Finance committee approves early reimbursement to developer for Burley Triangle infrastructure

Wauwatosa City Finance Committee members voted unanimously to approve an amendment to the Burley Triangle Phase 2 term sheet and a Tax Incremental District (TID) No. 7 budget amendment that advances reimbursement to the project developer, HSA.

John, a city staff member presenting the item, said the reimbursement is for about $2,300,000 that the developer fronted years earlier to build infrastructure where the Mayfair Collection now sits. “These were funds the developer borrowed on behalf of the city, and we are just advancing that reimbursement early,” John said, adding the city is not providing new subsidy beyond the original agreement.

The action will reimburse HSA in March and removes a $500-per-unit incentive (about $369,000) that was a separate sweetener to encourage additional units. The staff recommendation, approved 7-0, restructures the terms so the city repays the $2.3 million that HSA advanced but will not pay the additional $500-per-unit incentive. The committee chair said the item will move to Common Council for final consideration.

Nut graf: Committee members and staff framed the vote as an adjustment to timing and terms of a prior agreement rather than new financial assistance. City staff described the revision as advancing an obligation the city already owes to HSA in order to help the developer address bank covenants tied to a larger loan on the project.

City staff said the reimbursement will allow the developer to reduce outstanding debt tied to the development and to restructure payments to meet bank covenants. John said the developer’s related loan for that portion of the site is about $20,000,000 and that current rents are below the level required by the loan covenants; the developer has worked with its lender while seeking options. Mr. Blum, representing HSA, was present and said John’s summary of the history and request was accurate and he was available for questions.

The committee discussed the financial mechanics. Staff said the $2.3 million originally was accounted for as developer-fronted infrastructure costs and that reimbursing it early would mean the city/TID would forgo interest earnings it otherwise would have received. John estimated a net positive to the city’s TID of about $120,000 after factoring the eliminated $369,000 incentive and the lost interest; he also provided a worst-case estimate of roughly $243,600 in foregone interest earnings.

Members asked whether removing the incentive would undermine future development in the area. Staff replied the developer still owns undeveloped parcels and has other term sheets and approvals in place, including a planned Wingspan development of about 560 units, and that Mr. Blum has financial reasons to continue building even without the $500-per-unit incentive.

The committee recorded the formal motion to approve the staff recommendation; the motion passed 7-0 and will be transmitted to Common Council for final action.

Ending: The amendment reorders when the TID repays a past developer-fronted expense and eliminates a per-unit incentive. Committee members said they plan to review the Common Council packet when the item advances.