An attorney for the company that owns Aster Retirement Community says he contacted city of Clintonville officials about the proposed Angelus of Clintonville sale two months before the deal was closed.
At its Feb. 10 meeting, Interim City Administrator Chuck Kell first addressed the city council about the sale of the former Angelus property to a tax-exempt organization.
Angelus was part of a Tax Incremental Financing (TIF) District, which uses a property’s tax revenues to pay for bonds that the city uses to attract new development. About $300,000 remain due on the bond.
After researching the TIF agreement, Kell said, “The agreement actually signed by Angelus prohibited them from selling that development to a tax-exempt user without city approval.”
Nick Loniello is a Madison attorney who represents MHDC Clintonville, the tax-exempt organization that owns Aster Retirement Community of Clintonville. He said MHDC was “unfairly surprised” when it learned the city was accusing it of violating the TIF agreement.
“We fully informed the city well in advance of what we intended to do,” Loniello said.
On Oct. 6, 2014, Loniello sent a letter to Mayor Judith Magee, City Attorney April Dunlavy and Dan Coffey with Independent Inspections of Waukesha, whom Loniello believed to be the city’s assessor.
The letter informs the city that MHDC is a non-profit, tax-exempt entity that also owns senior living facilities in Dane and Walworth counties.
“While assisted living facilities are generally not obligated to pay any fee in lieu of taxes, MHDC Clintonville LLC desires to make an annual contribution to the city of Clintonville’s cost to maintain fire and police protection and other municipal service eaual to 50 percent of what the municipal mill rate would have been,” Loniello said in his letter. “According to our calculations, this results in a $19,680 annual Municipal Service Fee.”
“That offer was put on the table in October and it’s still on the table,” Loniello said.
Loniello asked Magee and Dunlavy to review the proposed service fee agreement and make any comments or suggestions. He asked Coffey to issue a preliminary determination of the facility’s tax-exempt status. Loniello also requested that approval of the Municipal Service Agreement be placed on the agenda for approval at an upcoming city council meeting.
The letter indicates that MHDC will acquire the property through a land contract purchase from the prior owner, Clintonville Castleberg LLC. The letter also indicated the sale would close in early December.
At the time of Loniello’s October letter, however, Magee was on a leave of absence. Clerk-Treasurer Peggy Johnson confirmed that all mail sent to the mayor during that time was put in the mayor’s mailbox. Council President Jeannie Schley served as acting mayor during that time.
Coffey was not the city assessor, so the letter should not have gone to him.
On Nov. 14, 2014, Loniello sent a letter to Adam Servi with Keystone Appraisal Group in Green Bay, who is the current assessor.
The second letter says the sale of the property is scheduled for Dec. 19, 2014, subject to the assessor determining that the property is tax exempt.
“We never heard any objection by the municipality,” Loniello said.
Loniello said there is nothing in the 2002 development agreement that indicates the term or length of the TIF bond, that prohibits the sale of the property without the city council’s consent, or that requires the property to remain taxable.
When contacted by the
, Dunlavy acknowledged receiving the Oct. 6 letter.
“The city, we were well aware a sale was in process but we didn’t know when or how,” Dunlavy said.
She added that she wasn’t contacted by Angelus regarding the development agreement or how any repayment would be made on the TIF bonds.
Dunlavy said she replied to the letter, and passed it on to Servi.
“I passed it on to him and then he was in contact with them about the proper channels to go through to get tax-exempt status in an assessment,” she said.
When asked what her reply was to the letter, Dunlavy stated, “Well, I don’t know if I had a written reply or if it was a phone conversation I had with attorney Loniello.”
Dunlavy said the city’s only involvement in the sale was regarding the assessing for tax-exempt status.
“Once that was handled, nothing was ever signed or taken care of and nothing was handled on Angelus’ part either,” Dunlavy said.
The money owed the city through the TIF agreement should have been handled during the closing of the sale, Dunlavy said.
She did not indicate what steps the city took after being notified on Oct. 6 about the proposed sale to a tax-exempt entity.
Kell, who was hired on as interim city administrator on Oct. 14, said he first learned about the proposed sale sometime in November.
“I made the city attorney aware that the agreement hadn’t been consummated and that we needed to get that in place,” Kell said.
Kell said he then found out the sale was going to happen sometime in December.
“That was another follow-up I had with the city attorney,” Kell said.
At that time, Kell said he learned that the company purchasing Angelus was tax exempt. He then had Clintonville City Clerk Peggy Johnson contact the city’s financial advisors, who informed him of the provisions in the development agreement requiring written city approval for a sale of the property.
When asked if the city should have been working with MHDC, Kell said he made the city attorney aware of the situation and that she needed to get her comments back to the attorney.
“She indicated that she’d do that,” Kell said. “I don’t know if she ever did it or not. I know she made contact with them, but whether she ever made comments on the document itself, I haven’t seen anything written by her that would show that she actually made some suggestions or questioned anything in it. But I know she made contact with them.”
Kell added Dunlavy was having a difficult time making contact with them.
A copy of the 2002 agreement between the city of Clintonville and the original developer, Angelus XXI Retirement Community LLC, includes a clause that says, “The developer shall not assign this agreement nor sell the development to any entity which by virtue of such ownership would render the development exempt from property taxes unless and until such assignee or purchaser enters into a written agreement with the city pursuant to which such entity agrees to make annual payments to city in an annual amount equal to the general property taxes that would have been paid in that year by the development had it been included in the tax rolls.”
“As far as I know they never got to that stage of approval of that assignment,” Kell said. “That’s where we would have said, ‘OK, you want us to approve this, we won’t withhold it provided the city is made whole in terms of this TIF district.”
The same clause also indicates that city’s consent will be deemed granted if it is not withheld by written notice within 30 days after requested.
Kell said he didn’t know if the Oct. 6 letter could be deemed as a written request for approval of the sale.
Loniello said he believes the TIF agreement was for 10 years and should have been paid off by 2013.
“If we were wrong and had a wrong understanding, we want to sit down with the city and work it out,” Loniello said.
Kell said the original TIF agreement was for 20 years with bonds having a 4.5-5.1 percent interest rate. The city was able to refinance with bonds ranging from 1-3 percent. The refinancing also shaved a year off the repayment schedule.
Loniello said the facility’s new name, Aster Retirement Community, is a trademark of Ashford Martin Corp., which manages four assisted living facilities throughout Wiscsonsin and plans to open four more in over the next year.
Ashford Martin is managing the Clintonville facility on behalf of MHDC.
Loniello noted that Aster Retirement Community of Clintonville has a contract with the state to provide housing for low-income elderly.
When the facility was a for-profit entity it struggled with its finances, Loniello said.
“The only way it will work is if it’s tax exempt,” Loniello said.
Under the terms of the land contract, Castleberg remains the title holder while MHDC makes payments. The land contract matures in five years.
Loniello said Cstelberg’s mortgage on the property is with First National Bank. He said FNB has a first lien on the property and he described the mortgage “as a solid loan now for First national Bank.”