PLATTEVILLE — The Platteville Common Council Aug. 13 approved the development plans of the proposed buyer of two vacant properties originally purchased by River to Valley Initiatives.
The council did not, however, approve waiving the $6,124.84 in nonperformance penalties assessed against River to Valley for not developing the properties within time limits — a waiver requested by the financier of the two property sales.
The developer’s agreement for the vacant lots at 565 W. Cedar St. and 420 and 440 Southwest Road is with Droessler Properties of Cuba City, which purchased two Kallembach houses, at 185 Center St. and 430 S. Chestnut St., and replaced them with single-family rentals.
Droessler’s plan for the West Cedar Street lot is to build a raised ranch or two-story house intended as a college rental, valued at at least $125,000 by 2022 — $40,000 less than the two-story single-family house River to Valley had proposed.
Common Council president Barb Daus was concerned about building a house that was worth $12,000 less than the 2010 Grant County median home, listed then at $137,000.
“We talk to developers and they tell us they can’t build anything less than $200,000,” she said. “I have to ask myself do we really want a structure like that in Platteville?”
Developer Zach Droessler said the property’s value was likely to be around $140,000.
River to Valley planned to demolish the Southwest Road houses and build a three-unit townhouse with three bedrooms and 2½ bathrooms each, valued at at least $450,000, according to the bid documents. Droessler’s plan is to build a three-unit townhouse with two or three bedrooms per unit, valued at at least $375,000 by 2023.
“I’ve seen his work before; he does good work,” said District 1 Ald. Isaac Shanley.
The two developer’s agreements covering the three properties, with additional landscaping, passed 6–0, with one vacancy on the council.
The council then approved a motion 4–2 to deny River to Valley’s request to waive the penalties on the West Cedar Street property. Daus and at-large Ald. Barb Stockhausen were opposed.
“It seems to me that River to Valley should be paying the $6,000,” said District 4 Ald. Ken Kilian.
“I still think we should waive those fees,” said Stockhausen. “If we don’t get this waived, the development won’t get made, and we don’t have any tax base.”
Shanley said the development agreement was between River to Valley and the city, not with the project’s lenders.
“The city is owed this money,” he said. “I’d like to see the lender take the loss, not the city. … If we don’t stand by our development agreements, what is the point of having them?”
When at-large Ald. Robin Cline asked “what teeth do we have” to get the payment from River to Valley, Director of Community Development Joe Carroll said, “I don’t think that River to Valley has any faith that they have the ability to pay.”
“I think they could come up with the $6,142,” said District 2 Ald. Eileen Nickels, who said it was possible that the properties could sit empty. “We as a city honored our contract, and the other entities did not honor their commitment.”
River to Valley Initiatives purchased five of the 12 houses the city took from Darrel Kallembach for nonpayment of fines on 19 of his properties, at 420 and 440 Southwest Road, 255 and 335 Division St., and 565 W. Cedar St., for a combined $125,208.76.
The 255 Division St. house was to be demolished and replaced by an “affordable single-family” house. The 335 Division St. house was to be renovated for “an affordable single-family residence for sale to an owner-occupied [low- to moderate-income] resident.”
The house at 255 Division St. was replaced by a much larger house listed by Realtor.com for sale for $311,600, sitting unoccupied on a lot without landscaping. The house at 335 Division St. has had work done, but the work is not finished.
The two lots next to each other on Southwest Road and the lot on West Cedar Street are vacant, nearly three years after new houses were to be built on those lots. Those lots were used as collateral for work on the Division Street houses, according to city records.
In addition to the nonperformance penalties, the liens on the West Cedar Street property exceed the $16,000 sale price, according to city documents. The property is now appraised at $27,000, according to city records.
River to Valley’s lender, Forward Community Investments of Madison, also asked the city to waive the penalty, with a letter to the city saying that “While we were willing to take a price cut of $11,000 (appraised value vs. sales price), a further $6,000 decrease to the net sales proceeds would make us think twice as to whether we approve the sale.”
The city assessed $366,765.38 in fines and interest from more than 100 citations against Kallembach for 19 properties, including one just outside the city limits on Grant County B, between January 2008 and July 2010. Violations included allowing occupancy without a valid rental license, allowing occupancy of more than four unrelated persons, and second- and third-offense citations for allowing occupancy without a valid rental license.
The city then won a court judgment of $309,804.84 and a court injunction against Kallembach, who was jailed for five months in 2012 for violating the court order to provide the city with copies of his leases and to have his properties inspected.
The city used $288,341 of the fines and interest to purchase 15 of the 19 properties at a sheriff’s sale in January 2014, with two outside bidders outbidding the city on four of the properties.
The city decided to keep three properties, selling a property at Furnace and Elm streets later, and sell the other 12 by Request for Proposal, which stated that the city “will select the proposals that are determined to be the most advantageous to the community. This may include proposals that do not include the highest bid amount.” The highest bidder was awarded only three of the houses.
“The bid amount was not a major part of the scoring system, and we were looking for long-term value,” said at-large Ald. Amy Seeboth-Wilson in September 2014. “When you factor increased value, we’re going to increase property values by more than $900,000 if everything goes as planned.”
The council in 2016 rejected a proposal from River to Valley to modify its developer agreement for the West Cedar Street property to move the house at 420 Southwest Road to West Cedar Street. River to Valley moved the house at 440 Southwest Road to 515 Lutheran St.