My interview with Channel 2 News on March 12th lasted about 20 minutes. I kept to the facts and tried to be objective and dispassionate about the situation – pretty boring interview. Toward the end reporter Chris Hrapsky asked me: ok, but aren't you angry about this? How do you really feel? Channel 2 aired my candid remarks in their news piece. As rookie clerk I learned an important lesson: continue to speak like a politician until the camera is put away.

I explained to Channel 2 that Hillshire (subsidiary of Sara Lee) had gone through an expansion. As part of that expansion, Hillshire installed chillers. The Department of Revenue (DOR) assessed those expensive chillers – effectively categorizing them as a glorified air conditioner. Sara Lee contended that the DOR should not count the chillers in their Personal Property assessment because those machines were necessary to cool the whole facility in order to run product. The Tax Appeals Commission ruled in Sara Lee’s favor. [Yes, there’s more to it, but if you understand this, you get the basic idea.]

Despite Bureau of Property Tax Section Chief Bill Wardwell’s statement that the refund situation was brought about by “inaccurate reporting by the company” I continue to feel that the DOR [in layman's terms] ‘screwed-up’ and that the magnitude of the collateral damage from a DOR screw-up is considerably more than anything that would happen if the Town made an assessment mistake. [In a year when DOR was advocating taking even more control of assessments away from Towns by lobbying for County-level assessments, it’s my way of pointing out that when local control is removed and things go wrong, it makes the hurt that much worse – presently, the state assesses all commercial property in a Town’s jurisdiction. !! CLICK HERE !! to see the latest DOR news about sweeping changes DOR wants made to the local assessment process that is currently under the control of Towns].

In the case of Sara Lee, the over-assessment by the DOR lead to a windfall for the Town and local taxing jurisdictions for 2007 and 2008 - ie. citizens didn’t have to pay as much property tax because Sara Lee was overtaxed.

Because Sara Lee ‘took it in the pants’ those two years, they deserve to be refunded ASAP. And, state statutes are written in such a way that if an entity is owed a refund, then the taxing municipality [Hortonia in this case] has 90 days to refund the money. Normally it’s not a big deal because, ‘normally’, the scale of the refund is a couple hundred or maybe a couple thousand dollars.

State statutes do not make any exceptions when the scale of the refund is as huge as it is, presently, for Hortonia.

Obviously, Hortonia doesn’t have $291,771 lying about, so Hortonia will have to borrow from the bank to cover the refund until all the other taxing jurisdictions pay Hortonia back their share. Per state statutes, the other taxing jurisdictions [New London School District, Outagamie County, Fox Valley Tech., State of Wisconsin] have until Feb. 15th to pay Hortonia back (Hortonia's portion is about $35,170).

Hortonia will continue to function – garbage will get picked up, roads will be maintained, life will go on. But, it will take longer for Hortonia to go from being in the red [paying off the Fire Hall loan, the road loans, and now, potentially, this new refund loan] to being in the black and rebuilding its reserves. Hortonia residents shouldn’t expect any tax breaks any time soon, but, they also shouldn’t worry that next year’s taxes will go through the roof either – the key to getting out of this financial low-point is steady repayment of Hortonia's municipal loans, then a steady rebuilding of reserves so when the next crisis hits, Hortonia can again fall back [at least in part] on a contingency account.

We all make mistakes, being only human as DOR employees are, I’m willing to cut DOR some slack as long as DOR takes responsibility for the mistakes made.

Unfortunately, DOR did the same thing, on a similar scale to the Town of Montpelier back in 2008. DOR continues to ‘screw-up’ and statutes do not require any change of activity on the part of DOR.

So the villain in this narrative is ‘the law’ – the state statutes which are written in such a way that DOR [the State] does not have to shoulder any of the financial hardship it creates when DOR makes mistakes. During my Channel 2 interview I repeatedly stressed that state statutes need to be changed at the very least to cushion the blow when refunds grow to this magnitude. Chairman Jaeckle summed it up pretty well at the last Town Board meeting when he observed: They took 3 years to screw it up and we’ve got 90 days to pay it?!

The benefactor in this whole mess would be the bank. Depending on how much the Town has to borrow, the bank stands to, potentially, make in the neighborhood of $14,000 in interest payments.

Sara Lee has shown some willingness to work with the Town to not impose an egregious financial burden, but, understandably, they want their money back. In the settlement between the DOR and Sara Lee, Sara Lee waived the cost of attorney fees and the statutory 12% interest. But, Sara Lee has not formally indicated that it is willing to wait beyond the 90 day statutory deadline to get its refund.

Town officials will continue dialog with all stakeholders in this refund process to pay the refund in a timely, responsible manner while advocating terms that will minimize the burden on the taxing jurisdictions and the taxpayers who pay them. I’m also going to be writing letters to the Wisconsin Town’s Association, the Town’s state representative and others, encouraging them to work to revise the statutes so other Towns don’t have to suffer this sort of fate.

In summary, this refund is a financial burden for the Town, but not a nightmare – we’ll get through it.

Andrew Hogan, Town of Hortonia Clerk

addendum - March 25, 2010

Town officials met at a special Town Board meeting on March 24th to discuss the situation. !! CLICK HERE !! for the minutes. The meeting was due in part to the DOR's input on March 19th that the Clerk's attempts to offset the full amout of the refund, being $399,300.76 rather than the 'net' $291,771, did not follow statutory procedure. On the flip side, Sara Lee proposed an additional offset that would reduce the impending refund down to $142,516. Given the complexity of the situation, the Town Board resolved to retain an expert to review all the documents and chart a course of action for the Town.

addendum - April 14, 2010

Secretary of Revenue, Roger Ervin came to the Annual Town meeting on April 13th and presented a clearer picture of DOR's role in the events that lead to refund situation. The meeting with Secretary Ervin was insightful, cordial and productive. The secretary explained that the time limit / 90-day deadline (that was the catalyst for my initial reaction) was erroneous.

Although, this deadline, per statute §74.37, was conveyed to the Town on February 23rd by an LGS Section Auditor and corroborated on March 4 by other DOR staff.

Last week Town officials learned that the operative statute should be §70.511, which is the one Sara Lee's attorney expressed in the letter the Town received on Feb. 16th. Based on this the Town understands that the refund deadline is January 31, 2011. Secretary Ervin and his staff confirmed this. Nevertheless, the Town plans to refund Sara Lee by mid-September (the details of the timing are still being worked out).

As for the refund amount, again the Town was told by LGS a piece of erroneous information regarding the full $399,300.76 amount. Secretary Ervin's staff explained that the amount will be 'net' reducing the amount back to the Towns initial expectation of approximately $292,000.

The biggest revelation for me was DOR staff's explanation about the reason over assessment.  My understanding had been that DOR inspectors had full access to the Sara Lee facility, viewed the expansion, then excessively over-assessed the value, which I characterized in the March 12th news piece. DOR said that they were on site, but, they were not given access to the expansion, specifically. So DOR based their assessment on best-guesses.

The analogy DOR gave goes something like this - if a local assessor is denied access to a home-owner's remodeling, and denied access to the paperwork associated with the remodeling, then all the assessor can do is guess.

DOR stated that it wasn't until 2008 that DOR staff gained full access to the facility and it wasn't until 2009 that DOR received an itemized listing of assets.

Given these dynamics, it took 3 years to come to a settlement where the assessment figures were acceptable to all parties.

Bottom line - DOR contends that the over-assessment was not a mistake; that DOR was denied the information needed to make an accurate assessment, so when they guessed, their guess was off base. Taking DOR's facts at face value, I would agree that DOR did not screw up. Nevertheless, had LGS accurately informed the Town that the deadline was January 31, 2011, and, had LGS accurately informed the Town that the 'net' amount was the operative amount, much of the consternation that led to my statements to the press could have been avoided. Of course I say this as I wipe the egg of my face for having failed to provide Agendas to everyone attending the April 13th meeting since I was too focused on making sure that there were enough copies of the annual report to go around - we still have 2 dozen if anyone is interested...

Going forward the Town would like to work cooperatively with Sara Lee, the Department of Revenue and the tax jurisdictions to insure the best possible outcome in the refund process for all stake holders. We also appreciate Channel 2's work in covering the Town of Hortonia, Sara Lee refund story.

!! CLICK HERE !! to see a photo of Secretary of Revenue Ervin addressing the Town at the annual meeting.