farmed, because it looks like it is on the picture.
Olver doesn’t know.
Mark says that this is really just bizarro land banking. If you imagine what we did, we bought it as land banking and then did a deal with T WAll. This is the consequence of it reverting back to us. With the added benefit that they are buying their way out of the deal. It was not to their advantage. He congratulates the real estate team.
They unanimously approve he resolution.
A FEW THOUGHTS OF MY OWN
Several random thoughts and questions:
This picture sounds a little rosy to me, seems as tho there are some numbers missing. In fact, the numbers are missing, the resolution says this: “A fiscal analysis has not yet been completed.”
Someone should get numbers on how much the city spent on building roads. Would we have done that if it wasn’t for this deal? Seems like we’ve created several roads to no where.
How much are we losing by not getting this on the tax rolls as planned?
How much manipulation was T Wall able to do by not marketing these properties as much as others – because they had nothing to lose if they didn’t sell these properties and they could make the city look bad?
It looks like only a dozen lots were sold in 10 years – why didn’t we address this issue much, much, much sooner. And hold them accountable.
And why is this a rush job now – so no one looks too closely and asks too many questions?
Its ironic that one of the streets is named after Grasskamp.
Tomorrow’s post will reveal something interesting about our manufacturing sector in Madison – something no one expected. It surprised even the Economic Development Committee experts.
