|
|
|
|
|
|
|
|
|
|
|
|
|
|
Village’s TIF District not developing according to plans
|
|
|
|
|
|
By Andrew Kuehl
akuehl@kewaskumstatesman.com
KEWASKUM- Expressions on the faces of Village Board members were a stark contrast to those seen when they thought their Tax Incremental Finance (TIF) District was going to be the home of the much-hyped Village Lakes Center. With much of the residential and commercial land still vacant, village engineers painted a very red picture for village trustees.
Ken Ward, an engineer with Ruekert Mielke, the village’s engineering firm, gave the board a state of the TIF address at a special village board meeting on Wednesday, September 19. Developer Gary Gavin was also in attendance along with his associates.
Ward opened the discussion and explained that much of the infrastructure work is complete, however engineers are still tying up loose ends with the sub-contractors. He explained that since the start of construction a total of the costs have been calculated to $7,744,345.07.
A breakdown of costs reveals that $1,190,720.25 has been spent on engineering, design and inspection. According to the developer’s agreement, Gavin is responsible for 11.44% of certain construction costs. In July of this year, he was invoiced for $368,492. If that amount is not paid by November 15, the amount will be placed on the tax roll as a special assessment.
Progress not being made as projected, developer penalized
According to the developers agreement, Gavin is required to achieve a certain minimum amount of construction on the lands located within the TIF district each year in order to generate tax increment for the parcel. If Gavin falls short for the year, he is required to pay a penalty to the village. That penalty money is to be used to help meet the debt repayment obligations of the district.
As of January 1, 2007 Gavin was required to achieve 98,926 square feet of construction. However, according to calculations from Ruekert Mielke, Gavin only had 55,601 square feet of construction. This 43,325 square foot shortfall yields a total penalty of $32,060.85. (These are not typical square feet construction terms according to Shambeau)
By January 1, 2008 Gavin is required to show 222,849 square feet of construction. If he falls under the square footage, he will again be penalized at 74¢ per square foot that was not developed. If left undeveloped, it is estimated that Gavin will be penalized an additional $98,837 in 2008.
As a financial guarantee to make sure performance penalties were paid if they accrued, the developer’s agreement required Gavin to open an escrow fund with a federally insured financial institution. The village was required to have access to funds in the account, drawing on them when necessary. The developer’s agreement required that 10% of all real estate sales in the district to be placed into this fund.
Shambeau stated in a September 14, 2007 letter to Gavin, that the village does not show that any account has been opened. According to his calculations, the total in that account should be $196,160. Gavin was given 15 days from the date of the letter to establish the escrow account.
Another security measure was put in place within the developer’s agreement. A $440,000 letter of credit was also to be given to the village as further security against any potential defaults. According to Shambeau, this too has not been received. Gavin was ordered to provide the letter of credit within 15 days from the aforementioned letter.
Another point of contention was the fact that according to the developer’s agreement, the village was to receive a $535,000 financial guarantee, in the form of a letter of credit.
When asked why the provisions had not been followed up on, Shambeau stated, “It’s unfortunate that the provisions were not put into place initially. Right now, the village feels this needs to get accomplished as soon as possible. We have been meeting with Mr. Gavin since shortly after I started, we’ve been negotiating concerns all along.” He indicated the letter to Gavin was a result of numerous meetings with himself, village staff and Gavin.
Gavin explained that he did not personally make any of the financial obligations because Ward assured him that Larry and Greg Chmielewski, representatives of Bullseye Construction/United Construction Group, who were developing the property at the time, was taking care of them. However, when the purchase never materialized, the village failed to secure the guarantees.
Village reminded their end of the deal wasn’t held up either
Gavin’s attorney, Karen Christianson, addressed the board. She reminded the board members that since the inception of the TIF district, lots of changes have occurred. She went on to report that the developer’s agreement required the village to have infrastructure in place by November 2005. “Clearly the village has not complied, you are still with an open contract,” Christianson reported.
Ward agreed, but reiterated the work is substantially complete.
The agreement articulates that if the improvements are not in place by November 30, 2005, the agreement shall be modified to provide for a mutually acceptable deferral of time. Christianson threw out the idea of having the village form a committee to change terms of the developer’s agreement because of the significant changes that have occurred since the agreement was adopted. “We need to sit down and negotiate new terms and timelines,” she pleaded.
On advice from the Village Attorney, Gerald Kiefer, the board neglected the idea of forming a committee to review and edit the developer’s agreement. Kiefer’s solution was to have Gavin and his associates discuss amicable terms with village staff.
Christianson next presented issue with the on-site soil compaction or, lack thereof. She reported that Ruekert Mielke acknowledges that testing was not done continuously.
Gavin, in a later interview, stated the village had a contract with Super Excavators to have the compaction done in 10-12 inch lifts with a compaction of 95 percent. Shambeau stated the village does not have evidence that the earthwork was not done according to the standard given to Super Excavators.
Gavin alleged that the work was only tested one day and only 15 tests were completed, five of which failed. He indicated that testing should have been done whenever fill was placed, yielding between 3-400 tests. He also stated he spoke with Ward and the on-site inspector that he did not approve of the fill being used.
Christianson explained that lack of compaction causes a defect in the sale ability and development of the parcel. The practice of soil compaction compresses soil, allows for better foundations for building pads.
Christianson pointed out an issue with the over sizing with a water main on the parcel. Gavin claims to have had a verbal agreement with former village administrator Dan Schmidt and Ward that he would not be reimbursed for the over sized, 12 inch main. However, the developer’s agreement vaguely stipulates the opposite.
Christianson also requested that the board reevaluate the calculation of Gavin’s share of the infrastructure costs. She wanted it determined if Gavin’s share of the costs took into consideration the implementation of impact fees. The developer’s agreement stipulates that in the event that the village imposes impact fees (which it has) for water main, Gavin’s share of the water main costs shall be recovered through impact fees.
Christianson also voiced concern in regards to a Department of Transportation (DOT) traffic study completed. The study commenced due to the safety of allowing access on Highway 45. She reported that the value of the property changes significantly with the approval or lack of approval for access to the district from Highway 45.
Currently, the DOT is in the process of evaluating the study. They have not made a decision on the matter. Gavin reported that the study is identical to one completed in 2005, and stated that Ruekert Mielke never submitted it to the state. “As it stands today there is no access (from Highway 45),” Gavin commented.
Shambeau said because the development being proposed in 2005 by United Construction Group is significantly different then what is now likely to be constructed, a substitute plan was needed and that is what was submitted. “The reality is we were working with the developer and his engineer to form the plan,” Shambeau affirmed.
Christianson closed her discussion by asking for the issues she brought to the floor be discussed before Gavin makes any payment.
In a later interview, Gavin expressed his displeasure at impact fees affecting any potential construction that occurs in the district requiring a six-inch water lateral, costing $92,000 just to be able to install the lateral.
Trustee Kevin Scheunemann agreed that the village shares some of the responsibility because the infrastructure was not complete by the date agreed upon in the developer’s agreement. He advocated for a quick resolution due to the fact that the financing for the district has been expensed to taxpayers.
Shambeau reported that the village has borrowed $7.7 million and has have not started to repay any of the principal. The village currently is only paying the interest on the $7.7 million that amounts to roughly $482,000 that must be paid in 2008.
So now what?
Shambeau indicated that to date, there has not been any formal exchanges of documents and village staff have a meeting scheduled for October 4 to discuss the items Gavin and Christianson outlined at the September 19 meeting. He would not comment on reworking the current developer’s agreement since the village board maintains authority over developer’s agreements.
“Ideally, we want to continue working towards resolution on the issues. We have a vested interest in this project. We’ve invested $7.7 million in the project,” Shambeau concluded.
|
|
|
|
|
|
|
