The Wisconsin Department of Revenue recently found Bucyrus/Caterpillar overpaid on its property taxes during four of the past five years – and, because of it, the city, school district and other taxing bodies owe the mining company more than $1.2 million.
The South Milwaukee City Council last week approved an agreement that will refund that tax overpayment in varying amounts over the next four years. The $1,265,135.22 will be sent to Caterpillar in these installments …
- 2014 (for 2008 overpayment): $283, 073.78
- 2015 (for 2009 overpayment): $540,205.17
- 2016 (for 2010 overpayment): $278,535.58
- 2017 (for 2012 overpayment): $163,320.69
Caterpillar dropped its 2011 appeal as part of the settlement agreement.
Of course, as one of several taxing entities, the city is only on the hook for a portion of each year’s repayment, ranging from more than $56,000 in 2017 to more than $187,000 in 2015. All in, the city’s liability here is more than $437,000. The schools, for instance, are liable for more than $521,000 over the four years, with lesser amounts owed by the county, MATC and state.
I voted for this agreement because it was clear this was the best we can get.
Besides allowing for the gradual repayment plan – vs. requiring the city to pay one lump sum this Jan. 1 — the agreement waives any interest payments Caterpillar could have sought. In exchange, the city waives its right to challenge any Cat property tax assessments between now and 2017. I absolutely do not like that fact – but the benefit of retaining that right seemed relatively small since it is the state, not the city, that assesses industrial properties.
How did this happen? It’s hard to say, since the state makes the final call on industrial assessments. So we are reliant on what they determine (and must pay the price if they are wrong).
The issue in question dates to the days of Bucyrus more than five years ago, when the company first disagreed with the assessments on property outside of the tax incremental financing district (south of Rawson Avenue). The state disagreed. Bucyrus disagreed again. The state disagreed again. And so it went until a court found in favor of Bucyrus (now Cat) … and the state determined the manufacturer had overpaid for those four years. The city was informed of this final decision recently.
I’m certain the downturn in the economy had an impact here. Industrial land and property across the country was simply not worth as much during the time frame in question.
So, what does this mean for the city budget and property taxes? To be determined. The city will use its cash reserves to make the 2014 payment when it’s due in September. After that, future refund amounts can be added to the tax levy and not be subject to any state levy limits. That means it’s likely future homeowner tax bills will be affected by the ongoing refund payments.
South Milwaukee Blog 
I have two questions regarding this:
1. Did the city receive an explanation from the court or the state as to why the assessment was ruled excessive? If not, why not? I would think the city is at least owed that since the state apparently made the mistake.
2. As an alternative to raising taxes, I would hope that the city will be looking at alternatives to pay their portion of the money back (i.e. budget cuts, efficiencies, synergies, etc.). Will this be happening? Since the 2014 payment will be made from cash reserves, it should provide some time to look into alternatives for the 2015 payment and beyond. If I compare the highest payment ($540,205.17 in 2015) against next year’s budget ($18.6 million), that’s 2.9% of that budget total…not an unworkable amount to deal with without raising taxes in my opinion. (FYI: I also made this comment to one of the school board members as I believe they have the same obligation to look at alternatives rather than just raising taxes.)
I’ll give credit where credit is due as I believe the city did a good job with the upcoming budget resulting in a tax levy decrease. Keep up the good work.
Chris: I will work on getting a better explanation … In the meantime, I want to clarify the size of the impact on the city budget. The city is only responsible for paying between $56,000 and $187,000 over the four years. The $540,000 figure is the total amount owed (all taxing entities) in 2015. Indeed, these are manageable amounts, especially for a city that has built up strong cash reserves, but still significant.