Dec. 22--A major corporate headquarters project planned for downtown Milwaukee obtains tens of millions of dollars in city financing in return for creating hundreds of jobs.
While that generally captures the essence of Northwestern Mutual Life Insurance Co.'s newly proposed office tower, it also applies to another high-profile project involving a large downtown office building -- which has failed to meet its job creation goals.
In 2006, the Common Council and Mayor Tom Barrett approved a plan to provide over $25 million to help finance ManpowerGroup Inc.'s new headquarters overlooking the Milwaukee River on N. King Drive, south of W. Cherry St.
The main lure for Milwaukee was Manpower's plans to move 900 to 1,000 full-time jobs to downtown from Glendale and Brookfield. The company also expected to add another 300 jobs within five years after the headquarters was completed in the fall of 2007.
Manpower, which provides employment staffing and recruiting services throughout the world, relocated to the downtown offices. But the company today has 870 employees at the headquarters, not the 1,200 or more workers it had initially counted on having by the end of 2012.
The city's agreement to help finance Manpower's headquarters didn't include provisions tying the city funds to the number of jobs created in downtown Milwaukee. With the proposed $48 million in city financing for Northwestern Mutual, the Department of City Development plans to include annual job targets that the life insurer must reach to obtain public funds, said city Development Commissioner Rocky Marcoux.
"We'll have a benchmark in there," Marcoux said.
Both the Northwestern Mutual and Manpower headquarters developments are connected to tax incremental financing districts, sometimes known as TIF districts. But the projects have some important differences, Marcoux said.
Northwestern Mutual plans to build its office tower, with 30 to 35 stories and an estimated price tag of $300 million to $350 million, after demolishing the company's 16-story office building south of E. Mason and east of N. Cass streets, on its downtown campus.
Under the city tax financing proposal, the details of which are still being drafted, Northwestern Mutual would recover 70% of the new building's annual property tax bills until those funds total $48 million. That would take an estimated 25 years, according to city development officials.
Once the amount was reached, all of the new building's property taxes would go to the city, Milwaukee Public Schools and other local governments.
The proposed tax financing district helps reduce the higher costs to Northwestern Mutual from developing a downtown high-rise instead of developing midrise buildings at its Franklin campus, Barrett and Marcoux said. With the new tower, Northwestern will keep 1,100 jobs at its downtown headquarters complex, which otherwise may have relocated to Franklin. It also plans to add up to 1,700 more downtown jobs by 2027.
The company now has 3,600 downtown employees, including 1,100 who work in the building that will be demolished because of its high long-term maintenance costs. A detailed city financing proposal is expected to undergo Common Council review in January.
In Manpower's case, the city funds were provided to developer Gary Grunau and his partners, who built the 280,000-square-foot headquarters and leased it to Manpower.
Most of the $25.5 million in city funds -- about $19 million -- paid for Manpower's 1,270-space parking structure, according to a 2006 city comptroller's report. Unlike downtown, parking for Manpower's employees at a much larger suburban site would have had little, if any, costs, the report said.
Property taxes from Manpower's building, and from the neighboring Time Warner Cable regional headquarters, will pay back those city funds, plus interest, by 2020, according to a current city estimate. The property taxes from the Manpower and Time Warner buildings will flow to the city, MPS and other local governments once the tax district's debt is paid off.
Recession slows hiring
Manpower said it would relocate 870 full-time jobs from Glendale, and another 100 jobs from Brookfield, to the downtown headquarters, the comptroller's report said. Manpower executives also expected to add another 300 jobs within five years of opening the new headquarters, the report said.
The fact that Manpower today has just under 900 downtown employees -- instead of over 1,200 -- reflects the economic changes that have occurred since the tax financing district was approved, said Marcoux and a company spokeswoman.
By 2007, when the new headquarters opened, the housing bubble had burst and a deep recession had started. Conditions worsened in 2008, with the collapse of Bear Stearns, Lehman Brothers and other global financial players. Since then, a slow U.S. economic recovery has been characterized by high unemployment, while Europe is now facing another recession.
"As you can observe from the world's economic news at large, our quarterly employment outlook survey and our own earnings releases, the recent and current economic headwinds have made for a challenging business environment for all companies, requiring continuous readjustment of business plans and agility when it comes to workforce needs," Britt Zarling, Manpower's director of global strategic communications, said in a statement.
Zarling declined to say whether Manpower would eventually increase its downtown workforce.
"As we look forward, we see great opportunity for our business, as companies need help developing an agile workforce strategy to support their ever-shifting business strategy," the statement said.
The Department of City Development didn't seek job guarantees within the Manpower tax financing district, in part because the company's move from Glendale and Brookfield to Milwaukee was already responsible for most of the project's job impact, Marcoux said.
"We knew we had a huge amount of jobs coming downtown," he said.
The creation of a major corporate headquarters on vacant land has helped stimulate other developments in the nearby Park East area, Marcoux said.
He cited such projects as the Moderne apartment and condo high-rise, to be completed by January; The North End apartments, where the second phase is under construction; ongoing renovations to Schlitz Park's office buildings; Beerline B Apartments, which opened in February; the Aloft hotel, which opened in 2009; and Park East Enterprise Lofts, which opened in 2006.
"We are proud of what ManpowerGroup has accomplished in revitalizing a significant part of the Milwaukee downtown area," Zarling said, "as well as hosting thousands of community events at our world headquarters since we opened our new doors five years ago."
At Northwestern Mutual, Marcoux expects the new office tower to help stimulate development within the nearby lakefront area, where the proposed Couture hotel and apartment high-rise and a neighboring 17-story office building are in the works.
But there's likely to be a less dramatic effect, given that most of the area near Northwestern Mutual's campus is already developed, Marcoux said.
With Manpower, city officials had acres of undeveloped land.
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