For the second consecutive Village Board meeting, contractors who built the Radisson Hotel gathered at Village Hall Monday and implored village leaders to explain why they have yet to receive payment for work they completed on the hotel more than a year ago.
Unfortunately for contractors, the only explanation from the village was, “No comment.”
That’s what Village Manager Mark Fitzgerald told reporters after the meeting when asked about the complaints brought forth by several contractors who spoke during public comment.
Village leaders have been tightlipped about the Radisson ever since a receiver was appointed to monitor revenue after members of the original ownership group became embroiled in litigation.
That’s put a laundry list of contractors in a bind. They haven’t been paid, and they aren’t being told why, and they feel like they’ve been feed empty promises from the village.
The group of contractors that attended the meeting Monday had grown since the last board meeting May 7. Two weeks ago, to mount among these construction businesses. Many of these contractors are owed tens of thousands of dollars, which can put a real strain on their business, which operates on slim margins.
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“This has been the most disappointing successful project I’ve been a part of,” Robert Sieger, the project architect for the hotel. “There were lots and lots of hard Wisconsin workers that laid tile and rolled paint that have really been victims.”
Barry Bloom, owner of Assured Power in Milwaukee, is still owed $70,000 for electrical work his company completed. He’s been leading the charge and rallying other contractors to find answers. He and other contractors believe the village already has the money to satisfy the debt, but are holding onto it for a reason they’d like to know.
In April 2010, the village that featured a $17.65 million loan to kick-start the hotel construction. Contractors believe more that $1.7 million are being held with a title company, Stewart Title Guaranty Co.. Contractors want to know why the village or owners aren’t releasing funds to pay them.
“We’re hoping to implore the village to at least take the time to sit down with us in a forum – we understand there’s litigation pending – but as far as we know it’s not against us,” Bloom said. “We’re just trying to get answers as to why the retainage on the project we worked hard to complete has not been finished and paid for.”
Of the seven contractors that chose to speak Monday, most said they have been forced to file the necessary paperwork to obtain payment several times with the village, emails have gone unanswered, or they were told on a number of occasions that they would get paid.
“There were a lot of promises made to us as a company that our payment would be coming any day,” said John Haubner of Horner Plumbing, which is owed $80,000. “That’s been for nine or 10 months. We need to get some answers, and it’s going to come from the Village of Menomonee Falls.”
A rocky road for hotel owners
Things quickly went south for the hotel's five-member ownership group after the village approved the loan for the hotel in 2010. In October 2010, David Gilbert, who was a 10 percent owner of the hotel, filed for Chapter 7 bankruptcy months after the loan was apprroved. According to documents from the U.S. Western District Court, Gilbert’s assets were worth some $3.3 million but had outstanding liabilities of $106.4 million.
That was just months after Gilbert provided necessary documentation to ensure he had necessary net worth to account for his portion of the hotel’s worth.
Then, Radisson part-owner Dean Grosskopf’s became in Dane County Circuit Court involving his hotel management firm, Professional Hospitality. According to the suit, Madison investor, Gregg Raup, is accusing Professional Hospitality of wrongfully diverting $1.2 million from hotels in Beloit and Green Bay to the Radisson Hotel in Menomonee Falls.
That spurred the village to take preemptive action and appoint a receiver to monitor day-to-day operations at the hotel and its revenues in November.
As part of the developer agreement crafted by the village, the hotel’s ownership group was required to make scheduled payments on the principal of the loan. However, the group failed to make its first $700,000 payment when it came due in November. A total of $4.1 million in principal is due to be paid by the partners over the next four years. According to the development agreement, the loan will be paid in full by the time the calendar turns to 2026.
Despite all the financial and legal trouble, majority owner Jim Heyden told Patch in January that the funds were always available to pay contractors.
Though the drop may have fallen in the metaphorical pond of Menomonee Falls, the ripples from contractor woes are having widespread impact on businesses throughout the state.
In addition to the contractors, the materials suppliers and other and other vendors tapped by these contractors are also feeling the pinch.
“This just doesn’t affect me and the people speaking tonight. You aren’t holding the retainer you are holding the payment for the entire scope of my work,” said Susie Beard of Badger Lighting and Signs. “We all owe money to other venders and small businesses for materials we purchased. We’re just asking for fairness and a resolution for all of us.”
The explanation for why contractors haven’t been paid may not be answered for some time. Fitzgerald offered no indication of a timetable or next step. It was simply, “No comment.”