A review panel Tuesday raised concerns about the viability of a proposed $37 million Town of Brookfield public financing plan intended to help spur a major retail-office-housing redevelopment.
Representatives of Waukesha County, the Waukesha School District and Waukesha County Technical College questioned whether the ambitious project, which would include Wisconsin's first Von Maur store, could generate enough tax revenue to pay $37 million in town debt by a 2028 deadline.
The five-member panel has to sign off on the creation of the taxing district, which is a key part of the plans for the project.
Norm Cummings, Waukesha County's director of administration, said he wanted to support a town incremental financing district for the project, but was still studying whether the numbers work.
"I'm mostly troubled by how close this is, how tight it is, in the 16-year time frame," Cummings said. "There's almost no room for error. This is as tight as I've ever seen it."
The $37 million is one of the largest, if not the largest, tax districts Cummings said he had reviewed throughout Waukesha County. A district for the Pabst Farms was about $25 million, he said. Another around Brookfield Square mall was about $23 million.
The Marcus Corp. has been working with town officials on a sweeping plan to raze the former Menards, Marcus West Pointe Cinemas, a strip mall and Applebees, and build the complex on 19 acres northeast of the I-94 exit at Barker Road.
A 140,000-square-foot Von Maur, an upscale fashion store sometimes dubbed the Nordstrom of the Midwest, would anchor the The Corners development, near Goerke's Corners.
Underground parking tops project costs
But to make the project's financing work — especially to build a 1,900-car underground parking structure below almost all the new construction — Marcus is seeking a town tax incremental financing district.
The town would borrow $37.12 million — or $38.12 million if a $1 million contingency also was tapped — and use the funds to help build the parking structure, new roads and utilities and a bridge over Poplar Creek. Of the $37 million, $22 million would be for the parking structure.
Property taxes collected on the new development would be used to pay down that debt. Once the debt is repaid, the tax revenue would begin to be shared with other taxing units: the Town of Brookfield's general coffers, Waukesha County, the Waukesha School District and Waukesha County Technical College.
A Joint Review Board, comprised of one representative from each of those taxing units, met Tuesday at Town Hall for its first review of the public financing plan.
Members raise concerns
All board members — except for Town Administrator Rick Czopp, the town's representative — raised concerns about the viability of the debt payback.
Cummings noted that the $37 million debt really is more than $51 million with borrowing interest.
"This TIF is going to have to generate a little over $51 million in order to pay off," he said.
Dan Warren, president of the Waukesha School Board and the school district's panel representative, noted that adjacent cities have larger tax bases than the town. He questioned the town's ability to handle a possible default by the developer in repaying the debt.
Warren and Cummings said the debt repayment relies not just on increased property taxes collected on the new retail, office and housing in The Corners, but also on additional tax base growth by properties around The Corners that were included in the tax district boundaries.
Warren asked what would happen if Marcus delivers on its revenue but adjacent industrial and commercial properties do not add enough tax revenue to repay the debt.
Protection against default
Mike Harrigan of Ehlers & Associates Inc., a consultant for the town, said the town was negotiating a developer's agreement with the Marcus Corp. that would specify the debt payback requirements — and consequences for defaults "to protect the town's interest."
It's possible that taxpayers — town and county — would be on the hook to pay the rest of the debt. But Cummings also said in an interview with Patch last week that such a default has not occured in Waukesha County before.
Ehlers said the existing tax base within the proposed finance district is $66 million. In 16 years after new construction and appreciation, that will nearly quadruple to $243 million, Ehlers said.
Harrigan said those value estimates came from the Marcus Corp. which researched market comparables including values surrounding Bayshore Mall in Glendale.
But Cummings — as well as Brookfield City Finance Director Robert Scott — questioned the accuracy of the projections.
Cummings said he believed the project personal property value for The Corners was more than double the personal property of Brookfield Square mall.
Harrigan said the town wants to avoid default and needs to know if the figures need adjusting.
"The town's not interested in having a surprise," he said, adding he agreed the financial projections and debt payback was "very tight."
City finance director challenges figures
In an interview after the meeting, Brookfield's city finance director said the value of 450,000-square-foot Brookfield Square mall — excluding its anchor stores and personal property — was about $134 million.
He questioned how the estimated 320,000-square-foot The Corners project — excluding its anchor Von Maur and personal property — could be valued between $134 million and $144 million.
Scott called the town's financing district debt payback plan "very aggressive."
City of Brookfield leaders tried to land Von Maur at Brookfield Square mall and have been critical of the redevelopment plan, saying it would poach existing businesses rather than attract new ones.
Harrigan said in an interview the town's assessor, Mike Grota, has been reviewing Marcus' estimates, and he would have to defend the property assessments imposed on lands inside the tax district.
Katie Falvey, Marcus' director of real estate, declined to comment on the concerns raised Tuesday.
"We're very happy to be at this stage," she said after the meeting. "And we look forward to the public hearing and the comments of town residents and the Joint Review Board."
The Town will hold a public hearing on the financing plan at 7 p.m. Sept. 26 at Town Hall, 645 Janacek Rd.
The Town Board is slated to vote on the plan in November, followed by final action by the Joint Review Board.