Walgreen Co. sues Milwaukee, two suburbs

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Milwaukee and two of its suburbs could be out more than a combined $1.6 million if Walgreen Co. prevails in four tax assessment lawsuits.

The Deerfield, Ill.-based company claims assessments for various Walgreens stores were too high, resulting in the company paying too much in property taxes. The contested assessments involve 18 properties in Milwaukee in 2010, two properties in Cudahy in 2010 and 2011, and four properties in Wauwatosa in 2010 and 2011, according to lawsuits filed against the municipalities.

Walgreens claimed it contested the assessments but that the municipalities did not reduce the values.

Ryan Braithwaite, who represents Wauwatosa and who represented Greenfield in a similar lawsuit in 2010, said he has been aware of Walgreens suing over tax assessments in Wisconsin since 2005.

Walgreens had sought a refund from Greenfield for 2009 and 2010 taxes on two properties.

Walgreens also sued Oak Creek over 2009 and 2010 taxes on one property, City Attorney Lawrence Haskin said.

Both the Greenfield and Oak Creek lawsuits were settled out of court.

Don Millis, who represents Walgreen Co., said the heart of the excessive assessment argument is that long-term leases linked to store properties erroneously are included in assessments, which inflates tax bills for Walgreens stores. Walgreen Co.’s appraisals of its properties don’t include those leases, which can lead to lower values than what a city may determine.

Millis said a judge could be asked to weigh in on the correct method of assessment if a case went to trial, but, as in the Greenfield and Oak Creek suits, settlements are a common resolution. In any settlement, Millis said, the goal is to reduce assessments for the disputed years as well as the current tax year, which should mitigate excessive assessments.

In Wauwatosa, Walgreen Co. hired Paul Bakken, principal of The Valuation Group Inc., Plymouth, Minn., to appraise the four properties to see how they matched up with the city’s 2010 assessments. Bakken’s appraisals found lower values than the city’s assessments.

Bakken did not return a request for comment by deadline Tuesday afternoon.

Wauwatosa hired Peter Weissenfluh and Dan Furdek of Real Estate Appraisals Inc., Milwaukee, to appraise the properties, and their determination supported the 2010 assessment.

Walgreens later amended its complaint to include the 2011 assessments.

“The basic, fundamental difference,” said Weissenfluh, who also is chief assessor for the city of Milwaukee, “is what interests are being valued.”

Margaret Daun, Milwaukee’s assistant city attorney, said that difference applies in Milwaukee and goes back to the leases.

Walgreens stores are built by a developer, and Walgreen Co. spends no money upfront on those projects, Daun and Millis said. The developer’s investment is paid off through a long-term lease, generally between 20 and 25 years.

Daun said the stability a lease provides raises the value of the property.

“The fact that a lease is attached to the parcel,” she said, “is a benefit to the investor.”

Millis disagreed. Any lease attached to a property, he said, should not be included in the assessment.

“We’re valuing sticks, bricks and mud,” Millis said. “We’re looking at the property, where it’s located, size.”

Walgreen Co. sued Milwaukee for a refund for 2011 property taxes, Daun said, although that process is just getting started. She said she expects the refund sought for 2011 taxes will be similar to the $1.2 million Walgreen Co. wants for 2010.

Walgreen Co. wants $343,415 from Wauwatosa. According to an Aug. 23 letter from Millis to Judge William Pocan, Walgreens and Wauwatosa went through mediation, and a potential settlement is on the table.
Braithwaite, the city’s attorney, said he expects the lawsuit to be settled but declined to comment on mediation.

He said any potential settlement would need to be approved by Wauwatosa’s City Council. The potential settlement was not on the Sept. 4 agenda for Wauwatosa’s Budget and Finance Committee, but the committee will meet once more before the end of the month. That agenda has not been set.

Millis said the settlement would be for a 12 percent reduction in 2010 and 2011 assessments and a 15 percent reduction in the assessed values for 2012

“I don’t know exactly what the refund would be,” he said.

In Wauwatosa’s response to Walgreens’ complaint, the city seeks dismissal of the lawsuit and an award to cover court costs. No request was made for the judge to resolve how the properties should be assessed.

Millis said Walgreens will consider seeking clarification if any of the lawsuits proceed to trial, although neither the Milwaukee nor the Cudahy lawsuits are as far along in litigation as Wauwatosa.

Braithwaite said he could do the same in the Wauwatosa lawsuit, but he said he does not expect it to go to trial.

“This case is quite likely to get settled,” Braithwaite said. “If it were to go to trial, it would probably be a battle between the appraisers.”

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