Plant’s assessment lowered by $10 million
BY BEN RODGERS
The city of Manawa, the school district, county and FVTC must return $300,000 in property taxes to TreeHouse Foods.
TreeHouse Foods is the owner of Sturm Foods. The company received a lower property valuation for 2011-13 and for 2016-17 on its three properties in Manawa after mediation.
In 2011 the difference between the values from Wisconsin Department of Revenue and Sturm Foods was $9.9 million.
The difference grew to $10.7 million in 2012 and to $11.1 million in 2013.
After mediation, the city’s total property value dipped from $89.7 million in 2016 to a projected $79.6 million in in 2017.
Manawa’s total loss in property value was more than $10 million.
Due to the lower assessment for previous years, four municipalities will be forced to pay back roughly $300,000 to TreeHouse Foods.
“We pay the refund up front which will be almost $300,000 and then we charge back the school district, the tech and the county,” said Manawa Mayor John Smith.
The Sturm Foods property is located within a tax increment financing district, which provided significant tax benefits as a way to encourage development.
“In 1991 the Sturm family owned Sturm Foods and the Sturm family was very caring in giving to the community,” Smith said. “So to work with the Sturm family for the betterment of their business meant prosperity for everyone in the city.”
The TIF district also worked for the benefit of Sturm Foods.
“The district provided roads, water, sewer, utilities, etc, and eventually an upgrade to the wastewater treatment plant,” said Cheryl Hass, city clerk.
When the city established the TIF district, it allowed all the new tax revenues generated by the development to pay for the projects, instead of going to the city, school and county.
“All of the money generated from the TIF district is paid to the city and the new taxes pay off the debt that the city accumulated in building the district,” Hass said. “After the the TIF district is paid off and disbanded the city, schools, and county then see the increase in value which in turn causes the tax rate to decrease.”
The TIF district was expanded by the city twice and ended in 2011. By that time TreeHouse Foods had purchased Sturm Foods from an investment company that purchased it from the Sturm family.
From 2006 through 2010 there was approximately $17 million issued in building permits for Sturm Foods and from 2011 through 2014, there was nearly $7.5 million.
From 2015 to 2017 building permits issued totaled $1.89 million.
Sturm Foods’ property values in Manawa will now be lowered to a rough total of $20.2 million.
This figure is not counting the development values from 1991 through 2006, since the creation of the TIF district.
“Now that the values have been devalued by $10 million, it would appear that the city lost most of the value that was generated because of the TIF district,” Hass said. “We have not gained anything.”
Mayor Smith accused TreeHouse foods of using a dark store strategy in getting the values lowered.
“TreeHouse Foods used for comparables when we were in tax appeals, they did use a mill, I believe it’s in Neenah, that’s been closed for as long as I can remember, and the most of their other comparables were shut down poultry processing facilities in Iowa and Nebraska,” he said. “They thought those are comparable to a state-of-the-art, fully functioning food processing facility. That’s what a dark store strategy is.”
TreeHouse said it was doing what any other taxpayer would do.
“Sturm Foods, like all individuals, homeowners and businesses, regularly seeks to assure that its real estate taxes are proportionate and fair versus other similar valuations for other taxpayers,” said Ron Bottrell, spokesperson for TreeHouse Foods in an email. “When valuations are not proportionate, there is a fair basis for valuation review and appeal which Sturm, like all other taxpayers, can and should appeal.”
Regardless of the rationale behind the argument for a lower value, the end result is different recipients of the taxes generated paying back the funds.
The Manawa School District is expected to owe between $90,000 and $100,000, roughly the same as the city.
“The School District of Manawa will be working closely with the city of Manawa and the Wisconsin Department of Revenue in the resolution of the chargeback of tax dollars to Sturm Foods,” said Dr. Melanie Oppor, district administrator in an email. “The Wisconsin Department of Revenue will notify the district of the exact amount of the tax chargeback by Nov. 15.
“In the interim, the district’s business office will be working in coordination with the district’s legal counsel and financial consultants to budget for the payback that is due on or before Feb. 18, 2018,” she said. “While this is not an expense that the district had included in the preliminary budget to date, adjustments will be made with no impact to student services.”
Costs for the county are anticipated to be lower, according Waupaca County Treasurer Mark Sether.
“Based on percentages of what we normally get from the city of Manawa our share would probably be in that $56,000 range,” Sether said.
As for what it means for the county moving forward, he said he is unsure.
“Obviously the city of Manawa is going to take a hit on this short term and longer term, but it affects the entire county in some aspects,” Sether said. “But any dollars is an effect to the county. Fifty-six thousand is a significant amount, but long term effect, I’d say it’s too soon to determine.”
Fox Valley Technical College also receives some tax dollars from Manawa, but the effect there is not anticipated to be major.
“As a overlying taxing jurisdiction, we routinely issue tax refunds as directed by local treasurers,” said Faith Schiedermayer, Fox Valley Technical College manager of budget and information reporting in an email. “While we have not received official notification of the Sturm Foods refund, the anticipated impact on the college’s operating budget is minimal.”
While this is a one-time charge back for these entities, the lower property values have long term effects in Manawa.
The decrease in property values will result in a roughly $81,317 cut from the annual budget.
“We as a city have to reevaluate the importance of the services we provide and how they’re provided,” Smith said. “I mentioned at the school board meeting that one of our aldermen goes to all of our athletic events and how someone mentioned to him how nice our city looks, how nice our streets look, how they are clear of ice and snow, I think that might need to change in the future because we’re not going to be able to pay overtime.”
Smith said parks and police could feel the effects from a smaller budget as well.
“Everything we do in the city is going to have to scrutinized that much harder,” he said. “There have been services that we have provided that will now have to be reviewed to see if the people we provide those for will have to undertake the responsibility. I don’t think Sturm understands that because some of that is going to affect them as well.”
The city would have continued the fight instead of settling. But because instances like this are becoming more and more common across the state, this case had a legitimate chance of ending up before the Wisconsin Supreme Court, Smith said.
“It’s not going to bankrupt us,” he said. “It could have bankrupt us if we would have gone to the Supreme Court it could have cost us more than $100,000 in legal fees.”
The end result in court could have also resulted in even lower property values, ballooning the $300,000 over-collection payment to closer to $800,000.
Since 2009 the city has paid $78,642 in legal fees. The past two years it paid $25,296 that otherwise would have gone toward economic development. It also paid a separate $15,000 for a private accessor to evaluate the property.
Sturm Foods employs roughly 1,000 people and produces dried foods and drink mixes.