Village rejects financing plan for Hillcrest subdivision

The Fredonia Village Board last week rejected a key component of Hillcrest Builders’ plan for a north-side subdivision by voting to not serve as the project’s “banker” and directing the developer to pursue traditional financing methods.

Hillcrest has proposed building about 100 houses and condominiums along North Milwaukee Street and north of the Northern Ozaukee School District campus.

To do so, Hillcrest owner Oyvind Solvang had asked the village to borrow money to pay for roads and other infrastructure, which would be paid back by Hillcrest from the sales of lots and homes.

But with other borrowing commitments — the reconstruction of Fredonia Avenue, improvements at the wastewater treatment plant and the future development of a new business park — the village could only borrow about $1 million without stretching its debt limit to near capacity, officials said.

It’s an arrangement Solvang said he has used in other municipalities on previous projects.

The advantage to Hillcrest of the village borrowing the funds is that the village’s interest rate would be lower than borrowing through a bank.

Solvang said, however, that $1 million would barely be enough to get his project off the ground and would require him to reconfigure the project so that more condos would be built earlier in the process.

The move to reject the borrowing plan was recommended by the village Finance Committee. The board voted 6-0 in favor of the motion, with Trustee Dan Gehrke abstaining as he is a real-estate agent with Hillcrest.

Another sticking point in negotiations between the village and Hillcrest is the need for a “personal guarantee” by Solvang that would protect the village if the development falls through.

While not borrowing funds lessens the risk to the village, trustees still wonder what would happen if the project fails, as has happened with three other development proposals in the village during the last 25 years.

Trustee Richard Abegglen last week said a guarantee could take the form of a letter of credit or bond.

Last month, Solvang said guaranteeing the entire project runs counter to his understanding that he and the village were partners in the project and suggested that such a requirement could kill the project.

Trustees said they would look to meet with Solvang in coming weeks to discuss the issues.