Council Strongly Supports Northwestern Mutual Deal

Northwestern Mutual North Building plan for E. Mason St. and N. Cass St. Rendering by Pickard Chilton.

Northwestern Mutual‘s $500-million proposal to completely overhaul its aging 18-story North Building and relocate its Franklin-based employees to downtown Milwaukee has strong support on the Common Council, even though the city would need to provide a $30 million subsidy to induce the deal.

“I think this is a home run,” said Alderman Scott Spiker to his colleagues on the Zoning, Neighborhoods & Development Committee.

Council members Michael Murphy and Russell W. Stamper, II also endorsed the proposal.

But the highest praise was offered by area Alderman Robert Bauman.

“I enthusiastically support this. The architecture is amazing,” said Bauman. “From an architectural standpoint, it’s an unbelievable project… It’s the same building, but it looks like an entirely different, brand-new building.”

The city would provide $30 million over a period of up to 20 years to the insurance company if it invests $500 million in the project and ultimately employs up to 5,750 employees at the campus.

“Nobody’s taxes go up because of this transaction,” said Bauman, noting the payment to Northwestern Mutual comes from increased tax revenue generated by the development. “It’s really not a subsidy in the sense that taxpayers are paying for this.”

“Number two, but for this investment, you would probably expand in Franklin, correct?”

“Yes,” said NM vice president Rebecca Villegas.

The development would also have an indirect benefit. The 32-story tower built in 2017 “did change the mindset of the real estate community in Milwaukee, the corporate community and many citizens,” said Bauman. He noted it kept a key employer downtown and added a major building to the skyline at a time when, “to a certain extent, you had already moved out. You developed a Franklin campus.” Now the Franklin campus will be shuttered and sold as the redevelopment project is completed.

“To the extent that we increase the tax base, we are providing for the entire city of Milwaukee,” said Bauman. He noted that expanding Downtown’s value, currently estimated at 22% of the city’s tax base, would generate more revenue to pay for improvements across the city. Northwestern Mutual is estimated to grow from 1.5% to 1.8% of the city’s entire tax base as part of the development.

Department of City Development economic development specialist Dan Casanova echoed this, noting that by using the TIF district to pay for public improvements Downtown, it would allow the city and Milwaukee County to use their limited funds elsewhere on improvements. And as the city’s commitment to Northwestern Mutual is paid off, additional new revenue would become available for the entire city.

Casanova, at Bauman’s questioning, said that DCD would propose a wider range of public improvements if it wasn’t limited by state law to spend the TIF funding within a half mile of the district’s boundaries.

“We feel that the benefits of this project far outweigh the city’s investment in this project,” said Casanova.

He noted that the city has created 17 TIF districts in recent years, many of which have been used to close financing gaps in affordable housing developments.

Stamper pressed the company to make sure it would again exceed the city contractor hiring requirements to access the TIF funding. A total of 40% of the construction work hours must be performed by unemployed or underemployed city workers and 25% of the city’s contracting costs must go to certified disadvantaged businesses.

“I hope you don’t leave with the impression at all that this is all being done to enrich Northwestern Mutual. It’s really being done, we believe, to enrich the community,” said company vice president Steve Radke.

“In this instance, I think you’re right,” said Bauman.

Northwestern Mutual representatives said they seriously considered moving employees to Franklin. The company considered three scenarios: a $200 million rehabilitation of the 33-year-old tower into a state of good repair; an expansion in Franklin and shuttering of the aging downtown tower; and a $500 million comprehensive overhaul and slight expansion of the 540,000-square-foot downtown building.

“We saw a lot of investment, but not a lot of incremental benefit,” said Villegas of the basic rehabilitation option. She said the Franklin option would be easier and cheaper, but the company preferred to create a cohesive downtown campus. Architecture firm Pickard Chilton’s plan calls for making the 18-story tower match the 32-story tower.

“What we have seen coming back to campus [post-COVID-19] is the value of relationships in driving our business forward,” said Villegas. She said the company feels it can close its suburban campus because it no longer needs the data center redundancy due to cloud computing.

N. Cass St. between E. Mason St. and E. Wells St. would be closed as part of the development. The company unveiled a rendering Tuesday that showed the proposal. A new lobby for the building extends across the street, connecting the parking structure and office building at 818 E. Mason St.

“It would create this nice, cohesive experience for pedestrians,” said Villegas. A publicly-accessible Starbucks would remain in the 32-story tower and the public would be able to access the lobby of the North Building. “We are still evaluating options for that lobby.”

Work could start this fall and be completed in 2027. It involves stripping the structure to its steel core and cantilevering additional floor space onto the structure.

The proposal has the support of Peter Rickman, head of the Milwaukee Area Service and Hospitality Workers Organization. “This is the model for” future city projects, said the labor leader, who has frequently questioned city TIF deals on the basis they don’t do enough to protect service workers.

Rickman praised Northwestern Mutual for using responsible contractors for its janitorial and security services. “There was no begrudging box-checking,” he said of the company’s hiring. “If we can turn those jobs into good, family-supporting jobs, we can transform this city.”

Despite their support of the agreement, not all committee members love the idea of a subsidy.

“The reality is that that’s the competition that we’re in,” said Murphy of why the city would create the TIF.

The subsidy agreement for the 2017 tower is scheduled to be paid off six years early because of higher-than-expected assessed values and tax revenue. The new agreement has a 23-year estimated payback period. Under both agreements, existing tax revenue continues to flow to the property-taxing entities.

For additional details on the proposed public improvements, the financing agreement, how the tower would be redesigned and how the deal was made, see our earlier coverage.

The full council is scheduled to review the proposal March 21.

Renderings

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