Milwaukee Police Chief Asks the Public: “Our Hand Is Out. Meet Us Halfway.”

We’re all in this together. If we want a safer Milwaukee, we need people to come together to trust law enforcement, to build healthy connections in neighborhoods, to provide help to those who might otherwise be headed for trouble. Law enforcement can’t do it alone.

That was the broad message from the Milwaukee area’s two top law enforcement leaders during an “On the Issues” program Thursday, June 1, 2023, at Eckstein Hall.

The most powerful statement of the theme came from Milwaukee Police Chief Jeffrey Norman. Derek Mosley, director of the Law School’s Lubar Center for Public Policy Research and Civic Education and moderator of the program, asked Norman and Milwaukee County Sheriff Denita Ball what they consider the most pressing need of the departments they lead.   

“I’ve said it time and time again: It’s trust. It’s trust that we are doing the right things for the right reasons for you all,” Norman responded, gesturing to the audience of about 200.

Norman, who was named acting chief in 2020 and given the full title in 2021, urged people to leave behind past problems with some of his predecessors. Holding on to the past hampers moving forward, and the department has changed, he said.  

“We have a different culture in the Milwaukee Police Department,” he said. “Believe me. Accountability is real. But we have a lot of great men and women doing work to keep our community safe. And I stand on that.

“It’s important for all of you to know that this is a different department. It’s a different department. Give us that benefit of the doubt. It’s a partnership. It’s not a one-way vehicle here. We can’t get to reckless driving, we can’t get to violent crime, we can’t get to the things that are going on in our neighborhoods if we do not trust each other.

“Our hand is out. Meet us halfway.” He held out his hand as he spoke.

Ball jokingly responded to Norman’s impassioned call by saying, “All right, rev.”

She agreed that trust is important. But she said staffing is the biggest challenge for the sheriff’s department, with need for both more deputies to patrol freeways, parks, and the airport and more people to work in the Milwaukee County Jail, which she oversees.

Norman, who is a 2002 graduate of Marquette Law School, also said staffing is a continuing issue for the police department.

Earlier in the program, Mosley referred to the killings at the Christmas parade in Waukesha in 2021 and at a Fourth of July parade in Highland Park, Ill., in 2022. He asked if tragedies such as those affected preparations for large events in Milwaukee this summer.

Norman said law enforcement plans for what can be done to minimize chances of such crises, including more use of physical barriers, more visible presence of officers, and more work with community groups ahead of and during events. But, he said, events such as the killings in Highland Park by someone who was in a building overlooking the parade can be hard to prevent.

Emphasizing the theme of partnering with the community, he said a big part of what can be done is information and help from citizens. “It’s you all,“ he said. The slogan , “If you see something, say something,” is important, he said. Tips from citizens are valuable.

Ball said the sheriff’s department has built up its relationships with the 19 municipal police departments in Milwaukee County and with other law enforcement agencies. “We are better together,” she said.

Norman said collaboration among agencies was valuable and can increase effectiveness. As he put it, “You’ve got the peanut butter, I’ve got the jelly, let’s make a sandwich.”

The two took several questions and comments from the audience. One person asked how police judge whether to react strongly or stand back when there is major disorder. Norman responded, “I’m not going to allow death and destruction on my watch.”

To watch video of the program, click here.

Continue ReadingMilwaukee Police Chief Asks the Public: “Our Hand Is Out. Meet Us Halfway.”

Two of Milwaukee’s corporate landlords are selling houses. One is making huge profits while the other is losing money.

Three large, private equity-backed corporate landlords operate in Milwaukee’s house rental market. All three began buying lots of Milwaukee houses in 2018 or 2019, and they ended 2022 owning just shy of 1,500 homes in total. The largest, VineBrook Homes, bought over 450 houses in Milwaukee last year, according to city parcel records.

But all three companies mostly ceased buying houses by late 2022, and in fact, two of the three have spent early 2023 selling houses. One of the companies, SFR3, has made double the money it spent to buy those properties. The other company, VineBrook, has actually lost money on these transactions. The third company, Highgrove Holdings, ended its buying spree months before the other two, and likewise hasn’t sold anything recently.

The different trajectories of these three companies give clues to their financial health, business strategy, and potential consequences they may have on Milwaukee neighborhoods.

In some ways SFR3 and VineBrook follow similar business models. Both are private companies which raise money by selling securities to qualified investors. Over the past few years, each has bought thousands of cheap houses across cities in the midwest and south.

In Milwaukee, each focuses on single family homes usually worth around $100,000. They mainly buy homes on the north side of the city–either north of Capitol Drive or west of 35th Street. VineBrook is much larger. At the end of 2022, they owned about 950 houses in Milwaukee and 27,000 across the country. SFR3 owned about 240 in Milwaukee, while their website claims “thousands of single-family rentals” in total. Neither are primarily flippers; instead, they follow a buy-to-rent business model.

Before 2023, I can find no records of VineBrook selling a single house in Milwaukee. SFR3 was more willing to flip their recent acquisitions, selling 14 in 2021 and 45 in 2022. Through mid-May 2023, SFR3 has recorded 25 more house sales and VineBrook 13.

I was able to directly compare the sale price with the purchase price in 23 of SFR3’s sales this year. They paid $2,084,630 for those 23 properties, owned them for an average of 67 weeks, and sold them for $4,218,000–a profit rate of 102%. Twenty of the houses were sold to an owner-occupier, according to transaction returns filed with the Wisconsin Department of Revenue.

Direct comparisons were possible for 11 of VineBrook’s 2023 sales, all of which took place between March 16th and May 12th. VineBrook paid $966,112 for these 11 properties, owned them for an average of 103 weeks, and sold them for $909,500–a loss of 6%. They only sold one of these properties to an owner-occupier.

SFR3 made a profit in each comparable home sale–not counting any rehab expenses. Their biggest gain came on a house they bought on the 1500 block of N. 57th Street, in the Washington Heights neighborhood. They paid $153,000 in November 2021 and sold it for $331,000 in February 2023.

VineBrook lost money in 6 sales and sold for more than they spent in 5. Their biggest gain was just $15,000. They paid $85,000 in June 2021 for a house on the 2900 block of N. 46th St, and they sold it for $100,000 in May 2023.

Their worst loss came just a few blocks away, on the 2300 block of N. 47th. That house was purchased out of foreclosure by an owner-occupier for $33,000 in December 2019. Then, that buyer sold to VineBrook for $109,000 in December 2020. VineBrook sold it to another owner-occupier for $50,000 in April 2023. This appears to be the rare instance where two owner-occupiers made out well at the expense of a private equity firm.

Why is SFR3 so much better at selling for a profit than VineBrook? It appears that SFR3 is both a savvier buyer and a more patient seller than its larger rival. Take those 23 SFR3 sale comparisons from this year. When SFR3 bought them, they paid just 89% of the then-assessed value of the properties. When they sold, they received 162% of the current assessed value. (Assessed values are based on property sales in the previous year or two.)

By comparison, VineBrook originally payed 115% of the assessed value of the houses it went on to sell in 2023. When it sold them, it received just 83% of the current assessed value.

SFR3 made shrewder purchases to begin with, but it also made more money by selling to owner-occupiers who are willing to pay top dollar. VineBrook apparently overpaid for houses to begin with, and it also appears to be selling hastily, usually to other landlords.

VineBrook’s troubles extend far beyond Milwaukee. In January, they forfeited $41 million in initial deposits after terminating purchase agreements to buy about 2,900 more houses (not in Wisconsin). This contributed to their $92.4 million net loss in the first quarter of 2023. By comparison, VineBrook reported a net loss of $2.7 million in the first quarter of 2022. VineBrook also faces challenges from rising interest rates. As of March 31, the company’s total debt was $2.6 billion, of which $1.9 billion was in floating interest rate loans.

In an April 2023 letter to shareholders, VineBrook’s CFO described their intention to “opportunistically pursue dispositions that offer the ability to recycle capital into accretive opportunities and reduce our exposure to sub-scale markets. In addition to using net proceeds from sales to further fund our revitalization program, we intend to use the remaining net proceeds to de-lever the Company, improving our balance sheet and the strength of the Company.”

In plain English, the company intends to spend 2023 selling houses in order to pay off debt.

Highgrove Holdings and SFR3 aren’t required to make the same kinds of detailed financial disclosures, so we have less insight into the health of their balance sheets. Still, the fact that SFR3 only sells their homes for substantial profits, while Highgrove has sold nothing at all, suggests that they don’t currently face the same financial crunch as VineBrook.

As Milwaukee’s home rental market grows more consolidated, we may see more situations where large landlords facing financial difficulties seek to offload many properties at once. VineBrook’s current willingness to sell their houses at relatively cheap prices has mainly just benefited other landlords. The house on 47th Street described above is the exceptional case in which VineBrook’s struggles actually benefited a local homeowner.

Continue ReadingTwo of Milwaukee’s corporate landlords are selling houses. One is making huge profits while the other is losing money.

Chicago and the Great Lakes Compact

Chicago’s water policy has been a regular subject of conversation at the Law School, whether in the form of public events, faculty scholarship, or blog posts. So, too, has the history and development of the Great Lakes Compact.

Great Lakes from space

Today’s post digs into the unique relationship between the two, given the recent announcement that Chicago has entered into a water supply agreement with the city of Joliet, approximately 35 miles to the southwest. Chicago will supply treated Lake Michigan water to Joliet for a century, beginning in 2030, at a cost estimated to approach $1 billion in today’s dollars. The Cleveland Plain Dealer called the deal a “stark warning” for the Great Lakes Compact. A USA Today column questioned, “How could Chicago [do that]?” The question likely invokes the Compact’s general prohibition on diversions outside the Great Lakes basin, with very limited exceptions. The answer lies in a 1967 amendment to a consent decree involving Illinois and other Great Lakes states, approved by the United States Supreme Court, that largely exempts Chicago from following the Compact’s rules.

The 1967 decree allots to Chicago (and several suburbs, via the Chicago water distribution system) a diversion volume of 3,200 cubic feet per second, or just over two billion gallons per day. The legal disputes that eventually resulted in the decree date back to Chicago’s reversal of the Chicago River, an engineering marvel resulting in no shortage of legal skirmishes. In a case argued before the Supreme Court in 1928 and decided a year later, Wisconsin, Michigan, and New York sued Illinois seeking to enjoin the Chicago diversion—then estimated at 8,500 cubic feet per second—because, they alleged, “the Chicago diversion had lowered the levels of [the Great Lakes and their connecting waterways] not less than six inches, to the serious injury of the complaining states.” The Court ultimately allowed the diversion to continue but capped its size to an amount that varied over decades of subsequent litigation until finally settling on 3,200 cfs in the 1967 decree.

Notably, the Court retains jurisdiction over the decree. From time to time a state has sought to reopen it. In 2010, for example, the Court denied Michigan’s motion to reopen the decree on the grounds that the diversion constituted a public nuisance by allowing the introduction of harmful aquatic invasive species into the Great Lakes.

The Compact’s default approach, a ban on diversions of Great Lakes water outside the Great Lakes basin, would prohibit the Chicago diversion. So there is no doubt that Illinois would not have agreed to the Compact without special carveout provisions protecting its rights to the Chicago diversion under the consent decree. The Compact does just that, in a lengthy section confirming that Great Lakes water use in Illinois is to be governed by the consent decree, not the Compact. In fact, to remove all doubt, the Compact actually prohibits Illinois from applying for diversions under its terms.

The precise terms of the Chicago-Joliet agreement are difficult to find, with the media reporting only the broad outlines of the deal. The Water Supply Agreement attached to the Chicago City Council’s approval provides that “Chicago shall deliver Water to Joliet on any day in an amount as requested by Joliet,” up to a “guaranteed maximum capacity” of 105 million gallons per day. That sounds like a lot of water—and it is—yet even at maximum capacity only accounts for about 0.05% of Chicago’s allocation under the consent decree.

Thus, there is little question that Chicago has the legal authority to sell water to Joliet. And even the maximum delivered volume is a drop in the bucket of Chicago’s allocation under the 1967 consent decree.

Yet the question remains whether it is good policy to sell water for economic development purposes. Some have suggested that as other parts of the country implement water use restrictions, the Great Lakes states should use water as a tool to attract new businesses and residents. Others argue that our abundant water supplies must be carefully stewarded. Finding the right middle ground will be challenging.

As for the Compact, the Joliet sale is perhaps foreboding, as the media coverage has suggested. But its immediate impact is limited to the amount of Chicago’s diversion. Greater difficulties await. At another recent Law School conference, this one commemorating the Compact’s tenth anniversary, former Wisconsin governor Jim Doyle suggested that the Compact’s greatest test would come when a signatory state faced a water crisis in a region outside the Great Lakes basin. Would the governor stick to the Compact and deny water to its own citizens, Doyle wondered? That is exactly the situation unfolding in Illinois, a Great Lakes state that is not governed by the Compact with respect to the Joliet crisis. But the implications for the other Great Lakes states – and the resulting concerns for the future – are unmistakable.

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