Proposed West Racine grocery store, gas station is dead

The JT's Paul Sloth is reporting tonight that Tom Tousis's plans to build a grocery store, restaurant and gas station in West Racine is dead.

Tousis and the city split ways after the city concluded Tousis's project was not worth enough money to pay off loans the city took out to demolish buildings on the site at the corner of Washington Avenue and West Boulevard. But a number of factors complicated the roughly $3 million development, which was one of the largest new construction commercial projects on the table in the city in the past year. 

Initially, Tousis faced opposition from West Racine business owners who were opposed to a gas station on the site. Opponents were concerned the gas pumps were a bad fit for an area that prides itself on small businesses and being walkable. 

A number of supporters mobilized in favor of Tousis's project, including local labor unions looking for a sizable project to create new jobs. Tousis had vowed to use local union workers for the job. 

Tousis's plans hit a snag when his team discovered a sewer pipe running through the property. The discovery forced them to downsize a $5 million project to between $3 million and $4 million (there was disagreement on the number), a reduction that ultimately doomed the project. It may also jeopardize future plans for the site. Along with the sewer pipe there's evidence the property could be contaminated from past use, including a mechanic's shop and as a dump for foundry slag. Both factors, as well as some complicated utility easements, will make new construction on the site challenging. 

(As an aside, the Department of Natural Resources awarded the city a $40,075 grant in 2007 to remediate a small brownfield site, the former Wisconsin Muffler Property at 3124 W. Washington Ave., across the street from the land Tousis wanted to build on. Gov. Jim Doyle announced the grant in a press release sent statewide. But in 2008 the city returned the grant and told the DNR they didn't want to use the money, according to a DNR official. 

"It doesn't sound like they did any of the cleanup work they were proposing or did anything to create the green space," said the official, who reviewed the state's official records on the brownfield grant.)

The city and Tousis are now playing out the end game of roughly a year's worth of back-and-forths over the West Racine project. The city's Redevelopment Authority actually granted Tousis an option on the site, and Tousis paid the city $5,000 for the option. 

The RDA then decided it needed to reconsider the timeline for the project, which set off the final round of negotiations that led to the proposal's collapse. The RDA is now expected to vote next week to cancel the option and refund Tousis's $5,000. The proposal only needs RDA approval, according to a memo from Brian O'Connell. 

As for the city, it's begun to look at new projects. One idea is to work with the Wisconsin Housing and Economic Development Authority to build a housing development for the deaf and blind. While WHEDA has turned down Racine projects in recent years, the West Racine project could move forward because it has a unique purpose, according to an insider. But even with the unique focus it will be difficult for the city to obtain the loans. 

Here's the resolution the RDA is expected to vote on next week:

REDEVELOPMENT AUTHORITY RESOLUTION 10-17 

WHEREAS, on December 14, 2009, by resolution 09-30, the Redevelopment Authority granted an option to Tom Tousis (d.b.a. Better Day Petroleum Company) to redevelop the Authority’s properties in the 3101-3121 block of Washington Avenue; and 

WHEREAS, Mr. Tousis has requested that the deadlines in the option be amended to provide additional time to complete project design, obtain regulatory approvals, and arrange financing; and 

WHEREAS, representatives of the Authority and Mr. Tousis have been unable to reach a mutually acceptable agreement on terms and conditions for the extension. 

RESOLVED, that the option granted to Tom Tousis (d.b.a. Better Day Petroleum Company) to redevelop the Authority’s properties in the 3101-3121 block of Washington Avenue is not extended; and 

FURTHER RESOLVED, that in recognition of the good faith efforts by both parties and their mutual desire not to incur additional costs related to the development proposal, the Executive Director is authorized and directed to refund to Mr. Tousis his option fee of $5,000.00. 

Fiscal Note: Funds are available for the refund of the option fee.

And here's the memo City Development Director Brian O'Connell sent to the RDA about the resolution:

DATE: June 3, 2010 

TO: Commissioners, Redevelopment Authority 

FROM: Brian O’Connell, Director 

SUBJECT: Agenda item 10-4655: Request by Karen Sorenson on behalf of Tom Tousis requesting an extension of deadlines for West Racine redevelopment project. 

This item was deferred from the Authority’s meeting of April 7, 2010. 

During the its review of the request, staff became aware that the likely assessed value of Mr. Tousis’ development would be less than the value on which the Tax Increment District (TID No. 11) project plan for the redevelopment area was based. The Authority deferred action on the request to provide an opportunity for Mr. Tousis and his representatives and city representatives to explore alternatives for increasing the assessed value on the property. 

City and Mr. Tousis’ representatives met twice during the following weeks and exchanged information between the meetings. Despite good faith efforts by both parties and a serious review of alternatives, we were unable to reach a mutually acceptable solution. Therefore, I am recommending that the Authority not grant the requested extension. 

In recognition of the good faith efforts by both parties and the mutual desire not to incur additional costs related to the proposal, I am also recommending that Mr. Tousis’ option fee of $5,000 be refunded to him. 

I have prepared a resolution for the Authority that will accomplish these recommendations. (See attachment.) 

If you have any questions about this item prior to your meeting on June 10th, feel free to call me at 636 – 9478.

City takes another run at developing Walker site

Walker site, take two. 

The city is preparing to make another run at building on 10 acres of land just north of the Root River along Lake Michigan that is the former home of Walker Manufacturing. The new proposal is scaled down from the pre-bubble ambition of Pointe Blue, a $200 million development that fell apart in 2007, but still aims to build 370 residential units over the next decade. 

Unlike Pointe Blue, the $74.1 million proposal probably won't be built by a single developer, City Development Director Brian O'Connell said. Instead, it will likely resemble the successful Gaslight Pointe development, which resulted in a handful of successful high-end residential developments along the lake front. 

The city is hoping for the same for the Walker site. But before it can begin courting developers, it has some work to do cleaning up the property. 

The former manufacturing site is polluted and needs to be remediate before new construction begins. The site also needs roads and utilities to attract builders. The city plans to lean on successful past developments to pay for the needed improvements, which are expected to cost $15,551,000. 

On Wednesday, city development officials laid out a proposal to extend the life of the tax increment district used to pay for Gaslight Pointe to pay for work on the Walker site. TIDs allow the city to use property taxes from a specified area to pay off loans taken out to spur new development. They usually last 30 years. 

The Gaslight Pointe TID was set to expire in June - meaning property taxes in the TID would be distributed to all local governments, not just the city - but the state Legislature passed a law allowing the city keep the TID open for another 10 years. Since all of the loans taken out to build Reefpoint Marina are paid off the TID is making money. The city plans to use that money to pay for the needed improvements on the Walker site, which is also a TID. 

They're hoping lake front development begets lake front development.

"We're creating opportunity to move forward," O'Connell said. 

Two city committees heard about the plans on Wednesday. The Standing Joint Review Board - composed of representatives from Racine Unified, Gateway, Racine County, the city and the public - met to consider changes needed to begin work on the Walker site. The board is charged with reviewing the city's TIDs.

While supportive, the board held off a vote Wednesday until the City Council makes a decision. The council's Plan Commission also met Wednesday to consider the proposal, but held off on a vote to give commission members a chance to read through the agreement. 

City officials also noted any development ideas now are merely conceptual. While housing worked on Gaslight Pointe, the Walker site is open to any style of development as long as it generates enough property tax value to pay off its loans and return the highest possible value to taxpayers.

During a public hearing on the city's proposed changes to the Walker site, city resident Tim Zikwoski suggested the city pursue a hotel, convention center and water park for the site, which is located near North Beach, the marina and Downtown. "We need something to draw people into Racine," he said. "... this is a real diamond in the rough. Hotel developers wouldn't pass it up."

City Development Director Brian O'Connell said housing, particularly on the lake front, fit the city's long-term plans for upscale development that pays a high-level of property taxes. While the current housing market is flooded with homes for sale, new construction on the lake would offer a different type of housing that would be appealing on the market.

O'Connell added that new construction would occur in stages to allow the market to fill demand. A development may come in and build 30 units and as they sell another developer may go ahead and build another 40 units. Over an extended period of time the area will fill up with new construction.

It's a different approach than developer Scott Fergus had proposed for Pointe Blue. Under that proposal, Fergus would have cleaned the site, built the utilities and built an entire residential and commercial development at once. It would have been a massive project for the city - arguably the largest in Racine history - but the housing market collapsed, Fergus lost his financing and Pointe Blue never became anything more than a sign posted on the site.

Bill Pugh, who lived in the Coast Guard house near the Walker site for 16 years, called the old development "Pointe Blah." While that deal fell through, he said, the city needs to do something in the area.

"Anything you can do to improve the neighborhood down there will help everyone," he said.

A few other notes on the city's plans for the Walker site:

* The Walker site is technically called TID 14. The city has spent $83,000 in the district, so far.

* Plans for TID 14 include $10 million in developer incentives designed to attract projects. The money is about half the $20 million in incentives budgeted under Pointe Blue. The incentives would be paid for by development on the site. Plans calls for developers to invest $64 million in the site to receive the $10 million in incentives.

* Without the incentives, the city will spend about $5.55 million preparing the site for development. Most of these costs will be covered by money from the Gaslight Pointe TID, which, under state law, can pay for improvements on the Walker site for five years.

* Plan Commission members plan to meet on Tuesday before the City Council meeting to discuss the proposal. They called the special meeting to give members a chance to review 30-page plan, which they received shortly before Wednesday night's meeting.

* Former state representative and County Board member Jim Rooney, who lives near the site, cautioned the Plan Commission against too much density. "We need to preserve and protect our waterfront," he said.

Falling home assessments drop city's value about $150 million in 2010

The city's housing and commercial real estate is worth about $150 million less this spring after a reassessment dropped the value of homes by an average of 4.4 percent. 

Real estate assessments fell this year because foreclosures are up and home sales are down, said City Assessor Ray Anderson. The city had 335 qualified sales last year compared to an average of 1,100-1,200 sales in recent years. It recorded 405 foreclosures in 2009 compared to an average of 30-40 homes per year in the 1990s. 

The lack of sales and girth of foreclosures created a large supply of available homes, which forced prices down as buyers waited for the best deals. 

"If you don't have many buyers, you have a larger supply," Anderson said. "It's basic Economics 101. If you have a big supply, you get a buyer's market." 

"This is the slowest I've ever seen the market," Anderson added, noting he was a real estate agent in the 1980s before becoming an assessor. 

Racine's housing and commercial properties are worth a combined $3.75 billion, according to Anderson. The number doesn't include manufacturing properties, which is determined by the state, or the value of assessed personal property in the city, Anderson said. 

The drop in assessments wasn't a surprise. Based on the recession and the housing slump, city officials had projected the decline last year.

While housing values dropped, the city's commercial properties held the line, Anderson said. Assessments on commercial buildings fell 0.3 percent this year. The city had 23 commercial sales last year, and most of those properties held their value.

City assessments are important because they're the primary source of revenue for local governments. Declining values mean the city, Racine Unified, Racine County and Gateway will have to increase their property tax rates to bring in the same amount of money as they did in 2009, or cut spending to match the decline in property values.

City Administrator Tom Friedel said the public should evaluate local governments based on spending, not tax rates. If government spending is flat than people's tax bills will be flat, he said, even if the actual property tax rate increases, he said.

The city's 2010 budget is a good example, Friedel said. City unions agreed to forgo pay raises this year and city officials found a way to cut about $683,000 in spending. The city's property tax rate increased less than 1 percent last year.

Another example is you can actually have a decrease in the property tax rate and an increase in city spending, which happens when assessments increase at a rate greater than the decline in the property tax rate.

Friedel said government spending is a better measure because it more accurately reflects the decisions elected officials make.

Anderson said his office pays no attention to the political decisions to be made based on property assessments.

"We call it as we see it," Anderson said. "We're not influenced by that at all."

He added the declining assessments led some residents to call and complain that their assessment was too high. The complaint is a little misguided because a property's assessed value is not the same as its market value. The assessed value has little influence on how much a property actually sells for. Arguing for a higher assessment essentially means you're arguing for a higher property tax bill.

There are exceptions, Anderson said. People trying to refinance their home may benefit from a higher assessment, and some home owners may be forced to pay a PMI (private mortgage insurance) if the assessment drops too low, he said.

But other complaints were emotional, Anderson said.

"For most people, a house is their biggest asset," he said. "They get upset when they see its value go down."