Friday, September 6, 2019

Oshkosh moves to hold on to incentive payments coming due to Menominee Nation Arena owner

The developer of the Menominee Nation Arena has filed for bankruptcy protection.

By Miles Maguire

The city has taken legal action to avoid making incentive payments to the current owner of the Menominee Nation Arena.

“Fox Valley Pro Basketball Inc. … is eyeing tax increment financing funds to execute a Hail Mary attempt to avoid liquidation,” the city said in a motion filed Friday. 

“Unless the debtor demonstrates a credible ability to satisfy the requirements for assuming its agreement with the city, the court should not require the city give the debtor hundreds of thousands of dollars that would otherwise be available to a successor-in-interest that will operate the arena as a financially viable property."

The city has agreed to pay Fox Valley $5.5 million, with the first installment, about $430,000, to be disbursed Nov. 1. But in a 127-page filing, the city argues that it should not have to turn over this money because its agreement with the arena developer has not been fully carried out.

Greg Pierce, the president of Fox Valley, was not immediately available for comment. Mayor Lori Palmeri declined comment. 

The city wants Fox Valley to act by Oct. 31 to hold up its end of the bargain. This would entail paying costs incurred by the city, some of which are past due; satisfying existing liens; resolving existing loan defaults; and providing assurances about future performance. 

If the city is successful in holding on to the payments, it would undermine the arena developer's plan to reorganize under Chapter 11 of the bankruptcy code. The developer filed for bankruptcy protection Aug. 19, and a hearing is scheduled in the case Oct. 2. 

According to legal papers, the single largest revenue source that the arena is looking at from October through January is the tax incentive payment that could arrive in November.

As an alternative to an order allowing it to hold on to the money, the city said it should get some form of financial protection for payments that it makes. "If the City is required to pay this year’s ... payment to the debtor, the court [should] also require the Debtor to post a bond or provide other adequate protection for the city’s interest in the ... payment."

The developer owes more than $20 million to a variety of suppliers and lenders. Its largest creditor is Bayland Buildings Inc., the general contractor for the project, which is owed $13 million. Fox Valley also has a large number of individual shareholders, many of them from Oshkosh, who could lose their investments if the company goes under.

"We want to make sure the development succeeds. That's why we filed the motion," said City Manager Mark Rohloff. "Whoever ultimately owns the arena is who we want to help."

The incentive payments, called tax incremental financing or TIF, were promised to offset extraordinary development costs associated with the arena, including city infrastructure and environmental remediation. The public money should go to support the development and not the developer, Rohloff said.

The filing calls into question the developer's ability to move ahead. The arena "apparently only has just enough money to operate before accounting for its millions of dollars of debt and special assessments," the city said. It also criticized the terms of loan the arena has received from Windward Wealth Strategies, a local investment firm that is also headed by Pierce.

Without this intervention, the city faced the possibility that the incentive payments would be used to pay off the Windward loan.  "For the funds from the TIF to go to settle a bankruptcy, that’s not the purpose of the TIF incentive," Rohloff said. The money was always intended to support the arena, "not to pay off a popcorn vendor or anything like that."

The city's motion raises doubts about the developer's actions and representations. The filing cites a 2017 development agreement with the city in which Fox Valley said it had  “sufficient funds through equity and debt financing sources to continuously operate, maintain and fulfill" the arena project.

In addition "there are serious questions about how the debtor spent the $19.7 million it reported it raised to the Securities and Exchange Commission," the city said. 

The city itemized the amounts it is owed by the arena: 
  • Police and Fire...$12,659. 
  • Utilities...$7,609. 
  • Miscellaneous ... $173.
  • Attorney's fees ... $24,294. 

1 comment:

  1. Let’s use the $413,000 to fix some streets in Oshkosh. Who was the Einstein that thought this project made sense? Turn it into a homeless shelter so they can have a warm place to sleep this winter. Quit wasting our tax money.