City Council approves $115,675.82 reimbursement to Marlene Miller over downtown redevelopment damage

The Washington City Council voted unanimously May 26 to approve reimbursement of $115,675.82 to property owner Marlene Miller for damage and related costs she attributed to demolition and construction tied to a tax-increment financing (TIF) redevelopment at 140 Washington Square.

City Administrator Fagen Shu told the council the request submitted by Miller outlines “costs and damages totaling approximately $115,675.82,” including structural repairs, lost rental income, legal fees and water-related damage. Shu said the council previously authorized a separate redevelopment agreement that allowed reimbursements up to $27,721.99 for specified redevelopment expenses, but Miller’s current request seeks a larger amount and some items may require additional legal and policy review.

Shu recommended using a redevelopment-agreement framework to evaluate and document eligible costs and asked the council to authorize the administrator and up to two council members to negotiate the agreement’s terms — explicitly excluding negotiation of the compensation amount, which the council was asked to approve tonight. Shu also said staff will return in June with a separate, not-to-exceed $25,000 proposal to excavate and investigate sanitary-sewer and drainage issues behind Miller’s building; that investigation and any subsequent repair costs were described as separate from the $115,675.82 reimbursement.

Speakers who addressed the council during public comment and the council discussion described damage to Miller’s building and urged the council to make her whole. Resident Tom Gross told the council he had “seen the water spouting out of her water lines” and asked the council to “remedy these mistakes tonight by paying reimbursing Marlene Miller 100% of what she's requested.” Walder Rutman, a member of the Historic Preservation Commission, said the city had provided over $1 million to the developer and that the historical society had received compensation while Miller had not.

During debate, council members repeatedly expressed sympathy for Miller and concern about holding the developer — variously referenced as CL Real Estate/CL Red and the project’s contractors — accountable. Several members said the developer had been offered opportunities to resolve the matter and had not engaged in good-faith settlement talks. Alder McIntyre said she favored making Miller whole but wanted legal counsel involved before finalizing terms, citing uncertainty about liability and the risk of setting a costly precedent.

The motion to approve Miller’s initial reimbursement request in the full amount of $115,675.82 was made by Alder Smith and seconded by Alder Johnson. The council then discussed whether to add language leaving a path to pursue developer participation; the council kept the substantive motion — payment of the requested amount — intact and approved the motion. The mayor announced “Unanimous approval. Motion carries.” All council members present voted in favor.

Council members asked staff to negotiate payment timing, release and hold-harmless language, and other implementation details and to include outside counsel in negotiations as needed. The council did not, at the meeting, formally appoint which two council members would be on the negotiating subgroup; alderpersons Martin and McIntyre expressed interest.

The council’s approval closes the immediate reimbursement request but does not foreclose the city’s right to seek contribution or recovery from the developer; council members said pursuing CL Real Estate/CL Red remains an option pending legal review. Shu said any negotiated agreement would return to the full council for final approval.

Next steps scheduled by staff include a June agenda item proposing a separate not-to-exceed $25,000 contract to investigate the sanitary-sewer/drainage condition behind Miller’s building and return to council with a proposed negotiation agreement for final action.