HomeMy WebLinkAbout08-424NOVEMBER 11, 2008 08 -424 RESOLUTION
(CARRIED 7 -0 LOST LAID OVER WITHDRAWN )
PURPOSE: APPROVAL OF SETTLEMENT AGREEMENT AND RELEASE OF
CLAIMS FOR EXCESSIVE ASSESSMENTS / BROOKSIDE NORTH
APARTMENTS, LLP; BROOKSIDE OF OSHKOSH, LLC;
HAVENWOOD HEIGHTS, LLC; HAVENWOOD LAKE, LLC;
COUNTRY PARK APARTMENTS, LLC; MAPLE COURT
APARTMENTS, LLC; AND MIDWEST REAL ESTATE
DEVELOPMENT COMPANY, INC.
INITIATED BY: LEGAL DEPARTMENT
BE IT RESOLVED by the Common Council of the City of Oshkosh that the attached
Settlement Agreement and Release of Claims for Excessive Assessments between the
City of Oshkosh and Brookside North Apartments, LLP; Brookside of Oshkosh, LLC;
Havenwood Heights, LLC; Havenwood Lake, LLC; Country Park Apartments, LLC; Maple
Court Apartments, LLC; and Midwest Real Estate Development Company, Inc is hereby
approved and the proper City officials are hereby authorized to execute and deliver the
agreement in substantially the same form as attached hereto, any changes in the
execution copy being deemed approved by their respective signatures, and said City
officials are authorized and directed to take those steps necessary to implement the terms
and conditions of the Agreement.
BE IT FURTHER RESOLVED that money for this purpose is hereby appropriated
from:
Acct. No. 100- 0908 - 6469 -00000 - Tax Refunds and Bad Debts
CITY HALL
215 Church Avenue
P.O. Box 1130
Oshkosh, Wisconsin
54903 -1130 City of Oshkosh
—
O rHKOfH
TO: Honorable Mayor and Members of the Common Council
FROM: Lynn A. Lorenson, City Attorney
DATE: November 6, 2008
RE: Res 08 -424 Approval of Settlement Agreement and Release of
Claims for Excessive Assessments / Brookside North Apartments,
LLP; Brookside of Oshkosh, LLC; Havenwood Heights, LLC;
Havenwood Lake, LLC; Country Park Apartments, LLC; Maple
Court Apartments, LLC; and Midwest Real Estate Development
Company, Inc.
BACKGROUND
Brookside North Apartments, LLP; Brookside of Oshkosh, LLC; Havenwood
Heights, LLC; Havenwood Lake, LLC; Country Park Apartments, LLC; Maple
Court Apartments, LLC; and Midwest Real Estate Development Company, Inc.,
collectively "Midwest ", as the owners of various apartment complexes and an
office building located in the City of Oshkosh filed a lawsuit claiming excessive
assessments had been levied against their properties and seeking a refund of a
portion of the taxes that had been paid on the various properties. The claims
relate back to the City's revaluation in 2005, with the initial lawsuit being filed in
2006. Thereafter, the succeeding tax years were joined in the same lawsuit.
The City was represented by Attorney Richard Carlson through the City's
insurance carrier.
This item is before the Council for approval of the proposed settlement that the
parties have negotiated.
ANALYSIS
As part of the revaluation process, various apartment complexes and the office
building owned by Midwest were reviewed and the assessments for these
properties adjusted. Midwest appeared at the Board of Review to contest the
0
various assessments and thereafter filed a lawsuit under the provisions of the
state statutes dealing with excessive tax claims. As part of the lawsuit process,
Midwest hired an appraiser who performed a full appraisal of each of the
disputed properties. The City also reviewed each of the properties in greater
detail with respect to the information received from Midwest and their appraiser.
The parties participated in formal mediation in the fall of 2007 but were unable to
reach a resolution of the matter at that time. However, the parties continued to
review the matters and to discuss the possible resolution of these matters. On
October 15, the parties met and were able to reach a proposed settlement which
would result in a total reduction of value over all of the apartment properties of
$2,977,300. This reduction in assessed value would result in a refund of
$224,100 in taxes and statutory interest. There was no reduction made on the
value of the office building.
Staff is recommending that the Council approve the proposed settlement. We
believe that the methodology that was used in the assessment process was
reasonable and sound. Valuation is not a bright line, but by its nature provides
legitimate arguments for both sides. Various factors, including the amount of
income attributable to a property, comparable sales of other properties, and
capitalization rates to name just a few, play into the determination of value for
properties and the weight that is placed upon each factor also affects the
determination of value.
City assessors have traditionally focused upon comparable sales when valuing
the apartment buildings. Income information for apartments within the City was
very limited and so was given little weight in the valuation process. Midwest's
appraiser, by contrast, focused heavily upon the income approach for
determining the value of the individual apartment buildings. The risks associated
with this difference in methodology is a potential difference of $15,182,000. If
the court were to reduce the assessments for the properties by that amount, the
estimated refund, including interest, would have been approximately $1,245,400.
In addition, the prevailing party may be entitled to costs which would include the
costs of the experts retained. If the City should not prevail in the litigation, there
may be additional costs assessed. Although these costs may be covered by the
City's insurance, staff did consider those costs as well as time and other factors
when evaluating the proposed settlement.
By approving this settlement prior to this year's budget adoption, the City would
make the adjustments to this year's assessment prior to the tax bills being sent
out. This would allow the City to avoid an additional claim for the current year
and additional interest should Midwest have prevailed in whole or in part on their
claims.
FISCAL IMPACT
The proposed settlement would result in an assessment reduction for the nine
properties at issue in a total amount of $2,977,300. For the years 2005, 2006
and 2007, the City would refund to Midwest $192,154 for taxes paid and $31,946
for statutory interest. The amount refunded for taxes would include taxes paid to
other taxing entities and the City would be allowed to chargeback the portion of
those taxes attributable to those entities in 2008.
RECOMMENDATION
Staff recommends that the Council approve the settlement and release.
I will not be attending Tuesday's Council meeting as I have a conflict with an
event for my son. I will be in the office on Monday and Tuesday. If you have any
questions or concerns about this matter, please contact me prior to the meeting.
i ectfully Sub ' ted,
nn A. Lorenso
City Attorney
Approved:
Mark A. Rohloff
City Manager
SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE is made by and between
Brookside North Apartments, LLP; Brookside of Oshkosh, LLC; Havenwood Heights, LLC;
Havenwood Lake, LLC; Country Park Apartments, LLC; Maple Court Apartments, LLC; and
Midwest Real Estate Development Company, Inc., collectively "Midwest" on the one hand, and
the City of Oshkosh, Winnebago County, Wisconsin ( "City "), on the other hand:
WHEREAS, Midwest, as the owner of real property in the City of Oshkosh, brought an
action under Section 74.37(3) Stats., claiming excessive assessments and seeking a refund on a
portion of real estate taxes paid for the years 2005, 2006 and 2007, in Winnebago County Circuit
Court, Case No. 06 -CV -836; and
WHEREAS, the City has denied that its assessments were excessive and that Midwest is
entitled to a refund of a portion of real estate taxes paid for the years 2005, 2006 and 2007; and
WHEREAS, Midwest and the City are desirous of resolving the dispute without further
expenses and the uncertainty of a trial in this matter,
NOW THEREFORE, in consideration of the following representations, promises and
other valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
Midwest and the City agree as follows:
1. Assessments. The assessed values of the real property for the years 2005, 2006, 2007
and 2008 shall be revised and reduced as set forth in Table 1 attached hereto as Exhibit 1. The
assessed values for 2009 shall be the same as 2008 unless there is a city -wide revaluation of
commercial properties; improvements requiring a building permit are made to a property; or
there is an arm's length sale of a property.
2. Tax Refund. The City tax refunds along with statutory interest for the years 2005,
2006 and 2007 shall be as set forth in Table 2 attached hereto as Exhibit 2. The refunds shall be
paid pursuant to the provisions of Section 74.41 Stats.
3. Release. Brookside North Apartments, LLP; Brookside of Oshkosh, LLC; Havenwood
Heights, LLC; Havenwood Lake, LLC; Country Park Apartments, LLC; Maple Court
Apartments, LLC; and Midwest Real Estate Development Company, Inc., on behalf of
themselves, their officers, partners, directors, agents, shareholders, subsidiaries, affiliate entities,
and all other persons or entities who may make a claim of excessive assessment/ taxation in
connection with the properties, hereby release, satisfy and discharge the City from any and all
claims that have been asserted or could have been asserted for excessive assessments/ taxation
for 2005, 2006, 2007, 2008 and 2009, including but not limited to, Winnebago County Circuit
Court Case No. 06 -CV -836.
4. Assignment / Interest. The releasing parties above warrant and represent that no other
person or entity has any interest in any of the claims, assertions, damages or other liabilities or
obligations which are referenced in the Agreement.
5. Dismissal. The releasing parties and the City shall execute a Stipulation and Order for
the dismissal with prejudice of Winnebago County Circuit Court Case No. 06 -CV -836.
6. Authority. Each party warrants and represents that the undersigned are empowered
with the authority to bind the parties along with their past, present or future agents, assigns,
directors, partners, employees, members, officers and successors to the provisions of this
Agreement by executing same.
7. Modification. The terms of this Agreement constitute the entire agreement of the
parties. This Agreement may only be amended or modified by a writing which specifically refers
to this Agreement and which has been signed by the partners.
Dated this T day of November, 2008.
14 ul i a i �DR�
Brookside North Apartments, LLP
CITY OF OSHKOSH
Mark Rohloff, City Manager
Brookside of Oshkosh, LLC
Havenwood Heights, LLC
Havenwood Lake, LLC
Steven Schwoerer, City Assessor
Lynn Lorenson, City Attorney
Pamela Ubrig, City Clerk
Country Park Apartments, LLC
Maple Court Apartments, LLC
Midwest Real Estate Development Company, Inc.
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