Neillsville City Council Discusses Providing Loan to Lisenby Properties

Friday, March 31st, 2023 -- 1:01 PM

The Neillsville City Council had a lengthy discussion on providing a loan to Lisenby Properties in order to complete their apartment project at the former Memorial Medical Center building.

At a City Economic Development Commission Meeting on Monday, the Commission discussed providing a loan to the Lisenby’s for the project. The Lisenby’s faced a “perfect storm” with the onset of COVID and the increasing construction prices.

They have invested $3.2 million of their own funds, while borrowing another $9 million to renovate the former Memorial Medical Center building into apartments.

This over 12-million-dollar project should have been completed, but, due to circumstances beyond theirs or anyone else’s control, the costs have climbed by over $4 million dollars mainly because of two factors: the highest inflation in over 40 years and construction costs increased by 25 to 30 percent.

The entire roof needed replacement at a cost of  $1 ¼ million dollars, a million over what was anticipated. Add to this a tremendous increase in the cost of borrowing money, prime going from 3.25% in March to 8% currently, making these two factors unmanageable.

The solution that was reached was for the City of Neillsville to borrow $3 million from a local bank and then loan it to the Lisenbys at a rate equal to what the City can get plus 1%. Citizen’s State Bank has indicated a rate of 4 ½% to the City.

The extra 1% would generate income for the City. In the end, the Economic Development Commission approved recommend the Common Council proceed with going out for bids for a $3 million, 3 year loan with semiannual payments with a final balloon payment, interest only for the first year (6th month and 12th month) and interest and principal for the rest, the balance amortized over 25 years, no prepayment penalty.

Then the City will do an Economic Development loan to Mark and Lynda Lisenby for $3 million at an interest rate of 1% over the bank loan rate received, with semiannual payments, no prepayment penalty with a collateral requirement of $3 million from the Selma and Thomasville properties, that the Lisenby's own, and personal guarantee from the Lisenbys.

During the Common Council meeting, Council Member Joe Neville asked if they have seen any documentation or are they taking their word for it. He said they need more information and should not make a snap decision tonight. They want to make sure it succeeds. Are all their bills paid?

Lynda Lisenby, one of the owners, stated they have 80 units in Selma, 34 units in Thomasville, 111 units in Mississippi and 104 units in Neillsville. They were hit by the perfect storm and they had put the hospital under contract in 2019.

Then COVID hit and the hospital was closed down and they could not get in. Demolition began in July 2020 and a significant roof project was done. Council Member Neville asked what the buildings are worth. Lisenby stated that they have spent the last ten weeks looking for a bridge lender.

She said they cannot cash flow an 8% loan rate and finish the project. The Neillsville project has appraised at $18.8 million and the Selma property at $4.6 million. Another $4 million is needed to complete the project. They sold all their properties in Clark County and Wisconsin to take on this project.

They started in 2007 with their first 4-plex. She wanted to assure the Council they are not going away. Partners Bank of Marshfield has been the main lender from the beginning. When Partners Bank hit their loan limit of $6 million, they brought in another bank for the next $3 million.

Council Member Julie Counsell asked if they had any property where the City could get a first position on. Lisenby stated all their properties have loans on them. They are trying to refinance the Selma property to pull out a million dollars. A realtor has listed the Selma property at $5.5 million.

Council Member Dan Clough asked about documentation on the $18.8 million dollar appraisal on the Neillsville property. Council Member Neville stated his other concern is paying it off in three years.

Lisenby stated once the project is completed with 90% occupancy, the intent is to fully refinance with Freddie Mac or Fannie May. Council Member Counsell asked if the $18.8 million appraisal was the future finished value. She would like to see cash flow for the next three years.

Will the cash flow from Neillsville only pay back the $9 million debt plus the City’s $3 million? Lisenby stated that the $18.8 million is the completed value. The banks are confident the Neillsville project rents of about $1.4 million annually will cash flow the project.

Council Member Counsell stated they are asking the City to be a bank, without any information. They need to do more due diligence. $3 million is two years worth of all the money the City takes in. She said they want them to survive as it is in the best interest of the City.

Economic Development Commissioner Gary Weirauch stated the City should start by looking at the 200 page appraisal and market study. Is it a viable entity? Look at financial statements; look at the Alabama properties; give it to the City’s auditors to review. Neillsville badly needs the housing.

Joy Palmer, with CliftonLarsonAllen LLP, stated that they are the City’s auditors, but valuation services are very different then auditing. Economic Development Commissioner Donald Quicker stated that there are benefits of keeping the Lisenbys in control of the project.

There is too much invested. The sooner it is finished, the better for the community. The more people in the apartments, the more money spent locally. The more families, more kids in the school. When the TIF District is finished all taxing, the jurisdictions will benefit.

The Lisenbys are community minded. They are donating, free of charge, an apartment for the Ambulance Service use ($1,200 per month). They need the additional funding. If they fall behind and the contractors move on to other jobs, it will be hard to get things back together.

Council Member Neville, again, stated show us something. Council Member Barb Petkovsek stated EC Commissioner Gary Weirauch said time was of the essence. Can the City go out for bids while they are getting the other information and working with the Lisenbys on an agreement.

City Attorney Bonnie Wachsmuth stated they could start the title work and other paperwork. Council Member Petkovsek asked how long can the bids be locked in. Gary Weirauch stated accept or reject within 30 days.

In the end, the Council approved to proceed with going out for bids for a $3 million loan, with acceptance or rejection of bids in 60 days, title work on the Alabama and Wisconsin properties and Lisenbys pulling together the paperwork.

Joy Palmer, with CliftonLarsonAllen, presented the City, Water, Sewer, TIF District #2, TIF District #3, Special Revenue Funds and Other Governmental Funds 2022 Annual Audit Reports regarding:

Auditor’s report and opinion;

• The City has $2.5 million in the General Fund with $1.8 million in Unassigned Fund Balance, which is a very good financial condition and very stable;

• The Water Utility shows a negative change in net position ($23,363) and the Sewer Utility shows a positive change in net position ($63,914) with Rates of Returns (Water 1.34% and Sewer 1.69%) these were very close.

1. Oversight is needed to make sure the fluctuations are monitored and utility rates are updated and sufficient to cover increasing expenses and remove changes, water rates were updated in 2013 when the PSC approved a 2.5% rate of return a rate study would be required;

• TIF Districts #2, #3 and #4 were reviewed. TIF Districts are a large up-front investment ($2.1million, $1.8 million and $619,987) recovered in future tax increments from the individual TIF Districts.

1. The Council needs to be aware that TIF #2 has a deficit of $166,462 with 10 years remaining, the district was extended by the granting of distressed status in February 2016 by the State of Wisconsin, with a dissolution date of 2032.
2. TIF #2 should pay off early. TIF #3 has 4 years of remaining life with a deficit of $364,615 which may not break even unless more development occurs. TIF #4 has a deficit of $618,941 with 19 years remaining;
3. Risk disclosure on the City’s cash and investments were reviewed at year end, the majority (93.9%) was FDIC or NCUSIF insured or collateralized, the remaining 6.1% was under the State Deposit Guarantee Fund, which is not considered to be insured or collateralized;

• Reviewed the City’s long term debt, City Statutory limit is $7.5 million with current borrowing of $2.3 – $5.2 million is available, the City is in good financial shape;

• Reviewed the GASB 68 and 71 Statements regarding the City’s share of the Wisconsin Retirement Pension Plan;

• The General Fund Budget Comparison was reviewed;

• Reviewed the Complied Schedule Report of long term debt, non-lapsing funds, insurance, water and sewer rates of return, regulatory basis;

• Reviewed the City’s internal control structure, lack of separation of duties, preparation of financial statements, audit adjustments and new lease standards;

• And, in conclusion the records are in very good working order, the staff was open and cooperative, the City had an overall good year with good financial planning in place.

Discussion followed on the audit communication letters; the new GASB Statement No. 87 on Leases was immaterial for 2022, but it has to be reviewed each year; new for 2023 will be audit standards for subscription based information technology (includes things like-Microsoft, SCADA and Police programs).

Palmer thanked the Clerk’s office staff for their work and stated that the Water and Sewer utilities rates of return should continue to be monitored. The Council approved to accept and file the 2022 Annual Audit report as presented.

City Clerk Rex Roehl presented a report on the City’s continuing appropriation accounts and their respective balances as of December 31, 2022. The accounts include:

• Police Department Administration (K9 and Police Training),
• Parking Lots and Meters,
• Library,
• Parks and Recreation/Room Tax 30%,
• Celebrations/July 4th, etc.,
• Christmas Decorations,
• Planning (Historic Preservation),
• Urban Development,
• Economic Development,
• Tourism Promotion/Room Tax 70%,
• Public Buildings,
• Public Safety/Fire Department Vehicles,
• Machinery and Equipment,
• Street Construction,
• Bridges and Culverts,
• Airport,
• And Parks.

Discussion followed on donation restrictions within each category. The Council approved to carry forward to 2023 the continuing appropriations as presented.

City Clerk Roehl presented an email from Clark County Treasurer Renee Schoen asking if the City would be interested in purchasing the Scott Davis property at 305 E. Fifth Street for back taxes. The County plans on tax deeding the property in May.

The purchase price right now is $20,775.42, but there will be additional interest accruing until the property is taken. Roehl stated that the City has $13,573.75 in special assessments and charges against the property for razing the house and weed cutting. The 2022 Fair Market Value of the property was $7,000. Whether the City takes it back or not, the City will end up writing the costs off in the future.

Council Member Counsell stated that it is an empty lot on E. Fifth Street with a huge drop off. The Council approved to notify Clark County that the City of Neillsville is passing on the offer to purchase the Scott Davis property at 305 E. Fifth Street.

Mayor Dewey Poeschel stated that the next item is a request from Penelope Wesbrook to keep chickens at 607 E. Fifth Street under ordinance Section 10-1-22. Council Member Clough stated that he drove by the property. He said it looks big enough and he asked if she had talked to the neighbors?

Wesbrook replied she had not talked to the neighbors. She has a double lot and she wants three hens for pets and the eggs. The chickens would be in the backyard by the tree line. City Attorney Wachsmuth asked about fencing. Wesbrook replied they would be building a fence for the chickens.

Director of Public Works Luke Friemoth stated that the property is assessed Residential with .82 acres. Council Member Neville stated that if you do this for one more will come. Mayor Poeschel stated it is on the outskirts of town and they review requests on a case-by-case basis.

Council Member Counsell stated she has no problem with it, but the ordinance needs updating. Council Member Perrine stated only three chickens? Wesbrook replied three hens, no roosters.

The Council approved giving permission for Wesbrook at 607 E. Fifth Street to have three (3 hen) chickens, subject to review if complaints are received or excess numbers of animals occur, because of acreage and location of the property. One alderman did vote no.

Mayor Poeschel stated that the proposal from Weld Riley Law Firm regarding available legal services was requested by Council Member Counsell. Council Member Counsell stated that sometimes more specialized legal support is needed.

She contacted Weld Riley to see what they can offer for expertise. John Behling, President of Weld Riley, introduced himself and gave his background. Behling and Nathan Miller would serve as the primary contacts for the City. Nathan Miller is a former Assistant Attorney for the City of Wausau.

Behling stated Weld Riley has been around for three decades and has 56 employees in four offices across the State. Municipalities are the heart and soul of their business. He presented a list of specialized services they provide whether on a full-time or part-time specialty basis.

The City would have 24/7 access availability via telephone or text as bad things happen in the middle of the night or on weekends. The number one complaint about attorneys is turnaround time. Their firm is multi-generational with attorneys in their 70’s to their 20’s.

Maggie McLoone specializes in employee handbooks. Rich White in civil litigation. It is up to the City how much or how little they use them. It used to be that the City Attorney was at every single meeting, but that is changing (especially since COVID and Zoom). They work with other law firms in the area.

City Clerk Roehl reported that Clark County Emergency Management will start monthly storm siren testing on April 5 th , testing on the first Wednesday of every month between 5 P.M. and 6 P.M.

The Council heard from a handful of residents during the Public Appearances portion of the meeting. One resident stated that she had attended a Tourism Committee meeting as a citizen and audio recorded the meeting on her cell phone which is her legal right to do.

She received a telephone call from a Council Member questioning why she was there audio recording the meeting? She stated she does not have Charter TV so she cannot watch from home.

It is her lawful 1st Amendment right to attend without explanation and not all meetings are broadcasted. She contacted both the Mayor and City Attorney on this harassment and no one contacted her back. The former Clark County Judge also recorded the meeting. Was he called?

Jake Brunette stated that he is running for the new Clark County Circuit Court Branch 2 Judge position. Brunette presented his background, values, experience and areas of legal practice. Brunette stated that his wife is the Clark County Circuit Court Branch 1 Judge.

He has been asked about there being a conflict of interest for both him and his wife being judges in the same County. He checked this out before he decided to run. The State Judicial Ethics Board has said there is no conflict of interest and there is already a husband and wife set of judges in the State.

Natalie Erpenbach stated that she would like to see the Planning Commission meet once per year to go over the City’s Comprehensive Plan. The Grants Committee should be made aware of what annual grant applications are made.

The Vibrant Spaces Grant application that went through had someone communicate with the WEDC that it was not supported and didn’t have any money. It was approved through the Council. There was a lot of hard work to get it in on time.

There is an undercurrent of bullying and intimidation. She is very upset and does not like it. There is no place for it in this community or City government. When redoing the personnel manual or City ordinance, civil engagement is necessary.

Penelope Wesbrook stated that she has a two lot property across from the elementary school and she would like to have three (3) chickens as pets and for the eggs.

Former Clark County Judge Jon Counsell stated it seems like Déjà vu all over again. About a year ago there was concern about the City rushing in to approve over a million dollar proposal for the Swiderski development with little or no committee involvement and almost no due diligence and investigation.

That follow up resulted in significant savings, with the dropping of a new road, saving roughly $600,000. Jon Counsell stated here we are again considering loaning the Lisenby organization three million dollars with only the Commission on Economic Development meeting on it.

When his wife, Council Member Julie Counsell, asked for any documents that the Commission received and considered-there was a two page summary from Donald Quicker, nothing from the Lisenbys-this is not due diligence.

Gary Weirauch who was at the Commission will tell you it is not due diligence. None the less the Commission voted to recommend making the loan. Jon Counsell stated that after reading the Commission minutes, there are concerns:

• How safe is a second mortgage position (talk of property values, no written appraisal was presented? Is any equity available;
• What kind and what level of risk is involved (information on types of debt against the project);
• If the project failed and the City had a second mortgage would the City be able to take over the first mortgage of nine million dollars (the City’s total borrowing ability is $7,500,000-after making this loan to the Lisenbys, the City would only have $1,700,000 of borrowing ability left, not enough to buyout the first mortgage of $9,000,000);
• Are the Lisenby current on bank and contractor payments-the City should know;
• What is the Lisenbys overall financial picture (are other funds available, do they have other assets available to give the City a first position on).

Jon Counsell stated that local contractors and suppliers being used is appreciated, but due diligence must come before approved. This decision should be adjourned to a later date or the vote should request due diligence and background information from the Lisenbys.

Take two weeks to gather information, study it, make an informed decision. It may turn out to be a great idea, if not the City could lose $3,000,000 and have to make it up somewhere-roads, equipment, employees.

The Council then heard the various Committee Reports. Council Member Petkovsek reported on the March 14th meetings of the Tourism Commission regarding:

• Discussion on and filing of the Wisconsin Department of Revenue Annual 2022 Room Tax Report;
• Discussion on and moving the remaining 2021 Room Tax funds to the 2022 fund for disbursement;
• Discussion on 2022 Room Tax grant applications;

And approval of grants to:

1. Neillsville Area Chamber of Commerce ($350 administration fee and $5,700 to support initiatives),
2. Neillsville Heritage Days ($17,800 to support initiatives),
3. Miss Neillsville ($813 to support promotional initiatives),
4. Clark Cultural Art Center ($3,450 to support initiatives and $3,000 to support the Friends of the Black River initiatives).

Council Member Clough reported on the March 15th meeting of the Historic Preservation Commission regarding:

• Discussion on the 2023 Historic Preservation Commission Action Plan;
• Discussion on historic properties in need of repairs;
• Discussion on website;
• And reviewed fund balances.

Council Member Neville reported on the March 16th meeting of the Heritage Days Committee regarding:

• Receiving a grant from the Tourism Commission;
• Discussion on band for Friday night;
• Discussion on renting a tent;
• Discussion with the Friends of the Black River on possible events;
• Discussion on bartenders;
• Discussion on vendor rules and fees;
• And approved charging the food vendors $25 per day if they do not bring their own power source and need to connect to City power.

Council Member Neville reported on the March 16th meeting of the Neillsville Community Fire Hall Board regarding:

• Payment of bills;
• Thanked the City crew for snowplowing;
• Discussion on roof leaks;
• Discussion on getting quotes on a water softener;
• And reviewed and accepted the 2022 Financial Statements.

Council Member Counsell reported on the March 21st meeting of the Library Board regarding:

• Librarians’ reports;
• Discussion on an outside marquee display;
• Discussion on revamping the office;
• Discussion on filing the annual Library reports with WVLS;
• Discussion on and filing the Public Library System Effectiveness Statement;
• And discussion on the Storybook Trail program and grant application for Schuster Park.

Mayor Poeschel reported on the March 27th meeting of the Economic Development Commission regarding:

• Discussion on the Lisenby Properties, LLC project financing;
• And the recommendation to proceed with going out for bids for a $3 million, 3 year loan with semiannual payments with a final balloon payment, interest only for the first year (6 month and 12 month) and interest and principal for the rest, the balance amortized over 25 years, no prepayment penalty; they the City will do an Economic Development loan to Mark and Lynda Lisenby for $3 million at an interest rate of 1% over the bank loan rate received, with semiannual payments, no prepayment penalty with a collateral requirement of $3 million from the Selma and Thomasville properties and personal guarantee from the Lisenbys.

Council Member Clough reported on the March 28th meeting of the Commission on Public Works/Utilities regarding:

• Current activities;
• And payment of bills.

Feel free to contact us with questions and/or comments.