Funds help pay for tax settlement
By Holly Neumann
The Board of Commissioners of Public Lands approved a State Trust Fund Loan totaling $238,458 to the city of Manawa to finance a tax settlement with Treehouse Foods.
“When Treehouse Foods purchased Sturm Foods, they had an attorney [Bob Hill] come in and basically convince them that they were paying too much in taxes, and if they worked with him, he could get their taxes reduced,” Mayor John Smith said. “This has been going on since 2011.”
After the city had multiple meetings with Treehouse and the Tax Appeals Commission, the commission ruled that the Department of Revenues assessments were correct within $1 million.
“So they took it to the next level which was the circuit court,” Smith said.
The circuit court ruled that the Tax Commission and the Department of Revenue were correct in their assessments.
“Treehouse Foods and Mr. Hill, took it to file a petition with the Supreme Court,” Smith said.
It was recommended that the city meet with a mediator to discuss the issue.
“The mediator sat with myself and the city clerk, and told us that he was informed that this would be a case that the Supreme Court was going to take to set precedence, as far as the dark store strategy and that we really needed to settle, if we didn’t we would lose approximately another $8-$12 million in value,” Smith said.
This was the second attempt at mediation.
“In 2016 we went to Madison for mediation and Treehouse Foods’ Manawa locations’ value finally went up $11 million to catch up with all the expansions they have done,” said Smith. “In that mediation, the city offered a $5 million reduction to that increase, in an effort to settle, but Mr. Hill and another attorney said absolutely not and left mediation. So this is what took us to mediation and circuit court in 2017.”
According to the Wisconsin State Legislature website the Dark Store Tax Loophole bill provides that, for property tax assessment purposes, to determine the value of property using generally accepted appraisal methods, an assessor must consider all of the following as comparable to the property being assessed:
• Sales or rentals of properties exhibiting the same or a similar highest and best use with placement in the same real estate market segment.
• Sales or rentals of properties that are similar to the property being assessed with regard to age, condition, use, type of construction, location, design, physical features, and economic characteristics.
The bill defines “real estate market segment” to mean a pool of potential buyers and sellers that typically buy or sell properties similar to the property being assessed, including potential buyers who are investors or owner-occupants.
The bill also provides that a property is not comparable to the property being assessed if the seller has placed restrictions on the highest and best use of the property or if the property is dark property and the property being assessed is not dark property. The bill defines “dark property” as property that is vacant or unoccupied beyond the normal period for property in the same real estate market segment.
“What the Dark Store Strategy uses is the best use if there was nothing in that building, would be a warehouse,” Smith said. “In the Tax Appeals Commission, Mr. Hill was able to get comparable from out of state, which were closed up, dilapidated poultry processing facilities, not current use, state of the art, food grade facilities.”
The city has settled in mediation, for roughly a $10 million reduction in taxes. Part of the negotiation included that Treehouse Foods would not appeal the 2016 tax year.
The amount of $238,458, will be split between the city of Manawa, Fox Valley Technical College, Manawa School District and Waupaca County.
“The city has to pay all of it up front and we have to take out a loan to pay it back,” Smith said. “We then have to charge it back to all other entities.”
What does this mean to the city of Manawa?
Taxes for both residential and commercial property owners will rise.
“For this year it means that everyone’s taxes are going to be going up, because the state left its value at the old rate,” Smith said. “In the future, we could be cutting services. So for our streets that are normally plowed, salted and sanded to the point of almost being bare, we will have to determine a priority list of what gets plowed and when it gets plowed. We probably won’t be calling the guys in early or having them work overtime. We won’t be able to afford it. We may have to cut police services.”
Smith said he is concerned not only for the city but also for the school district.
“Basically what they have done is taken anything out of our budgets that we could have used to make improvements or upgrades or even sometimes just to maintain. No one has this kind of money besides the company that is making $100 million in net profits,” he said. “The school is in a tough situation trying to work with a tight budget and there are improvements that need to be done. For the city our street budget is going to take a huge hit. We won’t be doing streets improvements next summer and who knows how long it will be before we can start doing them again.”
Smith encourages people to contact their legislators.
“You need to call Luther Olson and Kevin Peterson and tell them the dark store strategy needs to go,” said Smith. “It’s unfair.”
The loan amount will only cover what is owed to Treehouse Foods. It will not cover the $40,000 in legal fees that have incurred.