The DeForest Village Board has approved a settlement agreement, concluding a tax assessment dispute with the Walgreens Company with a property tax refund of $633,275.
“We don’t have their signatures yet,” said Village Administrator Steve Fahlgren, “but we have agreed to terms, I believe.”
The lawsuit accuses the village of improperly assessing the value of the Walgreens Distribution Center on Highway 19, resulting in overtaxation in both real property tax, covering the land and building itself, and personal property tax, covering the value of the contents of the building.
The state legislature had previously made manufacturing equipment tax exempt, which resulted in some confusion when Walgreens reported their assets. Walgreens categorized a significant amount of assets as the taxable “furniture, fixtures and equipment,” as opposed to the tax-exempt “manufacturing equipment.”
The refund, covering taxes from 2016 through 2020, will not be carried solely by the village itself, but roughly two-thirds will be paid by other local tax entities such as Dane County, Madison Area Technical College, and DeForest Area School District.
The payment will go through the village, but those entities will need to reimburse the village in 2022.
At the DeForest Area School District, they are not sure yet what their portion of the refund payment will be, according to Director of Business and Auxiliary Services Kathy Davis-Phillips.
“When a refunded tax situation occurs, the district is still legally entitled to receive the full amount of the original levy,” Davis-Phillips said in an email. “Once the district receives an official notice to refund the taxes we process a payment for the amount due. The district then adjusts the levy for the following year to recoup the refunded amount.”
Over the past few months it has nearly become a standard part of the village board agenda that in each meeting, the board goes into closed session to discuss the Walgreens lawsuit. Those sessions, according to Fahlgren, have been mostly devoted to the details of negotiating the now proposed settlement agreement.
There have also been accumulating legal costs, part of which is directly borne by the village, working with village attorney Al Reuter, but the larger part remains out of direct view, covered by municipal insurance, specifically Des Moines-based EMC Insurance.
“Defending a lawsuit against a village is handled by insurance, so the attorneys handling the case were paid for by our insurance company,” said Fahlgren. “We did pay, but it’s just buried in the premiums.”
Walgreens has sued the village multiple times before, with four settlements totaling $555,556 in lost property tax revenue. Walgreens has been represented by attorney Don Millis of Madison-based firm Reinhart Boerner Van Duren S.C., also representing other retailers like K-Mart, Target, and Land’s End in similar cases. In one case, Wheaton Franciscan Healthcare recouped $8.4 million in taxes from the city of Wauwatosa.
Even though there may be a resolution to the current case, when asked if this represented any kind of long-term solution, Fahlgren responded with a hard “no.”
“An assessment process is independent by nature...that’s why we can’t settle things going forward,” said Fahlgren. “Just because they settled on a dollar amount this go around doesn’t mean they wouldn’t feel different next time.”