State Supreme Court issues ruling: Tosa loses tax dispute

City can raise taxes to repay Wheaton Franciscan

July 19, 2011

Wauwatosa taxpayers will be required to refund a portion of Wheaton Franciscan Healthcare's multimillion-dollar property taxes, with interest, following a Wisconsin Supreme Court ruling issued Tuesday against the city.

The court issued its opinion in the case of Covenant Healthcare v. the City of Wauwatosa, a case that municipalities around the state have been following as precedent-setting.

At question was whether the outpatient health care facility at 201 N. Mayfair Road should be tax-exempt. The Supreme Court ruled yes, saying "it is used primarily for the purpose of supporting the tax-exempt St. Joseph's Hospital in Milwaukee," City Attorney Alan Kesner stated in a memo to Common Council members.

Wheaton Franciscan Healthcare, formerly Covenant, has paid property taxes on the buildings at the site since 2003. Each year they file two cases, one disputing the assessed value, saying it's overpriced, and another looking for tax exemption. This case only takes into account the exemption.

Outpatient centers - rather new in concept when Wheaton Franciscan proposed building the one in Wauwatosa - are popping up around the state and country as another way to treat patients and make money, Kesner said.

Representatives from Wheaton Franciscan could not be reached for comment by a reporter's deadline.

There is a tax exemption for facilities with 10 or more overnight hospital beds, the city attorney said.

The refund amount still must be calculated, but all taxing entities - the city, Wauwatosa School District, Milwaukee County, Milwaukee Metropolitan Sewerage District and Milwaukee Area Technical College - that received property tax revenue from St. Joseph's Outpatient Center, 201 N. Mayfair Road, could be expected to make repayments.

The city's taxpayers alone will be responsible for covering the cost of the interest and litigation expenses, Kesner said.

In April of 2009, the trial court ruled in Wheaton's favor, and, including interest, the dollar amount was $3.5 million for about 66 percent of the property that is categorized as tax exempt.

"The particular case involves the tax years 2003 through 2006, but Wheaton has filed additional cases in Milwaukee County Circuit Court to preserve similar arguments in subsequent tax years," Kesner said. "The exact percentage of the facility which is claimed to be exempt varies from year to year."

The city has to find the money to refund the health care provider - and the city gets its money from the taxpayers, Kesner said in an interview. Knowing this was a possibility for years, city staff members have been looking into options such as borrowing, dipping into surplus funds and tax increases.

One of the few exceptions to the state's strict tax levy limits is paying a court settlement, so taxpayers could see an increase on future tax bills.

Without Wheaton contributing as much in property taxes, the tax burden is divided among the rest of the city's property-tax payers meaning they will be responsible for paying more going forward, Kesner said.


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