Exhibition Center Cost to Appleton Taxpayers (Part 5) by Tom Roessler

Bottom Line: Appleton taxpayers were told that no taxpayer dollars would be used for the “construction” of the exhibition center. However, Appleton taxpayers paid a significant amount toward the project.  To date Appleton residents will have paid nearly $5 million toward the Exhibition Center project.  Read on to learn more…

Below is a summary of the expenses that Appleton taxpayers are held accountable.

 

Purchase of the land      $2,000,000

Infrastructure                  $1,777,979    ($390,737 for Exhibition Center related items)

Legal Fees                      $1,063,057    ($522,000 for failed loan option)

Equipment                       $     75,000    ($141,000 still unfunded)

Total                                 $4,916,036

Exhibition Center Cost to Appleton Taxpayers (Part 4) by Tom Roessler

Legal Fees: Legal fees for the Exhibition Center which Appleton residents were held accountable for amounted to over $1 million.  $522,000 of that amount was for attorney fees that were incurred as part of a failed effort to secure private-placement bank loans for the project.  Read on to learn more….

Background:  Ben LaFrombois began work as outside legal counsel for Appleton in 2014 to guide the development of the exhibition center. He first was a partner with the law firm of Hinshaw & Culbertson and continued to advise the city after he switched to the law firm of von Briesen & Roper.  In 2018 Mayor Hanna said Ben LaFrombois and the teams at Hinshaw & Culbertson and Von Briesen & Roper have expertise in large projects with complex financing. City attorney Walsh, he said, is "not a specialist in that kind of a transaction”.

What the legal work cost: The legal work was authorized in phases. Appleton paid the two law firms $715,057 for work performed in the first four phases (APC 1-31-18).

A contract was signed for Phase 5 legal work with Ben LaFromBoius of Von Briesen & Roper with a cap of $268,000 (APC 1-31-18).  At the completion of the Phase 5 work invoices were submitted totaling $397,143 of which $129,143 was for work that was out-of-scope.  An agreement was reached to pay the contractual agreed upon amount of $268,000 but the $129,143 amount was disputed (APC 9-2618). Eventually an agreement was reached to pay $80,000 of the disputed amount (APC 3-7-19). On September 24, 2018 the finance committee approved a request to terminate the contract with von Briesen and the City Attorney’s office was to assume any further activity regarding the Exhibition Center (Appleton Common Council meeting minutes).

The total amount of legal fees paid relating to the Exhibition Center came to $1,063,057 of which $522,000 was for attorney fees that were incurred as part of a failed effort to secure private-placement bank loans for the project (APC 3-25-18).

In addition to legal expenses the council also agreed to spend $75,000 to purchase equipment needed by Red Lion Hotel Paper Valley to operate the exhibition center. Another $141,000 in equipment is unfunded at this time.

Exhibition Center Cost to Appleton Taxpayers (Part 3) by Tom Roessler

Financial Fiasco Continued:  Nearly three years after construction began on the Exhibition Center a plan to fund the project was presented and quickly rejected for funding the project.  An estimated $2.7 million could have been saved in finance cost and $522,000 in legal fees if bonding had been pursued earlier.  Read on to learn more….

In October of 2017 Ben LaFrombois, Appleton's outside legal counsel for the exhibition center, submitted his plan for financing the Exhibition Center which called for Appleton to finance the project with loans from five local banks at an interest rate that would be 2.2 percent higher than the five-year U.S. treasury rate. The five-year U.S. treasury rate was 2.28 percent on the following Monday, placing the starting interest rate at 4.48 percent. The rate would reset every five years. Mayor Hanna said Appleton stands ready to use a "first-of-its-kind financing structure" (Ben LaFrombois’ plan) for the exhibition center.  LaFrombois said he would receive 1.25 percent of the loans, plus legal fees, as compensation for arranging the loans. At $31 million, 1.25 percent equates to $387,500. When the loan plan was unveiled, LaFrombois said it wasn't feasible to finance $31 million through revenue bonds. The most the bond market would support, he said, was $25 million or $26 million.  (APC 1-10-18).  

The surrounding communities stalled the bank loan option touted by LaFrombois and Mayor Tim Hanna, forcing a closer look at the revenue bond option. Neenah Mayor Dean Kaufert said the 10 municipal partners in the project could have saved about $2.7 million in financing costs if Appleton had taken advantage of lower interest rates on revenue bonds in August 2016.  Instead, Appleton pursued private-placement bank loans arranged by LaFrombois until serious objections were raised last fall because the loans had a variable interest rate. (APC 1/31/18).  That dispute cost Appleton $522,000 in attorney fees (paid to LaFrombois/ Von Briesen & Roper) that it incurred as part of a failed effort to secure private-placement bank loans. (APC 7-11-18)

A representative of Robert W. Baird and Co. told the Appleton Finance Committee on January 8, 2018 that the Appleton Redevelopment Authority could issue revenue bonds to pay for the construction of the exhibition center.  The interest rate on the bonds, was estimated at 4.07 percent, and would be fixed for the life of the bonds (APC 1-10-18).

Exhibition Center Cost to Appleton Taxpayers (Part 2) by Tom Roessler

Financial Fiasco:  Inability to secure bond financing for the construction of the Exhibition center resulted in Appleton draining its reserves to pay for the construction. Read on to learn more…

On March 4th, 2015 the Appleton Common Council passed an agreement stating that Appleton will pay Outagamie County $2 million for a site on West Lawrence Street — across from Radisson Paper Valley Hotel — on which the downtown exhibition center would be built. The money, plus some infrastructure work, was to be the city's primary investment in the project.  The agreement that the common council passed was contingent on several conditions:

·       An agreement with the Radisson hotel for the management of the center.

·      Securing bond financing to pay for the construction of the center.

·       Raising room taxes in the Fox Cities to repay the bonds. (APC 3-22-15)

Fast forward to January 2018 one week before the exhibition center was to open.  Nearly three years had passed without securement of bond funding for the exhibition center construction which was a pivotal condition of the original agreement.  Instead of securing the bond financing for the construction of the exhibition center the city of Appleton was paying for the construction ($26.8 million at that point) out of the city reserves which resulted in a loss of interest for the city of Appleton of $285,130.   On January 27th 2018 the Finance Committee recommended the Common Council approve a resolution to ask each of the 10 municipalities to pay back the lost interest through room tax revenues.  A deal struck by 10 municipalities to use regional room tax proceeds to recoup $285,130 in lost interest income on money the city spent to front the construction costs of the $31.5 million exhibition center. (APC 3-25-18)

Exhibition Center Cost to Appleton Taxpayers (Part 1) by Tom Roessler

Appleton taxpayers were told that no taxpayer dollars would be used for the “construction” of the exhibition center.  However, Appleton taxpayers paid a significant amount toward the project. The following articles will summarize those expenditures. 

Initial Cost:  Appleton paid $3.8 million toward the initial cost of the Exhibition Center which included $2.0 million for the land purchase, more than twice the assessed value, and $1.8 million for infrastructure.  Read on to learn more…

In September of 2014 Mayor Hanna said the city's net cost of the exhibition center would be "a little over $2 million" because the $1.8 million infrastructure work was needed independent of the exhibition center (9/28/14 APC).  The purchase of the exhibition center land from the county came to $2.0 million. In March of 2015 the common council approved the purchase of the land.  Several council members were troubled by the $2 million price tag, which is more than double the assessed value but equal to what Outagamie County invested in the property. The council defeated an amendment offered by Croatt on Wednesday to lower the city offer to $900,000 (APC 3-4-15)

According to a December 14, 2014 APC article the infrastructure improvements included the following:

$290,550 – Water main replacement

$22,150 – Sanitary sewers

$60,000 – Storm sewers

$657,542 – Street reconstruction

$22,737 – Land purchase (Lot #9)

$60,000 – Site Plan

$368,000 – Pedestrian bridge over Lawrence

$130,000 – Onsite storm water management

$167,000 – Power Poles

$1,777,979 - Total

Even the mayor would have to concede that the bridge over Lawrence street and the purchase of lot #9 would not be necessary if the Exhibition Center wasn’t built.  The cost of these two items totals $390,737.

Dark Store / Walgreens Loophole (Article 3 of 3) by Tom Roessler

What can we do as taxpayers to encourage our state representatives to close this loophole? Read on to find out more…

The closing of this loophole has been looked at since 2017. Bill Kloiber, District Director for State Senate President Roger Roth, states that in the past “Dark Stores” and the “Walgreens” bills were separate pieces of legislation.  This session, they have been rolled together with Senators Roth and Stroebel the lead Authors and Representative Brooks leading in the Assembly.  2019 SB 130 – Walgreens/Dark Stores is the Senate Bill https://docs.legis.wisconsin.gov/2019/proposals/sb130  

Please give the bill a look and encourage your State Senator to get behind the bill.  A letter to State Senate Majority leader Scott Fitzgerald demanding that this bill be brought forward and acted upon would also be helpful.

References:

Wisconsin Policy Forum, Forum issue #16 Wispolicyforum.org

June 2018 League of Wisconsin Municipalities publication

DeAnn Brosman, City of Appleton Assessor

Bill Kloiber, District Director, State Senate President Roger Roth

Michael Donatello, Office of Senate President Roger Roth

Dark Store / Walgreens Loophole (Article 2 of 3) by Tom Roessler

 Wisconsin property tax payers could see an increase of 8% or more if the Dark store / Walgreens loophole is not addressed by our state officials.  Read on to find out more…

Impact of inaction:   In Wisconsin, residential property owners pay 68% of Property Taxes collected.  In surrounding states without this loophole, this percent drops to a low of 50% in Minnesota.  It is feared that with continued use of this loophole, Wisconsin residential owners could see an additional shift to their property taxes of 8% or more.  Wisconsin Policy Forum, a statewide nonpartisan, independent policy research group, points out that statewide the number of appeals is on the rise as well as the amount of money refunded, citing that appeals classified as “Dark Store” rose from 63 in 2016 to 79 in 2017 with cities and municipalities refunding  $2.2 million in 2016 jumping to $3.1 million in 2017.

A request for information from The City of Appleton was answered by City of Appleton Assessor, DeAnn Brosman.  She states that loophole money is not lost to the city, but passed on to other property owners.  Brosman confirmed that the city currently receives 68% of it’s tax levy from individual household property owners and that Appleton has had to refund $802,110 in the past five years due to the loophole with an additional case pending.

Dark Store / Walgreens Loophole (Article 1 of 3) by Tom Roessler

Wisconsin Supreme Court delivers huge property tax break for Wisconsin retailers.  Read on to find out more...

History and explanation: In the 2008 Wisconsin Supreme Court case Walgreens vs City of Madison case, Walgreens argued that the assessed value of their properties for property tax purposes should be less than half of the actual recent sale prices of such properties.  The court concluded that the actual rents Walgreens pays should not dictate the value of the real estate for property tax purposes. Instead, assessors should value the property based on hypothetical “market rents”.  Since the decision, attorneys for Walgreens and CVS argue that the actual sale prices of their properties don’t represent market value.  Instead, the assessments should hinge on the amount the landlord could get if the drugstore moved out and a different retailer moved in.  The courts have agreed and these stores are now regularly assessed at half or less than half of their sale prices.

While courts in Wisconsin have not yet ruled on other types of properties, tax attorneys for large chain stores argue before assessors that the tax value of their new stores should be based on the value of closed retail properties in other areas.

Appleton to Approve Additional Fees by Tom Roessler

On June 18th the Appleton city council voted to increase monthly parking fees from $30 to $40, and add a $0.50/week fee for 30-gallon refuse carts.  Read on to learn more…

Monthly Parking Fees:

Employers providing parking passes for their employees will present this as an increase in salary, a raise.  This negatively impacts the employees.

The City Budget cites Appleton Property Taxes are spent on parking permits for all city employees. Over $20,000/annually is spent on library employees’ passes alone.

When questioned about this, the city’s response indicated NO TAXPAYER MONEY IS USED FOR THE PARKING UTILITY…it is all put into a fund, not delineated as to source. When asked why passes are not given without reimbursement by property taxpayer money, gratis, the response was that it is a “philosophical choice”.

Now would be a good time to look at the present policy: Give the passes without charging the property tax owners. New parking ramps will be constructed for downtown apartments and US Venture to generate additional income.

Garbage can fees:

Property owners have already paid additional fees to cover the purchase of their recycling bins. 

Fees were then added to the “regular” garbage cans to encourage movement to the smaller cans leading to a reduction in garbage collected, resulting in a reduction in landfill/tipping fees. 

With the public responding favorably to the city’s desire, additional fees are poised to be imposed in an amount DOUBLE that of what is “needed”.

Solution: Using the money garnered from the parking permit practice being altered, releasing the property tax burden of paying for parking fees of city employees, at least twice the amount needed to cover the $40,000 increase in tipping fees would be found.

It was refreshing to read that Mayor Dean Kaufert re-prioritized his city’s budget when road repairs needed to be addressed. 

Even though the tax base has significantly expanded, the Appleton City Council opted instead to move ahead aggressively on capital projects, increasing the annual budget by 9.9%, delaying no projects (including the renovations to City Hall at over $700,000), tucking unforeseen costs ($850,000 for removal of contaminated soil) into debt, collecting more than needed (overage used to pay down debt to keep additional borrowing accessible).

The practice of generating additional streams of income (fire pits, wheel tax, recycling and garbage cans, street lights) impacts affordable living here.

Outagamie County just approved the half-cent sales tax, which will generate more money for local municipalities. Is there any reason this money cannot be used to reduce/cease these burdensome costs?

Mixed-Use Affordable Housing by Tom Roessler

This article is the first in a series of articles discussing the vision that our city leaders have for our downtown which focusses on mixed-use development projects.  This article discusses the issue of affordable housing in downtown Appleton.

The Pitch:  The current Appleton Comprehensive plan which is the blueprint for downtown development discusses the need for more affordable housing.  As stated in the comprehensive plan: there is “a significant mismatch in our community in the availability of affordable housing and the ability of individuals and families to pay for such housing.”

In reality:  When a question was posed on the city website regarding rental rates for the mixed-use apartments going in downtown the City Hall replied, “From the projects that have been discussed, rent has been described as "market rate.”  “Think in terms of similar projects like RiverHeath.” “We aren't aware that any developers have announced what the actual rent prices will be as of yet.”  PerRiverHeath 2bed/2bath units range in price from $1,600-$2,300.  This is hardly a low-cost alternative for those wanting to live downtown at a reasonable cost.  Another mixed-use project that is in the works in downtown Appleton is the Zuelke building.  This mixed-use project will include luxury condos selling for a premium price.

The comprehensive plan also discusses the importance of attracting millennials to our downtown, but based on the projects currently in the works it doesn’t appear that millennials will be able to afford them.  A discussion with millennials that currently live downtown indicates they are concerned over the direction the city is taking.  They are worried about losing their current affordable downtown apartments.

A question was posed to our alderman relating to the mixed-use apartment rent.  His response was, “We've heard repeatedly over the years that the demand for housing downtown is very high compared to very limited supply.” “Given the estimated value of the finished property, I don't think we're talking about low-income apartments here.” “I expect there's more than enough demand to fill a small building of market rate or even luxury apartments.”  Are our city leaders out of touch or what?  It appears that our city leaders are more interested in raising tax revenue than meeting the needs of its residents.

Another Mixed-Use Project Just Teed Up by Tom Roessler

Did you know that the Appleton Redevelopment Authority met in private session on February 28th for the purpose of deliberating or negotiating the purchasing the property at 320 E. College Avenue?  A motion was then passed that allows for the ARA to contribute up to $250,000 toward the purchase of this property.  Read on to learn more.  

 According to the Appleton Comprehensive Plan the 300 Block of E. College Avenue is conceptually identified as a site for new multi-family residential development over a mix of commercial / office space which could serve the needs of existing property owners, including but not limited to Heid Music and Lawrence University. The goal is to fill a housing demand, transition to the small scale neighborhoods and enhance the immediate surroundings with small commercial space to pull foot traffic north of College Avenue.

Appleton Downtown TIF District #3 by Tom Roessler

Did you know that TIF District number 3 was established in 1993 and won’t expire until 2031?  Since 1993 the city of Appleton has advanced TIF district #3, $42 million dollars.  In the last 25 years TIF district #3 has only repaid $9.7 million of the $42 million advanced by the city.  Read on to learn more.

TIF District #3 includes the area bounded by Richmond and Superior Streets, from the County Courthouse to the School Administration building.  TIF District #3 primary projects include the Green and Yellow Parking Ramps, the Radisson Paper Valley Hotel expansion, the Evans Title building, Appleton Retirement Community, the Copper Leaf Hotel, and the Richmond Terrace property.

TIF district #3 was established in 1993.  Beginning in 1993 the city began “Advancing” TIF district #3 funds for the construction of two ramps and other improvements to that district.  These advances came from the general fund and the Appleton Parking Utility.  As outlined in the 2019 budget (page 180) from 1993 to date the city has advanced TIF district #3, $42 million.  The revenue from taxes that go to the County, School District, FVTC, and the general fund for the city of Appleton are frozen at the 1993 level until the TIF expires. The incremental taxes on increased value are used to pay off the TIF which in this case will not be until 2031.

In the last 25 years only $9.7 million of the $42 million has been repaid to the city through taxes that exceed the 1993 base levels.  TIF district #3 was scheduled to expire in 2021 but the city filed and received an extension for another 10 years which brings the scheduled expiration now to 2031.  This extension allows the TIF district another 10 years to repay the city advances. Based on the rate of repayment, it doesn’t appear likely that the city will be repaid for the entire remaining $32 million that was "advanced" to TIF district #3.  Based on Appleton’s experience with TIF district #3 we are wondering why the city is rushing to transform the entire downtown with the newly established TIF districts #11 and #12 (see map below).

Sources Appleton 2019 Budget page 180; City of Appleton Director of Finance

Screen Shot 2019-02-28 at 2.05.42 PM.png

What Happened to Fiscal Responsibility? by Tom Roessler

Did you know that The City of Appleton number one Key Strategy for 2015 read: “Determine city-wide priorities and budget accordingly”, now reads: “Prompt delivery of excellent services?” None of the new 2019 Key Strategies reflect fiscal responsibility. Below are the city of Appleton key strategies for 2015 and 2019.

City of Appleton Key Strategies 2015

1.  Determine City-wide priorities and budget accordingly 

2.  Proactively pursue collaborative and cooperative agreements to meet the needs of the community 

3.  Develop and implement effective communication strategies 

4.  Develop our human resources to meet changing needs 

5.  Encourage sustainability 

6.  Continuously improve efficiency and effectiveness of City services 

7.  Promote diversity in our community 

City of Appleton key Strategies 2019

1.   Prompt delivery of excellent services

2.   Encourage active community participation and involvement

3.   Recognize and grow everyone’s talents

4.   Continually assess trends affecting the community and proactively respond

5.   Promote an environment that is respectful and inclusive

6.   Create opportunities and learn from successes and failures

7.   Communicate our success through stories and testimonials 

Expect More Mixed Use Projects by Tom Roessler

You may know that the Appleton Common Council approved a joint development agreement on February 6thwhich included $900,000 of incentives for the Gabriel mixed-use project.  However, did you know that in December of 2017 the Appleton Common Council approved a joint development agreement which included $2,019,500 of incentives for the Zuelke Building mixed-use project.  You also may not be aware of several other mixed-use projects that are outlined in the cities comprehensive plan that can be found on the city’s website. Keep reading to find the additional mixed-use projects that the city is pursuing.

A Comprehensive plan was developed for the city of Appleton and it was updated in 2016.  The Common Council reviewed the plan and passed an ordinance to adopt the Comprehensive Plan. The mixed-use projects below are part of the plan that the Common Council has approved.  Based on the recent push to get mixed use projects approved expect action on these in the near future.

·      The current library site, whether or not the library stays or moves to another location a mixed-use development is envisioned for this site.

·      The transit site where the concept envisioned is a vertical mixed-use building which would maintain the transit center as the primary use on the first floor of the building. 

·      The blue ramp site is to be taken down and the proposed concept is for a 5-6 story development which would include a mix of office, residential, and the ground floor for commercial use.

·      The Washington Square site conceptual plan envisions a 4-5 story residential apartment development with a rooftop deck and first floor would be used for retail or office purposes. 

·      The Soldiers Square site where a mixed-use concept would replace a portion of the YMCA parking ramp site with a public plaza. This concept was recently replaced with the proposed new public library mixed-use development. 

Downtown Parking Cost Going Up Slightly??? by Tom Roessler

Did you know that the city of Neenah has free parking in its downtown and for their Public Library, while in Appleton the cost for parking downtown and at the public library is going up.

  • The two-hour limit for on-street meter prices will go up 33% from $0.75/hour to $1.00/hour. That includes off-street meters at the Appleton Public Library.

  • The 12-hour parking meters north of Washington St. will go up 25% from $0.20/hour to $0.25/hour. 

  • All meters with red meter heads remain $0.50 for 30 minutes.

  • Parking ramp prices for the Red, Green and Yellow Ramps will no longer be a $1.00/hour rate for less than two hours. That fee will go up 100% to $2.00/hour for less than three hours of parking. Rates for 3-4 hours is still $3.00/hour and four hours or more is $5.00

  • These parking increases apply for all except city employees who are reimbursed for parking.

If the new library is built at the Soldier’s Square location where a ramp would be the nearest location to park it would cost a minimum of $2.00 to visit the library.  Why in the world are we thinking of building a new library and putting it in the most congested area of downtown Appleton!  

Visits to the library have decreased 21% since 2009.  Charging a minimum of $2.00 per library visit will only result in fewer visits to our library. 

Sources for this information:  “Parking changes coming to downtown Jan. 1st” - appleton.org; “Downtown Parking”  -https://www.ci.neenah.wi.us/departments/parking-utility/downtown-parking/; Appleton 2019 budget

 

Appleton Borrowing Again? by Tom Roessler

Did you know that City hall will borrow money for two small street pavement projects instead of using cash as was planned?  The cash will instead be used to fund the police officer positions this year.  This will also allow the funding of two city hall improvement projects 1) $210,000 to renovate the 1st floor customer area and 2) $475,000 to remodel and upgrade 5th floor Public Works area.



Series of Unfortunate (Budget) Events by Alexander Schultz

Last week, Common Council passed a motion to adjust the Onedia Street bridge project budget with an additional $850,000 increase to cover unanticipated tipping fees for highly contaminated soils (15,000 tons of industrial contaminated fill that was placed, coincidentally, in the Bluff 1 site when we didn’t know any better) because the levels were higher than those allowed by the current dump site necessitating a re-routing of this bad soil to the County Landfill.

Two weeks before that, another unforeseen appropriation was voted on to remediate an outstanding services bill tied to the Expo center which, again, members of the Finance Committee and Common Council had little recourse to act upon, save negotiating a smaller arbitration amount.

It would seem in just these two circumstances that Finance Committee members had little opportunity to ask serious questions about why these discoveries are being made so late in the game when the projects are already well under way or already complete?

In the case of the soils issue, questions were left unasked. What are the alternatives? Are there other options to deal with soil contamination on site? Have other landfill sites been considered? Why weren’t these lead contamination figures provided earlier given our $300K contract with a firm to conduct soil studies and report findings before breaking ground?

Instead, under pressure of an on-going project, CC members were again forced to suck-it-up as yet another in a recent "series of unfortunate budgeting events” with the potential to add nearly $1M in debt with very little opportunity to consider alternatives.

We hope the City leadership begins to take notice that the Taxpayers are taking notice as many more Capital projects kick off in 2019.