In a first test of a new city policy, a prominent developer and builder will pay the city $400,000 to support initiatives for small, minority- and women-owned businesses after failing to satisfy requirements for subcontracting at a big redevelopment Downtown.
The $400,000 to be paid by developer Urban Land Interests and builder J.H. Findorff & Son is partly a settlement of a fine and partly a gift to help the city better support small, minority- and women-owned business after ULI and Findorff struggled to find such subcontractors.
The city has been including requirements to hire Small Business Enterprise (SBE) companies for those receiving tax incremental financing (TIF) support for the last several years, said Nick Zavos, deputy mayor for government affairs.
In 2015, the city gave developer Urban Land Interests $13.5 million in TIF for its roughly $115 million project on and near Capitol Square, which includes redevelopment of an office tower at 25 W. Main Street, and a 530-space underground parking garage and 80 apartments above it across the street. It fully opened this spring.
The TIF contract required ULI to find “maximum feasible opportunities” for SBE companies, Zavos said. ULI and the city’s Department of Civil Rights worked on establishing a goal for the project, and with 85 percent of the project underway by the time the TIF contract was signed, the city and ULI settled on a 3 percent goal, he said.
Still, ULI and Findorff were unable to satisfy the city’s good-faith effort requirements to hire SBE companies, achieving under 1 percent, Zavos said.
Mark Binkowski, a development associate at ULI, which has done several TIF projects with the city, said this was its first with an SBE requirement and that ULI and Findorff struggled to meet the goal due to a tight labor market and the project’s complexity, which narrowed the pool of subcontractors qualified to do the work.
After discussions, Mayor Paul Soglin introduced a resolution under which the city would accept $100,000 annually from ULI and Findorff for four years in lieu of the city taking any further steps regarding their SBE commitment at the project. The payments would begin in 2020.
The $400,000 is partly a settlement because ULI and Findorff didn’t meet the goal, but partly a gift because the remedy isn’t clear for not reaching the 3 percent goal, Zavos said. A fine could have been as small as $5,000, he said. Also, ULI and Findorff’s experience reflected the results of a 2015 city public works contracting disparity study, he said.
The study recommended that the city consider a larger role in helping develop such businesses through training and mentorship, and that the city support other organizations’ efforts to build a pipeline of minority and female workers.
The city currently spends $225,000 annually on construction employment initiatives such as the Foundations for the Trades, Latino Workforce Academy, Big Step and others, Soglin’s resolution says. The $100,000 from ULI and Findorff would be handled as a general fund appropriation and help the city with such employment initiatives, it says.
“ULI and Findorff are helping the city and our community move forward on an important and long-needed program,” Zavos said.
Binkowski said, “Let’s put our money where our mouth is with funding for the city to continue to grow and present opportunities for SBEs.”
The city’s Finance Committee is scheduled to consider the resolution at a special meeting on Tuesday, with a final decision by the City Council that evening.