A private university based in Milwaukee will borrow $163.7 million through tax-exempt bonds to finance the construction of new emergency response facilities for the Wisconsin and Milwaukee County governments.

The Medical College of Wisconsin is leasing land on the Milwaukee Regional Medical Center campus to the state and county, and is building a new state crime lab; new county morgue and toxicology facilities; a new County Office of Emergency Management and other administrative and research offices on that land.

Through its subsidiary, Forensic Science and Protective Medicine Collaboration, Inc., the Medical College will finance the construction of a new building in Wauwatosa to house the new facilities. FSPMC is borrowing $163.7 million via revenue bonds, issued by the Wisconsin Health and Educational Facilities Authority, to carry out that project. 

WHEFA Executive Director Larry Wiemer II said that as a conduit issuer of revenue bonds, WHEFA can issue bonds for 501(c)(3) corporations and make loans to healthcare, educational, research and other nonprofit organizations to finance eligible projects.

A rendering of the new crime lab for Wisconsin and Milwaukee County, displayed at a November groundbreaking ceremony.

C.D. Smith Construction

The subsidiary is a 501(c)(3) corporation created to advance development projects on behalf of the Medical College. It was formed for the sole purpose of generating revenue from the sale of this project to the state and the county.

According to an investor presentation, the Series 2024 revenue bonds will be used to reimburse the Medical College subsidiary for the construction of a 339,239-square-foot building, 217,150 square feet of which will house two condominium units to be sold to the state and the county, and 122,089 square feet of which will host a 369-stall parking structure.

In addition to buying the completed condominium units, the state and the county will ground-lease the seven acres on which the project is to be built from the Medical College for the next 40 years.

The bonds are secured by the leasehold mortgage on the ground lease, and by a collateral assignment of the development agreement and the design-build agreement to the bond trustee. 

The pricing date for the bonds is expected to be Wednesday, according to the investor presentation. The underwriters are Raymond James and Blaylock Van, LLC, according to the presentation. Kaufman Hall is the municipal advisor and Quarles & Brady LLP is the bond counsel, according to Wiemer. 

The state saw the need for a new crime lab due to overcrowding and outdated laboratory conditions in its current lab, which is also “located in a high crime area and deficient in safety, security, ADA accessibility, deferred maintenance and parking,” the presentation said. 

“The existing facility is no longer functional and is an impediment to employee recruitment and retention,” it added.

The county needs a new morgue and toxicology facilities because the current County Medical Examiner’s office is outdated and falls short of industry standards, it said. The plan is to have those replacement facilities co-located with the new Office of Emergency Management to enable coordinated emergency responses.

“The Medical College of Wisconsin is committed to its long-standing partnerships with the state of Wisconsin and Milwaukee County,” said Holly Botsford, director of marketing communications for the Medical College. “Additionally, there is value in this new facility being connected to the Milwaukee Regional Medical Center Campus, which will foster greater collaboration between the tenants of the Forensic Science and Protective Medicine and the members of the broader MRMC campus.”

Botsford noted that the Medical College will not profit off the ground lease with the state and county, and the college’s subsidiary, FSPMC, is financing the condominium construction through bond proceeds.

The construction costs are estimated at $184.97 million, with the developer agreeing to pay any costs of the project not covered by the proceeds from the sale of the condominium units to the state and the county. The state and county have paid $1.8 million so far, and an additional $37.2 million from the county’s Finishes Allowance is expected during the construction phase of the project.

The developer, C.D. Smith Construction, broke ground in October 2023, and expects to complete the project by July 2026. 

When they buy the finished condos, the state and county will only pay what it cost to construct the building, Botsford said; the purchase prices in the purchase and sale agreements are equal to the estimated cost of construction.

“The only entities that will receive proceeds will be the developer and the construction team for their work,” she added.

Moody’s Investors Service assigns a Baa2 rating to the bonds, outlook stable. In its rating action, Moody’s noted that this public-private partnership has more credit weaknesses than the typical North American P3, including weaknesses around material Force Majeure events and a termination regime with fewer lender protections. 

Still, Moody’s said the project’s essential status to the county and the state makes it likely they will “honor their contractual obligations,” including shouldering higher costs, and they have already appropriated the funds anticipated under the contract. 

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