Controversial TIF request heads to Port council

Critics say city has already subsidized marina district condos by selling valuable land for low price based on flawed assessment

THE FIRST PHASE of developer Stephen Perry Smith’s Lakepointe townhouses at the corner of Washington and Lake streets in Port Washington’s marina district is expected to be completed late this summer. Smith says the remaining two phases of the development can’t move ahead without tax incremental financing from the city. Photo by Bill Schanen IV
By 
KRISTYN HALBIG ZIEHM
Ozaukee Press staff

Port Washington aldermen are expected on Tuesday, Aug. 7, to consider a developer’s request for tax incremental financing support for a project on marina district land that critics say has already been subsidized by taxpayers because city officials sold it for a low price based on a flawed appraisal.

Developer Stephen Perry Smith, who has constructed the first of three planned Lakepointe townhouse buildings on land at the east end of Washington Street that the city sold him for the appraised value of $140,000 last year, recently asked the Common Council for $365,000 in the form of a TIF loan to offset the cost of dealing with poor soil conditions and remediation.

The fact that Smith wasn’t seeking any TIF funding for the project was something aldermen touted when they approved the sale of the land last year.

“We taxpayers were assured the $140,000 (purchase) price was correct in no small part because it took into consideration the developer would not be asking for TIF,” Kim Haskell, 767 W. Grand Ave., told the council July 17. “Why is the city being asked to subsidize a developer’s profit margin?”

The $140,000 appraisal for the former car-trailer parking lot was done by Scott Aussprung, and contested by local real estate appraiser Pat Wilborn, who had estimated the land value at $500,000.

“The appraisal from the very beginning was inadequate and completely missed the point,” Wilborn said.

Wilborn said he lodged a complaint about the appraisal with the Wisconsin Department of Safety and Professional Services, and it was recently upheld. 

By selling the land at the original appraised value of $140,000, Wilborn said, the city in essence has already subsidized the Lakepointe townhouses being constructed by developer Stephen Perry Smith.

“How much more incentive do you need?” he asked. “The city has no business helping develop the marina (district), and providing additional TIF would be a continuing move in that direction.”

In a memo to the city, Smith said he purchased a “clean, build ready” site from the city but he has since found unexpected issues, including coil compaction, old foundations and debris that was buried, oil gas or oil pipelines and contaminated soils.

He asked the Common Council for $365,000 in TIF funding to offset the cost of work needed to deal with these issues. Without the funding, Smith said, he can’t proceed with the second and third phases.

He asked that the city provide a $225,000 loan when the first phase of the project is substantially complete and $140,000 when he starts the second building.

The project is already $401,000 over budget because of cost overruns due to construction labor and materials, Smith said, adding that he will absorb those costs. 

Smith said the first phase of the project is sold out and more than half the units in the second phase are also sold

City Administrator Mark Grams said that the city’s TIF consultant has analyzed Smith’s request and taxes from the project will pay back the loan before the TIF district ends — potentially by the end of 2027.

The first phase of the project is expected to add $1.125 million to the city’s tax base, while the second phase would increase the tax base by $1.6 million, Smith said.

City officials said this week they are willing to listen to Smith’s case, but cautioned that approval of the TIF loan isn’t automatic.

Mayor Marty Becker said he has questions that need to be answered.

“I have to know the reasons why,” he said. “If it’s contamination, that’s one thing.”

Soil conditions are another matter, he said, adding he wants to know whether the developer did borings ahead of time and what those showed.

Ald. Mike Gasper, who represents the downtown district, said he wants to hear more before making a decision.

“I don’t want to see the project end up with just one building built,” he said. “At the same time, I don’t really want to pay out TIF funds if we don’t have to.”

Gasper said he would be most likely to approve funding for contaminated soil, but is willing to consider TIF funding for poor soil conditions. But he said he wants to know if Smith relied on the city’s study of soils in the area, if he had done his own borings and what they showed — questions Ald. John Sigwart said he, too, wants answered.  

The sale price of the land, Gasper said, isn’t necessarily something to be considered.

“We’re stuck in a position where this is being built,” he said. “We’ve sold that. We can’t undo that. He’s got part of it built. We need to balance all that.”

Sigwart said that although he believes the land was undervalued, it’s in the past. Other communities sell land at a discount just to get development, he said, citing the Village of Grafton’s decision to sell land for its Lumberyard development for $1.

“I think this is going to require some added negotiation, not all of it on the council floor,” he said.

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