Tax issues, Supreme Court ruling at center of Bavarian land deal

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By Marie Rohde

Glendale is getting ready to buy the Bavarian Inn property in a deal that bails out a company the city has fought with for years over taxes.

“Assuming we are successful, it will allow them to survive,” Glendale City Administrator Richard Maslowski said of Deutsches Land Inc., the group of five German fraternal organizations that owns the property. “It will also give us control over a piece of property that is important to the future of the city.”

Eventually, the city would be willing to sell the 15-acre property at 700 W. Lexington Blvd. back to Deutsches Land, said Maslowski, who added the city is not trying to turn a profit in the deal. The property includes the Bavarian Inn, Old Heidelberg Park and popular soccer fields and has a fair-market value of $6.3 million.

The city, Maslowski said, is interested in the deal because Glendale wants to protect the property, making sure the park and soccer fields don’t get paved over by a different buyer.

Monday night, Maslowski will ask the Glendale Common Council for permission to negotiate the deal at a price expected to be between $1.6 and $1.8 million. The price includes the $1.2 million Deutsches Land owes Mitchell Street Bank, about $345,000 in back taxes and legal fees. The deal will not cost taxpayers, he said.

“We want them to come up with a business plan,” Maslowski said of Deutsches, “that will generate enough revenue to cover the repayment of the loan, make payments in lieu of taxes and take care of several deferred maintenance projects.”

The property has spiraled into foreclosure as the result of declining membership and growing costs to maintain the property, said John Klingseisen, Deutsches Land’s president. Deutsches has been unable to make payments to the Mitchell Street Bank, and the property was scheduled to be sold at a sheriff’s sale March 14.

Klingseisen was reluctant to discuss the deal before the council votes but said he is optimistic the deal could breathe new life into his nonprofit organization that now has only a few hundred members.

“I think it will be a good partnership,” he said. “They are trying to protect their tax base, and we’re trying to get our costs down to where we can survive.”

The partnership, considering the long history of disputes between the city and Deutsches, is equivalent to the lion lying down with the lamb.

The tax dispute dates back 15 years and centers on the difference between a pure nonprofit organization and one that makes a profit from a restaurant, bar and events. The city insisted Deutsches should pay taxes on its profit-making arm, while Deutsches claimed exemption.

The case went to the Wisconsin Supreme Court, which issued a landmark decision in 1999 that established the criteria for what property could be claimed as tax exempt by a nonprofit organization.

The court ruled Deutsches had to pay taxes for portions of its property.

Deutsches continued to protest its tax bill in court after the high court ruling. In 2008, a judge found the lawsuits frivolous and ordered the group to pay Glendale’s legal bill of about $15,000.

All five groups in Deutsches are Bavarian in origin. The oldest, a singing club, was formed in 1895. The soccer club was formed in 1929 and is the most successful, with some 300 members, Klingseisen said.

The group bought its current property for $57,000 in 1943. A portion of the land borders the Milwaukee River and has been eyed by developers.

In 1967, the clubs built the Bavarian Inn, a 21,000-square-foot building that cost $600,000 to build and $400,000 to furnish. The group also sponsors a popular Oktoberfest.

Maslowski said Deutsches is an asset to the city and that he wants the restaurant and activities at the site linked to Bayshore Town Center, which Glendale played a key role in redeveloping several years ago.

“We do not want to see big-box stores going in there,” Maslowski said of the Deutsches land. “The North Shore doesn’t have enough park and recreation land. We want to see that what is there is maintained.”

Maintaining the park hasn’t always been part of the city’s plan.

Manpower Inc., a Fortune 500 company founded in Glendale, moved in 2007 from a 16-acre site adjacent to the Deutsches property. Glendale and Deutsches explored ways to combine the two parcels for development as a business park. None of those deals materialized.

The deal to buy the property leaves a lot of details to be worked out between the city and the fraternal organization, but Maslowski said the relationship isnít as bad as it may appear.

“Oddly enough,” he said, “even during all those years of litigation, it was a cordial relationship.”