CDA awards $500,000 grant for riverwalk site redevelopment

TIF money to be used to fund apartments on contaminated site

By Ed Nadolski

Editor in Chief

The City of Burlington’s Community Development Authority on Thursday approved a $500,000 grant that will assist a developer in building an apartment complex on a contaminated site along the riverwalk at 200 Bridge Street.

The money will come from the city’s tax incremental financing district, which is specifically earmarked for redevelopment projects such as this, according to City Administrator Kevin Lahner.

Both Lahner and Mayor Bob Miller conceded the amount of the grant is unprecedented for a development of this type, but said they believe it is needed to finally return the contaminated 5.38-acre property to the tax roll as something other than a vacant, potentially hazardous eyesore.

“It’s a lot of money and it should not be done without a lot of thought,” Lahner said. “I would have preferred not to give (the developer) any money.”

However, Lahner added, the contamination on the site presents higher-than-normal development costs and the potential for ongoing issues if not handled properly.

Miller said the grant is one of the few ways the city can ensure the site – which has been vacant for more than a decade – is restored to its tax-revenue-producing potential estimated at $3-4 million in property value.

“It’s just an ideal solution for a difficult lot,” said Miller, who is a member of the Community Development Authority. “It’s a key piece of property along the riverwalk. This ties up that southern end.”

Miller said he’s aware some people may view the grant as corporate welfare, but he’s confident it’s the proper use of TIF funds and will serve the city best in the long run.

History of site

The site, bordered by Bridge Street, the State-Adams Street Bridge and the Fox River, was used for years as a coal gasification plant by the former Wisconsin Gas Co. The plant was phased out as environmental controls were enacted and the site eventually became the responsibility of We Energies, the successor to Wisconsin Gas.

As the city was undertaking the sweeping redevelopment of the riverfront about a dozen years ago, We Energies began working with state regulators on removing and/or containing contaminated soil on the site to prepare it for development.

According to Lahner, the site was eventually sold to the city for a nominal amount. The city, in turn, sold the property for $279,000 to local dentist Charles Mesec, who planned to build a commercial/office building on the site.

Although construction commenced, it stopped shortly afterward, leaving some footings and masonry framework for elevator shafts on the otherwise vacant site.

That was approximately six years ago, according to Lahner, and since then ownership has been transferred to Magill Construction in a settlement with Mesec. Other than the forced removal of the elevator shafts, there has been no activity at the site since.

Apartments proposed

Late in 2012, S.R. Mills of Bear Development, Kenosha, sought and was granted a zoning change at the site to accommodate two 24-unit apartment complexes.

However, because of relatively high cost to build on the site due to the contamination issues, Bear Development requested the grant from the city and is also seeking tax credits from the Wisconsin Housing and Economic Development Authority.

The application for the tax credits is due Feb. 1 and Bear will learn in mid April whether it will be awarded the credits. Lahner said the project will go forward only if Bear is successful in obtaining the state credits.

However, Lahner added, that the project is currently in the “sweet spot” in terms of criteria and stands a good chance to earning the credits – something that might not be available as incentive in future years.

“If we move forward with this today, it will very likely get done,” he said.

Lahner also said he has a comfort level that Bear has the experience and wherewithal to complete the difficult project at the standards needed to maintain the “closure” status of the contaminated site as set by the Department of Natural Resources.

Lahner said Bear has completed other such developments and did two of the four WHEDA-funded projects last year.

Grant impact

According to Lahner, the city’s financial consultant has determined the TIF district has more than enough funds available to accommodate the $500,000 grant. However, because the TIF will be closed within five years, the tax revenue increment created by the new development will not have sufficient time to pay back the full amount. Despite that, Lahner estimates the TIF will still have a positive balance of $1.5 million upon its closure in 2017.

If all goes according to plan, Bear is expected to close on the purchase of the property in May and begin construction on the first 24-units in June. The second phase of the project – another 24 units – is tentatively scheduled to commence 2014.