Politics & Government

Numbers Emerging on City's Losses in Lawsuit – and They Aren't Pretty

Taxpayers could be hit for about $4 million in additional taxes, and schools could eat some $2 million more.

The mood was grim Tuesday at City Hall.

The city was just starting to lick its wounds and didn't have a close calculation of its dollar losses in a , but some rough figures were starting to emerge.

The figures are not attractive. According to one alderman, Wauwatosa taxpayers will be tapped for close to $4 million more on their tax bills, and that might be a conservative estimate.

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On top of that, the it received in the disputed case, which might come to $2 million or more.

It's all in the actuarial math, and the numbers are still being crunched.

Find out what's happening in Wauwatosawith free, real-time updates from Patch.

Wauwatosa was sued by Covenant Healthcare, now Wheaton Franciscan Healthcare, over taxes on the medical facility it built in 2003 at 201 N. Mayfair Rd. Wheaton contended that part of the facility should be tax-exempt, but Tosa differed and has assessed property taxes on the property ever since.

Tuesday, Wheaton prevailed in the state's highest court, and now Wauwatosa has to repay about $8.5 million in taxes, interest and legal fees. But Tosa, by law, can recoup much of the total from the other entities for which it collects property taxes, including all the principal paid to , Milwaukee County, the Milwaukee Metropolitan Sewerage District and the Milwaukee Area Technical College — the separate line items on your tax bill.

Tosa's taxpayers, however, are alone responsible for the city's large share of property tax levies and for all the interest and legal fees accrued over eight years of litigation.

"It's bad," said Ald. Peter Donegan. "It's going to hurt. We're going to have to borrow."

The city will have to pay back the full amount at once if Wheaton Franciscan demands it, and there is no magic pot of money big enough to provide that cushion.

City Attorney Alan Kesner said that the city's share of the property tax levy was about 30 percent, and the school district's share was "30-ish."

Actually, it's just a bit on the "-ish" side. Look at your 2010 tax bill, and the calculation shows that 32 percent of your property taxes went to the schools and 31.5 percent went to the city. Another 24.5 percent went to Milwaukee County, and the remaining 12 percent was split between MMSD and MATC.

Since the city alone is liable for its share plus all interest and legal costs, it will bear the brunt. But the Tosa schools will bear a heavy burden as well, as the recipient of the largest share of tax revenues.

The missing figures in the equation are just how much of the $8.5 million total are eaten up in interest and lawyer's fees on both sides. While the city employs Kesner and a legal staff, it hired outside counsel to argue its case.

"I think it's going to come to between $3 million and $4 million" as the city taxpayers' share, said Common Council President Eric Meaux, "and I'd say on the high side."

Another question was why the city let itself get into the position of having to pay back $8.5 million that was under litigation for eight years. City Attorney Kesner said Tuesday that the city considered escrowing the revenues against the possibility of losing, but didn't because it would still have had to pay the schools, the county, MMSD and MATC their shares — "not an appropriate strategy," Kesner said.

Donegan agreed, saying, "I can't fault the city for not escrowing those funds, because we would have had to tax citizens for those monies being paid out and for which they weren't receiving services."

But Ald. Dennis McBride thought differently, saying, "If they had escrowed that revenue, it would have been a very small part of anyone's tax bill year-to-year, and it would have been accruing interest, and we'd be able to pay it back now without all this harm.

"I'm considering introducing an ordinance to require us to escrow any funds that are under litigation, so this doesn't happen again."


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