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Consideration of recommendation to provide short term financing to the Wauwatosa School District for their share of the Froedtert Settlement, which is due February 15, 2026
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Submitted by:
John Ruggini
Department:
Finance Department
A. Issue
As part of the Froedtert Hospital property tax appeal settlement, the Wauwatosa School District is required to pay a proportionate share of the total settlement by February 15th, 2026. Due to cash flow, they do not have sufficient funds on hand. We recommend the City provide a short-term loan.
B. Background/Options
In September 2025, the City of Wauwatosa agreed to a $10.0 million settlement to resolve property tax appeals made by Froedtert Hospital. As required under state law, the City paid the entire settlement and subsequently filed “chargeback” requests with the Department of Revenue which were approved so that the other taxing jurisdictions must pay their proportionate share of the settlement by February 15, 2026. This totals $3,502,031.13 for the Wauwatosa School District. This is the second largest school chargeback in the state of Wisconsin in the past 10 years.
Since the City collects property taxes on behalf of the school district, its cash flow is significantly different and they do not have ample cash on hand to make this payment in February. In addition, making the payment in February causes financial reporting challenges since they will not be reimbursed until the 2026 property taxes are paid.
City staff from both jurisdictions have met and also had individual discussions with their financial advisors and determined the most cost effective solution is for the City to provide a short-term loan to the school district to be repaid prior to November 13, 2026. As the City would have otherwise invested and earned interest on these funds, staff propose charging a 4.5% interest rate which is still significantly less expensive then if the District had pursued a bank loan. For comparison purposes, the State Trust Fund is currently providing two-year loans (their shortest lending period) at 5.0%.
Attached is the proposed Promissory Note to be executed between the City and District.
The District and the City were unsuccessful in finding a legal mechanism to allow the District to smooth out the property tax impact of this chargeback. Unfortunately, state law will force them to increase their levy one-time by this amount as part of their 2026 levy.
C. Strategic Plan (Area of Focus)
NA
D. Fiscal Impact
The interest rate charged as part of the loan should be equivalent to what the City would have otherwise earned by investing this cash so there is no financial impact.
E. Recommendation
I recommend the Committee and Council approve lending the School District $3,502,031.13 per the terms of the attached Promissory Note.