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Tosa's tax chargeback plan likely biggest in state's history

DOR to review Tosa's request to recoup money

Oct. 12, 2011

City officials hope the Wisconsin Department of Revenue will approve about $2.1 million in refunds from other taxing entities to help cover a portion of the property tax settlement paid to Wheaton Franciscan Healthcare. If the state agrees, Wauwatosa's request would rank as the largest single chargeback issued.

In any given year, chargebacks are used to make minor adjustments to the tax roll. The size of this request - it returns money for several subsequent years' property tax payments - sets it apart, City Attorney Alan Kesner said.

"They've never had one this large," he told the city's Budget and Finance Committee on Tuesday.

The city has provided information to the state indicating it has no choice but to collect refunds from the Wauwatosa School District, Milwaukee County, Milwaukee Metropolitan Sewerage District and Milwaukee Area Technical College for their portions of the taxes levied on the outpatient health care facility property at 201 N. Mayfair Road. The Supreme Court this summer ruled that a large portion of the property qualifies as tax exempt.

The chargebacks don't come as a surprise to the other taxing entities. Wauwatosa Finance Director John Ruggini has been in talks with officials from each group so they can find ways to come up with their portion of the money.

County Executive Chris Abele has put Milwaukee County's refund in his budget, City Administrator James Archambo said.

The Wauwatosa School Board on Monday talked over the city's offer to borrow on the school district's behalf and use the anticipated 2015 payout of the Milwaukee County Research Park tax district to pay off the loan. No decision was made, but the board is likely to go along with the plan, Archambo said.

To keep from losing state aid, the district needs to issue a one-time tax levy increase upfront or pay it off with the tax district disbursement, city staff said.

The school district needs to let the city know which option it will choose by Nov. 15 so tax bills can be prepared in time for the December mailing. However, for borrowing purposes the city would like to have a decision in two weeks, Ruggini said.

Committee members supported a plan to replenish the $8.4 million paid to Wheaton Franciscan with money from the city's health insurance reserve fund, chargebacks and borrowing money that would be paid off from its portion of the tax district payout.

Financial rating agencies are in the mood to downgrade due to the economy and financial issues facing all levels of government, Ruggini said. He spoke with analysts from one of the firms and while they won't give actual advice, "when we talked through this scenario they were as supportive as a rating agency could be," he said.

Research Park, Innovation Park roles

The success of the Milwaukee County Research Park tax district will not only help the city, and possibly the school district, pay off their portion of a multimillion-dollar court settlement, it should help prepare for the University of Wisconsin-Milwaukee's Innovation Park project.

Since its inception, a section of the County Grounds where the historic Eschweiler buildings stand has been included in the Research Park.

The city also created a special tax district last year for Innovation Park, which overlaps with Research Park. That makes the housing development portion of Innovation Park eligible to use money generated by the Research Park.

The funds will help pay for running utilities to the other side of Highway 45, city staff said.

Finance Director John Ruggini sat down with representatives of both projects to determine what improvements still need to be made to Research Park and what projects would be eligible for funding in Innovation Park. The to-do list needs to be finished prior to closing out Research Park's tax district and disbursing payments to taxing entities.

There was an indication that the Research Park district could close out in 2013, but with the added projects the target is now 2015. At that point, Ruggini anticipates a payout of $8 million to $9 million to be split among taxing entities.

The city loaned $12 million to Innovation Park for infrastructure and site preparations. At the time, the funds were expected to be paid back in about 20 years.

Assistance from the Research Park district only shortens that time frame and increases Innovation Park's value, city officials said.

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