The story behind a $1 million settlement the village of Kronenwetter paid
Buckle up, because it's complicated
Update: The amount of the two payments has been corrected — the full settlement amount was correct.
A source reached out to me recently with a slough of documents related to a court case in which the village of Kronenwetter reached a settlement with a developer for $1 million.
It’s an interesting case to say the least. It’s also one of those cases that’s very, very complicated. So it has taken me some time to sort through.
Yet another Kronenwetter story? Well, it’s not by design. When I first took on the issues going on in Kronenwetter, I didn’t expect the village to become an ongoing source of stories. But things keep happening. To quote a noted AP editor of the past “Well, it happened, didn’t it?”
But more importantly, once you start getting a reputation as a journalist who isn’t afraid to poke into things, people come out of the woodwork to give you more information.
The basics of the story is that the way the village of Kronenwetter handled a development in its tax increment finance district cost it $1 million. The story is more complicated than that, of course.
The lawsuit
Stone Ridge Developments and its principal Dean Prohaska (we will simply refer to Stone Ridge to make things easier from this point forward) filed a lawsuit against the village of Kronenwetter in 2018. According to the suit, Stone Ridge had partnered with the village to develop a subdivision within Kronenwetter’s TIF district No. 2.
According to the lawsuit, the village at the time “had received and will receive a massive windfall” related to TIF No. 2, and that the village “has been and will be reimbursed twice for the same obligation.”
The lawsuit says that the village in 2014 received a large judgement funded by Stone Ridge to cover the improvements Kronenwetter made to the district; but then it also recovered increment (additional tax revenue) to cover those expenses, thus in the lawsuits view, was double dipping. Or as the lawsuit put it, the village received a massive windfall at Stone Ridge’s expense.
(Tax Increment Finance districts or TIF are districts municipalities can form to help fund projects within them that combat blight. Municipalities essentially borrow against future tax revenue increases to help fund projects that would not otherwise happen “but for” the city incentives given to developers. In reality, TIF projects are rarely rejected by the boards that approve them for not meeting the “but for” standard — I have yet to see one rejected in my entire career.)
The development
Stone Ridge in its agreements with the village of Kronenwetter essentially agreed to build houses in the planned development area. Part of the agreement was that if Kronenwetter built the roadway connecting the subdivision to the main roadway, it would insist that Mosinee would pay 50% of the costs (the project borders Mosinee). As the village president at the time put it “it will be a cold day in hell before we open the road without receiving any payment from Mosinee.”
(It’s not clear which road that became but the Stone Ridge subdivision is on the southern Kronenwetter border which abuts Mosinee.)
The village did build the road connecting the subdivision, but never sought any money from Mosinee for it, despite that being part of the agreement.
All told, according to the suit, Stone Ridge created 100 multi-family units and 25 residential homes. Stone Ridge would have built more, the lawsuit says, if the village hadn’t miscalculated the building ratios that caused them in error, Stone Ridge alleges, to deny building permits. According to the suit, those ratios were the ones that the village and Stone Ridge agreed upon in their development agreements.
Because of the missteps, Stone Ridge argues, they were unable to meet the terms of the agreement they had made. The village sued Anchor Bank and won, but instead of sending the money to a special fund designated for the TIF district as state law requires, Stone Ridge argues, the village instead just added it to the general fund. The money would have allowed the village to pay off the entire debt of the district or to keep making the payments until the debt was paid off.
Kronenwetter is the only municipality in the county with two distressed TIF districts (as The Wausonian has reported before), but neither are the district in questions. Nos. 1 and 4 in the village are listed as distressed, unrelated to No. 2.
In a touch of irony, the village ended up using $800,000 of the settlement money to buy 33 parcels in the Timber Creek subdivision in a sheriff’s sale. Those properties were taken by foreclosure by Anchor Bank as part of Stone Ridge’s payment to Anchor Bank for the judgement with the village.
The village planned to build residential on those parcels, the same as Stone Ridge was going to before the miscalculations that said they couldn’t.
The lawsuit alleged as specific counts: breach of development agreement; breach of good faith and fair dealing; equitable indemnification; equitable subrogation and constructive trust. The suit didn’t seek a specific amount of relief.
The settlement
After working through a mediator, last summer the two parties came to a settlement agreement. On July 27 of last year Dean Prohaska and Stone Ridge Development signed a settlement agreement for $990,000 in two payments of $495,000 each from the village. The village’s representatives signed the agreement on Aug. 15.
The settlement releases all claims. The village already made one payment (confirmed via the village’s attorney and sent to Kronenwetter’s then-interim administrator Duane Gau) on Sept. 1 of last year. And it is expected to make another on Sept. 1 of this year.
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