Green Lake prepares to borrow $3 million to restore Heidel House

The city of Green Lake is preparing to borrow roughly $3 million to help finance the restoration of the Heidel House. Developers have boasted a May, 2021 reopening date.

The city of Green Lake is getting closer to borrowing about $3 million to support the Heidel House redevelopment.

During Monday’s Committee of the Whole meeting, the Green Lake Common Council received a presentation from PMA Securities LLC Public Finance Director and the city’s financial advisor, Brian Della, regarding the investment.

Della, who appeared via Zoom, explained that the city entered into a developer’s agreement with Green Lake Hotel Group LLC in September.

As part of the agreement, he noted Green Lake Hotel Group is guaranteeing the city a certain amount of “tax increment revenue” each year in return of the city’s investment of roughly $3 million or 60% of the project costs.

Tax increment revenue is additional property tax revenue that accrue only to the city due to investments it has made to improve the property.

According to Della, the developer believes project expenses will be great enough to warrant the full $3 million cash grant from the city, which will be distributed in two disbursements.

The first is slated for March 15 and the second is due when the Heidel House is open for operation, which is estimated to be in May of this year.

“The developer is incentivized, I hope, to get the facility open in time for summer … [but] when the developer opens is when the developer opens,” Della said to the Common Council. “You’re gonna borrow all the money, and you’re gonna start paying interest beginning March 1. You’re just going to give the developers the money as they earn it and, hopefully, they’re on schedule to open this summer.”

The Common Council will vote on a resolution next week, which will set the amount being borrowed at a maximum of $3.19 million.

“It doesn’t obligate that the city has to borrow that much, but it’s more of a ‘not to exceed’ amount,” Della said of the $3.19 million.

During his presentation, Della explained that there are two scenarios for the city’s actual borrowing amount, depending on whether the city is awarded a $250,000 grant by the Wisconsin Economic Development Corporation (WEDC).

Della noted the city should have more information regarding the WEDC grant by Feb. 8. If the city doesn’t know if it was awarded the grant at that time, Della says it can borrow the $3.19 million and use the grant to refinance its debt from the project.

“We’ve got options for however the state manages this grant,” he said.

Without the WEDC grant, the city would borrow $3.19 million. With the grant, however, the city would borrow $2.925 million.

According to Della’s presentation, the city would not begin receiving tax increment revenue from the developer, which will be used to pay off the debt, until 2023.

Prior to that, however, a document from the meeting noted the city will have to cover $49,400 in expenses related to the project.

Della explained that the city would “run a small deficit” and it would “start to climb out of that whole” as tax increment begins coming in and the city refinances the loan into general obligation debt in three years.

The city’s debt is anticipated to be repaid in full by 2043 without the WEDC grant and by 2042 with the grant, according to the presentation.

After the Common Council adopts the borrowing resolution, Della noted the plan is to begin “selling the debt” Monday, Feb. 8, in which PMA will help the city receive bids from different banks.

He said the city will look for the bank offering the lowest interest rate, noting the “low bid wins.”

“We’re expecting good rates, as it’s a very low interest rate environment,” Della said. “Investors are comfortable with municipalities, in general, and we think we’re going to get some real good interest from the commercial banking institutions.”

He added that the city is expected to receive it’s loan on March 1, two weeks before its first payment to developers will come due.

Additionally, Mayor Ray Radis noted the city has a $12 million debt capacity, which will be eaten into slightly by its investment in the Heidel House project.

“We have to be careful with how we spend the rest of our $12 million,” he said. “We’re just going to have to make the right decisions together as a committee.”

Aside from the city’s financial obligations, Radis noted there’s potential for future development on the Heidel House property, specifically, with the Grey Rock Mansion.

“They are looking at putting some housing in there to offset some of the cost, which is good for us [because] the more money that comes in, the better position we’re in,” he said. “A lot more to come on this.”

Joe Schulz served as the reporter of the Green Laker in 2019 and 2020, before being hired as a reporter for the Commonwealth in October 2020. He is from Oshkosh and will be graduating from UW-Oshkosh with a degree in journalism in December.

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