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HomeMy WebLinkAbout09-224JUNE 9, 2009 09 -224 RESOLUTION (CARRIED 7 -0 LOST LAID OVER WITHDRAWN ) PURPOSE: APPROVAL OF SETTLEMENT AGREEMENT WITH WALGREEN CO. FOR EXCESSIVE ASSESSMENTS FOR PROPERTY LOCATED AT 950 SOUTH KOELLER STREET INITIATED BY: LEGAL DEPARTMENT BE IT RESOLVED by the Common Council of the City of Oshkosh that the attached Settlement Agreement between the City of Oshkosh and Walgreen Co. 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: /_3R•1�Iiii►no E tell] ile-OI: 1 0El[-1 F-71= M TWTrI:] 0e 190 "eW SETTLEMENT AGREEMENT Agreement between Walgreen Co. ( "Walgreens "), a corporation organized and existing under the laws of the State of Illinois and registered and authorized to conduct business in the State of Wisconsin, and the City of Oshkosh, Wisconsin (the "City "), a municipal corporation organized and existing under the laws of the State of Wisconsin. 1. Definitions In this Agreement: (a) The "Property" means the land and improvement on parcel number 1308480200 located at 950 South Koeller Street in the City of Oshkosh, Wisconsin. (b) "Case" means the action pending in the circuit court for Winnebago County, Wisconsin titled Walgreen Co. v. City of Oshkosh; Case No. 08 CV 1192. (c) "Court" means the Circuit Court for Winnebago County. (d) A "tax year" means a year in which an assessment is made as of January 1, with taxes based on the assessment payable in the year following the tax year. 2. Refund of Taxes for 2007 The City shall issue a refund payable to Walgreen Co., c/o Robert Hill & Associates IOLTA Trust Account, or to another account designated by Walgreens in writing, pursuant to Wis. Stat. § 74.37, in the amount of $8,344.03 as a refund of property taxes previously paid by Walgreens based on the property tax assessment of the Property for tax year 2007. 3. Reduction of Taxes for 2008 Based on the initial assessment of the Property for tax year 2008 of $4,093,600, the total property tax liability for the 2008 tax year was $91,577.77 (net of the First Dollar Credit of $28.81). As of the date of this Settlement Agreement, Walgreens has remitted a total of $68,683.33 against its liability for property taxes based upon the property tax assessment of the Property for tax year 2008. The City previously granted a partial refund in the amount of $14,359.96 and, with this Settlement Agreement, supplements this partial refund with an additional refund amount of $8,456.65, for a total refund of $22,816.61 for tax year 2008. The refund of $22,816.61 shall be applied to the payment due on July 31, 2009, leaving a balance due of $77.83. 4. Waiver of Costs and Interest Each party waives all claims for costs. Except as provided in section 5, Walgreens waives any claim to interest on the refund amount. 5. Time of Payment The City shall pay the refund of taxes provided in section 2 of this Agreement in full, no later June 30, 2009. The City shall pay Walgreens interest on the unpaid principal amount of the refund at the rate of 0.8% per month from June 30, 2009 to the date payment is made. 6. Removal of Case from Trial Calendar Within 5 days of receiving an executed copy of this Agreement, the parties shall immediately inform the Court that the parties have entered into a settlement agreement and shall jointly request the Court to remove the Case from the trial calendar and set aside any scheduling orders then in effect. 7. Stipulation for Dismissal Within ten days after Walgreens receives payment in full of the refund of taxes provided in section 2 of this Agreement, the parties shall: (a) Enter into a stipulation, in the form attached as Exhibit 1 to this Agreement and signed by their respective attorneys, for the dismissal of the Case (including, but not limited to, all claims asserted in the Complaint in the Case) on the merits, with prejudice, and without costs to either party; and (b) File the stipulation with the Court. 8. No Admissions of Liability or Concerning Assessments or Fair Market Value This Agreement is the settlement of disputed claims. Neither party makes any admission about the assessments or the fair market value of the Property. 9. Responsibility for Fees and Expenses of Attorneys and Experts Each party shall be solely responsible for the fees of its attorneys and experts. 10. No Representations Each party acknowledges and agrees that no representation or promise not expressly contained in this Agreement has been made by the opposing party or any of its employees, attorneys, agents, or representatives. Each party acknowledges that it is not entering into this Agreement on the basis of any such representation or promise, express or implied. 11. Binding on Successors This Agreement shall be binding upon and inure to the benefit of each of the parties and their respective heirs, successors, and assigns. 12. Governing Law This Agreement shall be governed and interpreted by the laws of the State of Wisconsin. 2 13. Interpretation of Agreement The parties acknowledge that this Agreement is the product of joint negotiations. If any dispute arises concerning the interpretation of this Agreement: (a) Neither party shall be deemed the drafter of this Agreement for purposes of its interpretation. (b) The parties shall attempt in good faith to resolve the dispute. (c) If the parties cannot resolve the dispute after reasonable efforts, the dispute shall be submitted to mediation, at the request of either party. The mediator shall be jointly agreed on by the parties or, if they are unable to agree, shall be appointed by the Court at the request of either party. 14. Representation By Counsel, Reliance Each party acknowledges that it has been represented throughout all negotiations leading up to this Agreement by attorneys of its choice and that its attorneys have approved this Agreement. Each party represents that in entering into this Agreement, the party has relied on its own judgment and on the advice of its attorneys, and that no statements or representations made by the other party or any of its agents, except statements or representations expressly made in this Agreement, have influenced or induced the party to sign this Agreement. 15. No Assignment or Transfer Walgreens represents and warrants that it has not assigned or transferred to anyone and will not assign or transfer to anyone any of the claims in the Case. 16. Entire Agreement This Agreement states and constitutes the entire agreement of the parties concerning its subject matter and supersedes all prior or contemporaneous agreements (written or oral), representations, negotiations, and discussions concerning its subject matter, including but not limited to, all agreements (written or oral), representations, negotiations, and discussions made in the course of mediation of the Case. 17. Use of this Agreement This Agreement shall not be filed with the Court in this Case or in any other case or proceeding, except for the purpose of enforcing this Agreement. This Agreement and any part of this Agreement shall not be admissible in the lawsuit or in any future judicial or administrative proceeding and shall not be offered as evidence or presented by any Party in the Lawsuit or any future judicial or administrative proceeding, except for the purpose of enforcing this Agreement. 18. No Admissions of Liability or Concerning Assessments or Fair Market Value This Agreement is the settlement of disputed claims. By entering 3 into this Agreement, the City does not admit any liability to Walgreens for any of the claims asserted in the Case or Walgreens' objections to the assessments, and the payments made under this Agreement shall not be construed as an admission of any such liability. Neither Party makes an admission about the assessments or the fair market value of the Property for the tax years 2007 and 2008 or any other date nor any other admission concerning the assessments of Walgreens' property. 19. Waiver. No waiver of any breach of this Agreement shall be deemed a continuing waiver of that breach or a waiver of any other breach of this Agreement. 20. Amendments or Modifications This Agreement may not be amended, modified or altered in any manner whatsoever, except by a further written agreement duly authorized and signed by the parties. 21. Authorization to Sign Agreement Each person signing this Agreement on behalf of either party represents and warrants that the person holds the position indicated beneath the person's signature and that the person has the requisite corporate or other authority to sign this Agreement on behalf of the party. Each party represents that entry into this Agreement is not in contravention of any agreement or undertaking to which the party is bound. 22. Reading of Agreement Each person signing this Agreement on behalf of either party acknowledges that the person has read this Agreement, that the person understands the terms and conditions of this Agreement, that the person (if other than an attorney for the party) has been advised by legal counsel concerning this Agreement, and that the person freely and voluntarily signs this Agreement. 0 WALGREEN CO. By: Reinhart Boerner Van Deuren s.c. 22 East Mifflin Street, Suite 600 Madison, WI 53703 Don M. Millis State Bar ID No. 1015755 Jessica Hutson Polakowski State Bar ID No. 1061368 Attorneys for Walgreen Co. CITY OF OSHKOSH By: City of Oshkosh Attorney's Office 215 Church Street Oshkosh, WI 54903 Lynn A. Lorenson State Bar ID No. 1000821 Date: 5 2009 Date: REINHART\2759308DMM:DMM 05/23/09 5 2009 CITY HALL 215 Church Avenue P.O. Box 1130 Oshkosh, 54903-1130 City of Oshkosh 0 TO: Honorable Mayor and Members of the Common Council FROM: Lynn A. Lorenson, City Attorney DATE: June 3, 2009 RE: Approval of Settlement Agreement with Walgreen Co. for Excessive Assessments for property located at 950 South Koeller Street BACKGROUND Walgreen Co. filed a lawsuit claiming excessive assessments had been levied against their property located at 950 South Koeller Street and seeking a refund of taxes paid in relation to that property for the years 2007 and 2008. The City was represented by Attorney Richard Carlson through the City's insurance carrier. The parties to the lawsuit participated in mediation with Judge Gordon Myse on May 21, 2009. After the mediation session, there was additional discussion between the parties and a proposed settlement was reached. This item is before the Council for approval of the proposed Settlement Agreement. ANALYSIS Assessment of property must be made on the basis of its market value or the full value that would ordinarily be obtained for the property at a private sale between willing buyers and sellers. In general, the best indicator of the market value of a property is the recent sale of that same property. The assessor must carefully examine the circumstances surrounding each sale to determine whether the sale price may not be the best indicator of value or whether that sale price may require adjustment to account for other factors such as favorable financing terms, the inclusion of other items in the sale price (such as development costs) or other factors. Q-16 Memo: Walgreen Co.: 6/8/09: Page 2 In 2006 the property located at 950 South Koeller Street was purchased by Inland Southeast Oshkosh Koeller Street ( "Inland ") for $4,325,000. Inland leases the property to Walgreen Co. and Walgreen operates under a recognized business model that may result in Walgreen paying higher- than - market -rate rental payments. This business model was the subject of litigation with the City of Madison for property tax years 2003 and 2004, resulting in a Supreme Court decision issued July 2008. As the Court described it, "(u)nder this model, Walgreen rents property rather than purchasing it, working with developers who find sites for Walgreens' stores at prime locations in heavily trafficked areas, buy out existing businesses located at the desired sites, purchase the property, and build and /or develop it with 'super adequacies' to suit Walgreens needs. Walgreens' lease payments under this business model include compensation to the developer for all such financing, land acquisition, construction, development and financing costs, together with a profit margin." Incorporating costs related to development of the property into the lease may result in lease payments which are higher than the market rent for comparable properties. The City Assessor reviewed the sale of the property located at 950 Koeller and adjusted the sale price down to $3,598,100 to reflect market value of the property based upon market rents of similar prime commercial properties along the Highway 41 corridor. Walgreens appeared at the Board of Review to contest the assessment of the property and thereafter filed a lawsuit claiming that the tax assessed against the property was excessive. Walgreens claimed that the fair market value of the property was no higher than $2,200,000. As indicated above, the City and Walgreens participated in a mediation session with Judge Gordon Myse on May 21, 2009, and thereafter were able to reach a proposed settlement in this matter. Staff is recommending that the Council approve the settlement agreement. The proposed settlement establishes the assessed value of the property at $3,074,000.00. This amount was estimated based upon a fair market rent within the range of current market rents along the Highway 41 corridor. The reduction in the assessed value results in a refund of $8344.03 for 2007 and $8456.65 for 2008. In the settlement agreement, Walgreens is agreeing to waive any interest on the refunded amounts. With regard to the risks of not approving the proposed settlement, if the City would proceed to litigation and should not prevail in that litigation, the City would be obligated to refund any amounts that the court determined were excessive, together with statutory interest on those amounts. In addition, a prevailing party in litigation may be entitled to costs which could include the costs of experts retained as well as other costs of litigation. Should the City not prevail, the City could be assessed additional costs. Memo: Walgreen Co.: 6/8/09: Page 3 FISCAL IMPACT The proposed settlement would result in a refund of the assessments issued for 2007 and 2008 for the Walgreens property located at 950 Koeller in the amounts of $8344.03 and $8456.65 respectively for a total refund amount of 16,800.68. There will be no interest on the refunded amounts. 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. RECOMMENDATION Based upon all of the facts of this case and consideration of the law governing the assessment process, the Staff recommends that the Council approve the settlement agreement. Respectfully Submitted, Lynn A. Lorenson City Attorney Approved: Mark A. Rohloff City Manager