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Tiff brews over lack of TIF funding for new restaurant

But city sold corner lot to brew pub developer for just $1

Feb. 10, 2009

The $2.4 million St. Francis Brewery and Restaurant was tapped out of receiving tax-incremental financing funds.

On a 5-1 vote, the St. Francis Common Council rejected a recommendation by the Community Development Authority to give $35,000 to Rick Michalski, the managing member of Lakeside Village Square and Cupol, and his partners on Feb. 3. Lakeside Village Square is the development company for the site. Cupol is the operating firm for the brew pub.

Tax-incremental financing, or TIF, is a mechanism that allows municipalities to borrow money to fund infrastructure improvements for an area that otherwise would be difficult to develop or redevelop. The increased property tax revenue from the improved land is then diverted from the tax roll to pay off the loan.

City sells land cheap

Some council members voted against TIF funding because the city sold the corner lot at Kinnickinnic and Howard avenues where the brew pub stands to Michalski for $1.

"This gentleman was given the property that they are building that on for $1, so in my personal view, I think this gentleman is $34,999 ahead and we shouldn't be giving him any money," said Alderman Donald Brickner.

Michalski also owns an abandoned warehouse adjacent to the brewery site, which may be converted into a retail development called Lakeside Village Square if the brew pub is a success.

Brickner said he would be more willing to approve TIF funding if Michalski and his partners were to build "something decent" on the adjacent land later.

Mayor Al Richards agreed, adding that the city made an agreement with Michalski to construct a building for "X amount of dollars" and it did not materialize.

CDA sees a 'gateway' site

Alderman Ted Jarosh supported TIF funding for the brewery.

"I'm kind of in an unusual situation because I'm on the CDA, I voted in favor of this," he said. "That's true that the land was purchased for $1, but it cost an awful lot of money to get the land ready so it could be built there."

Jarosh said the CDA believes the land is being developed in a way that could be "a gateway to the community."

Michalski said when he submitted an offer to purchase the corner lot on from the city, the TIF district did not exist. But Michalski said he and his partners were promised by city officials that once the TIF was created, they could participate, Michalski said.

"That's where the huge disappointment comes in," he said.

In order to purchase the property for $1, city officials told Michalski that he would also have to buy the adjacent lot with the abandoned warehouse. Michalski bought the land for $325,000.

Environmental issues

Once crews surveyed the land, Michalski realized that the area around the telephone lines was designated wetlands and that the warehouse lot was contaminated with foundry sand. Michalski had to work with the state Department of Natural Resources in order to proceed with the project, delaying it, he said

"Because of the issues, no lender would give us money until the environmental issues were taken care of," he said.

Michalski paid about $55,000 to cleanup the land for development, he said. He also had to provide groundwater samples to the DNR, which further delayed the project.

"We weren't just sitting on our hands, the project was held up," he said.

Originally, Michalski and his partners requested $128,000 from the TIF district to cover costs for a silo, sprinkling system, landscaping, decorative awnings, signage, lighting and stone exterior.

"The $35,000 was just a nominal amount compared to what we put in," Michalski said. "I paid substantially."

City Administrator Ralph Voltner said Michalski and his partners were told that if additional land was purchased, they may be eligible for $40,000 in TIF funds for the brew pub, which is what staff anticipate the owners will spend on property taxes in one year.

Chantel Balzell can be reached at (262) 446-6602.

By the Numbers

Since the tax-incremental financing district was created in 2006, the city has allocated funding for the following:

$25,000 was granted to Ralph Bruno to build Merchant's Row

$25,000 was authorized to Derrick Dysland for R.E.I. Images

$15,000 was granted to Jim Siepmann to construct a footpath near the Trestle Creek subdivision, which is under construction

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