Why a Hampton Inn cost taxpayers more than $10 million.
Not having a hotel in a suburb, other than an aging Days Inn, is the sort of problem that keeps the local mayor awake at night but passes over the heads of most residents. In the case of West Allis, you only have to drive a mile west on Greenfield Avenue, the main drag, to hit a cluster of rather nice hotels in Brookfield. Still, the no-lodging issue – compounded by the no-banquet-hall issue (unless you count the Knights of Columbus hall on South 92nd Street) – is not only a serious one for Dan Devine, the 44-year-old mayor of ’Stallis, but it carries the force of history. “This whole discussion started before I even had my driver’s license,” he says.
And now, the talk is over. A shiny new Hampton Inn and conference center opened next to State Fair Park in West Allis this fall, at a cost of $6 million in lost revenue to federal taxpayers – on top of the $4.7 million in state funds used to prepare the site. This confluence of luck, government incentives and good old-fashioned cunning makes for an eye-opening study in how even a small municipality, if cagey enough, can all but will a desired development into being.
The story of West Allis’ dream hotel begins with a disaster. In 2008, heavy flooding damaged the Milwaukee Gray Iron foundry on Greenfield Avenue, a bland edifice that sat opposite State Fair Park, and swamped the Mykonos restaurant next door. Both languished until 2011, when West Allis used $3.5 million in state flood-repair funding to raze them and an additional $1.2 million to clear away some adjacent homes. The result was a large city-owned parcel readied for development, and at no small cost to taxpayers.
John Stibal, the city’s all-seeing development director, led the effort to find a hotel developer and eventually settled on Stand Rock Hospitality, a Wisconsin company best-known for building and operating upscale resort hotels (often with indoor water parks) in Wisconsin Dells, Tennessee and Pennsylvania. It’s a highly successful company, one West Allis was happy to welcome aboard.
However, a $1.5 million loan for the project – only 30 percent of which Stand Rock will have to pay back – was raised using some crafty maneuvering by the city. An entity it controls applied for and won some federal tax credits, then sold $6 million of them to U.S. Bank, generating the cool $1.5 million. These New Markets Tax Credits came from a program at the U.S. Treasury that’s supposed to be used for fighting poverty by stimulating investment in poor communities and fledgling business ventures.
In practice, it’s been more of a free-for-all. A report released by former Oklahoma Sen. Tom Coburn in 2014 described the Clinton-era program as “a goodie bag for big banks and corporate America,” seeing as many of its beneficiaries, including an IHOP in Milwaukee and a new dolphin exhibit at the Atlanta Aquarium, have been far from impoverished. The private entity created by Stibal to snag New Markets Tax Credits – the First Ring Industrial Redevelopment Enterprise (FIRE) – has collected more than $190 million worth since 2007, including the $6 million that benefited the Hampton Inn. FIRE’s hands have dipped into projects all over southeastern Wisconsin, helping to rehab industrial properties, remodel a former warehouse (only for it to become occupied by Johnson Controls), improve the southern end of the Summerfest grounds and refinance debts at Discovery World.
Sustained in part by the fees it charges, FIRE isn’t the only economic development outfit in metro Milwaukee to use New Markets Tax Credits. But it is the only one to be so closely intertwined with a local government. Stibal says that he, along with the two other city employees who keep FIRE running, aren’t paid for their time, but the city is – as if they were on loan as consultants. FIRE takes up about a quarter of Stibal’s time, as it’s grown into something of a cottage industry. “We didn’t think it would be this successful,” he says.
Some $9.5 million in additional financing for the Hampton Inn came from foreign investors – Chinese nationals who, by participating in the federal EB-5 Immigrant Investor Program, will have an easier time obtaining visas. The West Allis Community Development Authority (of which Stibal is the executive director) lent $350,400 to the $13.8 million project, on top of $2.5 million in conventional loans from, just like in the old days, Tri City Bank.
“Hotel Pool” appears in the December 2015 issue of Milwaukee Magazine.
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Correction: An earlier version of this story misspelled John Stibal’s name. The story has been updated to reflect the correct spelling. We regret the error.