Huge Michels Deal Gets No Direct Subsidy

If you make the city attractive enough, you might be able to lure a major employer to Milwaukee without any direct city subsidy.

At least that’s what happened with Michels Corp. and the company’s $100 million plan to build a six-acre, mixed-use development anchored by the utility contractor’s new civil infrastructure division. Many of the positions in the 250-employee division will be in engineering or other highly-technical fields. “People that, quite frankly, are easier to recruit in Milwaukee than other places,” said Michels’ Chief Legal Officer David Stegeman in September.

The company, which is headquartered in rural Brownsville just outside of Fond du Lac, hopes to begin construction in the next 90 days on the $49 million first phase for its River One development along the Kinnickinnic River at the north end of Bay View. Firm vice president Tim Michels said in August that he hopes the firm will eventually employ 800 people at the site.

Architect Matt Rinka revealed last week that the planned 130,000 square-foot office building in the first phase is already being enlarged. RINKA project manager Ryan Pliska confirmed via email that the building is now approximately 30 percent larger, with 26,000-square-foot floor plates planned for much of the eight-story building.

The complex, planned for the northwest corner of S. 1st St. and W. Becher St., is intended to have multiple office buildings, an apartment building, hotel and a number of commercial stalls.

The Common Council approved a $7.1 million tax-incremental financing district for the project’s first phase Tuesday morning, but none of the funds will go towards the developer in the form of a cash incentive.

The Department of City Development had originally negotiated a $1 million cash grant to Michels in exchange for creating 250 jobs, but with that came the legislatively-triggered mandate that the entire project’s construction be subject to a 40 percent hiring requirement for unemployed or underemployed city residents and that 25 percent of the contracts by dollar value be assigned to city-certified, disadvantaged Small Business Enterprises. Michels preferred to forgo the grant.

The remaining $7.1 million TIF will pay for the city’s share of the new riverwalk segment ($3.4 million), environmental cleanup ($400,000), rebuilding W. Becher St. ($2.5 million) and city administrative and contingency costs ($750,000). Because Michels is only directly receiving funds for the riverwalk, only the riverwalk’s design and construction will be subject to the Residents Preference Program and SBE hiring requirements, defined in the agreement as a “best effort.” As a matter of practice, the city funds 70 percent of all riverwalk costs in exchange for round-the-clock public access.

The council unanimously passed the deal without debate. When it came before the council’s Zoning, Neighborhoods & Development Committee last week, neither Stegeman nor the committee mentioned the change.

Michels did not respond to a request for comment on the change, nor did council president and MORE ordinance sponsor Ashanti Hamilton. Committee member Robert Bauman in an interview with Urban Milwaukee said: “I was told Michels did the math and found it’s more expensive than not to take the money.” Jeff Fleming, Department of City Development spokesperson, offered this to Urban Milwaukee: “deals are negotiated and as negotiations progress the terms often change.”

The tax-incremental financing district now heads to Mayor Tom Barrett for his signature.

For more on how the design has changed, see our coverage from last week.

Renderings

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