Wisconsin Prepares For Another Busy Election Season
By Tom Larson
With the recent surprise retirement announcements by both Congressman Tom Petri (CD-6) and state Senator Mike Ellis (SD-19), the Wisconsin political landscape has become even more unsettled.
Prior to the last week’s announcement, the battleground for control of the state Senate consisted of a handful of seats controlled currently by Republicans and 1 seat currently controlled by Democrats. That battleground has now expanded to a few more seats, now that Sen. Ellis has retired and with the strong likelihood that Sen. Joe Liebham (SD-9) will enter the race for the open 6th Congressional District vacated by Petri. Although the Republicans currently have an 18-15 majority, Democrats could take back control if they gain 2 seats this election cycle. This will be more difficult given that they will likely lose 1 seat currently held by Sen. John Lehman (SD-21) which has become much more Republican after redistricting. Nevertheless, they are targeting four seats currently held by Republicans Liebham, Frank Lasee (SD-1), Petrowski (SD-29) and Terry Moulton (SD-23), and two open seats formerly held by Ellis and Dale Schultz (SD-17).
In the Assembly, Republicans currently hold a sizable 60-39 majority, but Democrats are looking to shrink that majority due to a large number of retirements (20) this year. The Assembly will likely have 12-15 competitive races with 3 open seats and a number of incumbents who will be facing potentially tough races because their districts are considered “swing districts” due to the relatively equal representation of Democrats and Republicans living in the district. Although Democrats have a decent chance to gain ground on Republicans in the Assembly by taking several seats, Assembly Republicans will likely remain in control after November due to their large majority, the favorable political makeup of their districts and the strong Republican turnout that will likely take place for Governor Walker in his race against challenger Mary Burke.
NAIOP-WI will continue to monitor and actively participate in these races to help ensure the legislative environment continues to be favorable for the commercial real estate development industry.
New Law Will Place Limits On Financial Security Requirements for New Development Projects
On April 15, 2014, Governor Walker signed into law Assembly Bill 835, legislation that will provide greater certainty for developers required to provide financial guarantees for public improvements paid dedicated to a municipality. The legislation was introduced in response to tougher restrictions faced by developers in on obtaining letters of credit and other financial security from lending institutions.
Five years ago, letters of credit were relatively easy to obtain and, as a result, were commonly required by municipalities to ensure that infrastructure projects were completed. However, after the downturn in the real estate market, lending institutions have been reluctant to issue letters of credit and, if they are willing to issue a letter, they are very expensive to obtain. (This is true for all businesses, not just for the development industry.)
Unfortunately, many local communities are still requiring letters of credit because (a) letters of credit are the form of security traditionally favored by local municipalities and (b) most municipalities haven’t had any new development in recent years and thus they are unaware of the tougher restrictions placed on obtaining financing for real estate development in today’s world. Now, with the real estate market coming back and new development starting to occur again, developers are reaching an impasse with municipalities on letters of credit and, in some cases, new projects are not moving forward.
To address this problem, AB 835 will provide developers with the option of choosing between letters of credit and performance bonds, which will ensure that (1) local governments receive adequate financial security to finish proposed infrastructure project, and (2) developers can obtain financial security necessary for job growth and business expansion. Specifically, the new law will do the following:
- Allows the developer to choose between a surety performance bond or a letter of credit
- Places a 14-month limit on the timeframe that a municipality can require financial security after substantial completion of the improvements
- Caps the amount of financial security established as 120% of the estimated total cost to complete the required public improvements.
- When roads are involved, defines “substantial completion” as when the binder coat is installed on the roads to be dedicated
- When no roads are involved, defines “substantial completion” as when 90 percent of the public improvements by cost are completed
NAIOP-WI supported this legislation and worked closely with the Wisconsin Builders Association and lawmakers to enact it into law.