City awards utilities contract for project at old Tiroler Hof

The Marquette City Commission recently approved a contract related to upgrading utilities at the former Tiroler Hof property in south Marquette, shown above, which is to be redeveloped for residential use. (Journal photo by Mary Wardell)

MARQUETTE — The Marquette City Commission has awarded the contract to build out utilities to the former Tiroler Hof property for an amount roughly 30 percent higher than the city’s estimate.

The commission voted 6-1 Monday to award the $450,000 contract to sole bidder Oberstar Inc. for construction of water and sanitary sewer infrastructure leading to the planned residential development, Harbor Vista, in south Marquette.

The engineer’s estimate was about $350,000. Commissioner Sara Cambensy opposed the contract.

The commission in a 4-2 vote this spring entered into a developer’s agreement with Robert Mahaney, founder and president of Veridea Group. Cambensy and Commissioner Mike Conley cast the dissenting votes at the April 10 meeting, and Commissioner Sarah Reynolds was absent.

In the contract, the city agreed to upgrade water utility infrastructure connecting to the parcel along U.S. 41, now called the Nordic Bay property, in exchange for a commitment by Mahaney’s Adventure Lodging Real Estate LLC, an affiliate of Veridea Group, to invest an initial $5 million in the multiphase residential project.

Conley on Monday said he had reservations when the agreement was discussed in April, but it was approved, so awarding the construction contract is necessary.

“The city of Marquette made a deal and we have to stand by it,” Conley said. “It’s more expensive to do that, but we made an agreement, and we can’t back out.”

Reynolds said she wouldn’t have supported the agreement in April, but, echoing Conley, she supported Monday’s contract because the agreement was in place, and it was too late to redo the bid.

City Manager Mike Angeli said due to the amount of construction in the area, the market is not in the city’s favor and the bid was higher than estimated.

“The increased cost is what it is, but we still anticipate being able to pay it off with the increased tax revenue,” Angeli said.

Cambensy asked where the $100,000 difference will come from.

Angeli said the full cost of the project will be covered with a bond, to be paid off with tax revenue from the development.

In April, the development was projected to break even in 12 years, according to city documents. Angeli said Monday it would now probably take an extra couple years.

Cambensy said with the added cost and interest, it could take 15-16 years for the city to pay that bond off.

“I think if the city was flush with money, if we had a lot of revenue coming in, if we weren’t losing the We Energies (power plant), I think we could partner with private business for this. But again, we can’t afford to pave the streets of our residents without bonding for our projects,” Cambensy said. “I think we really need to look at our total debt and go cautiously into these partnership agreements.”

Mayor Pro-Tem Tom Baldini said Mahaney has made a specific commitment by specific dates, and he is fulfilling his obligation.

“We are going to have to put this money into this water system at some point. We know that,” Baldini said. “Somebody came along and provided an opportunity to do it now with the building of a $5 million project. I think it’s a good win-win in the city.”

The utility project had previously been identified in Marquette’s Capital Improvements Plan, so the city advanced it for the development agreement.

According to city documents, the extension of the water main from Tonti Road to Cliffs Power Road and to Lake Street will also provide another water supply to south Marquette for emergency situations.

Mayor Dave Campana and other city officials noted that the project will benefit residents of south Marquette and Shiras Hills, as well as the Marquette Fire Department and others because the utilities are currently not up to code.

Commissioner Mike Plourde said, “We cannot turn our back on those areas.”

Plourde said Veridea Group is “as prestigious a group as we’ve seen in the city, and everybody in the city can see their work already.”

Veridea is responsible for Liberty Way and other commercial real estate developments in the area.

Cambensy said lots of people with private land would like help getting utilities for it.

“I don’t think we have the credit line and the capacity to go into a lot of these agreements unless the return on investment is so unbelievable that we just can’t turn it down,” she said.

Baldini said the city’s credit line is good.

“Matter of fact, we still have a AA rating even after we borrowed an additional ($28 million) for the Johnson Control (energy performance contract),” Baldini said. “Let’s be candid about what the other markets are saying about our city. The city’s books are in good shape, the revenues are in good shape, and we have money to pay our bills.”

Mary Wardell can be reached at 906-228-2500, ext. 248. Her email address is mwardell@miningjournal.net.