Hike Tax Levy for 2 Years to Recoup City Lawsuit Loss, School Board Advises

In a surprise move, the Wauwatosa School Board advised administrators Monday to boost the school property tax levy over just two years to recover a $2 million payback made to the city after it lost a major tax lawsuit last year.

If the administration heeds the board's wishes, taxes for schools would rise by another $51 a year over the regular levy on a $250,000 home.

Two weeks ago, the board considered options of a three-year or five-year special "charge-back" levy increase to recover the money, which was paid to the city out of reserve funds. Board members were split in that discussion, 3-3, with one member absent.

But Monday night, School Board President Michael Meier put forward his own proposal to replenish the district's reserves over only two years at a higher rate.

His reasoning: Cash reserves are kept to protect the schools from risk in the case of extraordinary events that would demand an immediate and large payout – rather like the lawsuit payout itself. Shorting reserves puts the district in a position where it might have to resort to short-term borrowing to make up the difference.

"We have made the decision as a board that we do not accept the risk position of borrowing," Meier said. "The idea that we would be in a three-year risk position was unacceptable to me."

Rapid repayment vs. lower tax rates

Several board members thought, though, that it was much to ask of taxpayers to raise the levy so much over so short a time. The three-year vs. five-year discussion they had already had was based around spreading out the pain for citizens.

"We have to be mindful of our community's investment," said Sharon Muehlfeld. "Those taxes accrued over 10 years. Is it fair to recoup that in two years?"

Covenant Health Care, now Wheaton Franciscan, sued Wauwatosa in 2003 over collection of property taxes on its Mayfair Road clinics, claiming a large part of the building space should be tax exempt.

The city kept collecting the taxes, and the case wasn't settled until July 2011, when the Wisconsin Supreme Court found in favor of Wheaton and ordered the city to pay the health care company back nearly $8.5 million.

Under state law, in such a case the city may recover the principal in taxes it collected for other entities – Milwaukee County, the Milwaukee Metropolitan Sewerage District, Milwaukee Area Technical College, and the Wauwatosa School District.

The School District's share of that came to $2,053,515.05. That amount was paid back in a lump sum to the city from reserves.

Board member Phil Kroner also argued that it was asking a lot of taxpayers, who had already paid into that $2 million, to pay it back so rapidly.

"After collecting over 10 years," he said, "I don't think we're doing the community any favors recouping over two years."

With that, he offered an amendment to the proposal on the table to spread the special levy increase over four years.

Concerns over a shortage in reserves win the day

But Meier returned to his risk argument.

"It took 10 years to collect it but the stroke of a pen to lose it," he said. "Is it a board position that we back away from an aversion to short-term borrowing? The board has always avoided spending down the fund balance."

Tom Jarosz agreed strongly, saying it was simply sound business practice: The sum is fixed in today's dollars; the longer you stretch out the repayment, the more inflation reduces the value of those dollars.

"You recover it as quickly as you can," Jarosz said. "We're just trying to make the pot right."

In the end, a solid majority of the board was swayed, and Kroner's four-year amendment failed, 5-2, with only Lois Weber joining him.

Weber, in the interest of consensus, then voted in favor of the original proposal as it passed 6-1 with only Kroner still dissenting.

Ertl's contracted extended through 2014

With no debate, the School Board also voted unanimously to extend Superintendent Phil Ertl's contract for two years.

Ertl will be paid $163,738 this year, a 4 percent salary increase.