Finance Committee

City of Oconomowoc Finance Committee Aldermen: Mulder, Chairman / Schellpeper, Secy / Spiegelberg Tuesday, December 06, 2022 - 5:40 PM City Hall – Conference Room 3 174 E. Wisconsin Ave. Oconomowoc, WI 53066 Notice: If a person with a disability requires that the meeting be accessible or that materials at the meeting be in accessible format, call the City Clerk at least 48 hours prior to the meeting to request adequate accommodations. Tel: (262) 569-2186. 1. Call to order and confirmation of appropriate meeting notification 2. Committee Business a. Consider/recommend Resolution 22-R3084 Authorizing Indexing of Impact Fees and Sewer Availability Charges - Effective January 1, 2023 b. Consider/recommend Resolution 22-R3088 Revising Fixed Assets Capitalization Policy - Effective for Fiscal Year 2022 c. Consider/recommend Resolution 22-R3086 Levying Special Assessments Against Benefitted Property for Thackery Trail Project (St. Jerome's Congregation) d. Consider/recommend Approving Agreement for Payments in Lieu of Taxes (PILOT) from Lutheran Homes of Oconomowoc 3. Adjourn ________________________________ Diane Coenen, City Clerk City of Oconomowoc Notice is hereby given that a majority of the Common Council will be present at the above scheduled meeting to gather information about a subject over which they have decision-making responsibility. This constitutes a meeting of the Common Council pursuant to State ex rel. Badke v. Greendale Village Board, 173Wis. 2d 553, 494 N.W. 2d 408 (1993) and must be noticed as such, although the Common Council will not take any formal action at this meeting. 1  MEMORANDUM FINANCE DEPARTMENT Date: November 28, 2022 To: Common Council and Mayor Magnus From: Laurie Sullivan, Finance Director Re: Resolution to allow for annual Impact Fee and Sewer Availability Charge indexing RELATES TO THE STRATEGIC PLAN Strategic Goal - II. Improve and Maintain our Infrastructure/Facilities V. Enhance the Effectiveness of our City Government D. Maintain/Improve the City’s Financial Sustainability BACKGROUND The City’s ordinances allow for the indexing of impact fees and sewer availability charges through resolution to keep amounts current for inflation and increases in costs. The City last indexed impact fees and sewer availability charges in 2022. ADDITIONAL ANALYSIS The following charts outline the current fees for 2022 and 2023 fees adjusted for the applicable index increases: City Impact Fees 2022 2023 Highways & Other Transportation Facilities Impact Fees (CCI .0569) Residential dwelling unit $421 $445 Commercial/Institutional per sq. ft. $1.563 $1.652 Industrial per sq. ft. $0.413 $0.436 Law Enforcement Facilities Impact Fee (CCI .0569) Single-family/duplex residential dwelling unit $461 $487 Multi-family residential dwelling unit $308 $326 Commercial/Institutional per sq. ft. $0.636 $0.672 Industrial per sq. ft. $0.122 $0.129 Parks, Playgrounds & Other Recreational Facilities Impact Fee (CCI .0569) Per residential dwelling unit $3,120 $3,298 Per resident at maximum occupancy for institutional residential $1,041 $1,100 development Per residential dwelling unit where 1,500 sq. ft. of land is dedicated for $1,780 $1,882 public parks as a condition of land subdivision (credit up to $1,416) Per resident at maximum occupancy for institutional residential $504 $532 development where 600 sq. ft. of land is dedicated for public parks as a condition of land subdivision (credit up to $568) 1 2  Utility Impact Fees 2022 2023 North Interceptor (adjusted by average annual LGIP rate – .0071) ⅝ or ¾ inch $2,131 $2,146 1 inch $7,929 $7,985 1 ½ inch $19,068 $19,204 2 inch $31,670 $31,895 3 inch or larger (per residential equivalent connection – REC) $2,131 $2,146 Sewer Availability Charge 2022 2023 Sewer Availability Charge (CCI .0569) Existing unconnected development annexed to City prior 6/30/91 (credit of $2,065 $2,182 $2,395) Undeveloped lots in City platted on or before 6/30/91 (credit of $735) $3,635 $3,842 Properties located outside City or properties annexed into City after 6/30/91 ⅝ or ¾ inch $4,331 $4,577 1 inch $16,117 $17,034 1 ½ inch $38,758 $40,963 2 inch $64,375 $68,038 3 inch or larger (per residential equivalent connection – REC) $4,331 $4,577 FINANCIAL IMPACT City impact fees and sewer availability charges are adjusted annually by the Construction Cost Index (CCI). Utility impact fees are adjusted by the average annual Local Government Investment Pool (LGIP) rate ending in September. For the 2022 rate adjustment the following indexes were used: CCI adjustment of 0.0569, LGIP adjustment of 0.0071. RECOMMENDATION Recommend approval of the 2023 index adjustments to the impact fees and sewer availability charges. SUGGESTED MOTION Motion to adopt Resolution 22-R3084 to index the impact fees and sewer availability charges as outlined. 2 3  RESOLUTION NO. 22-R3084 RESOLUTION AUTHORIZING INDEXING OF IMPACT FEES AND SEWER AVAILABILITY CHARGES EFFECTIVE JANUARY 1, 2023 WHEREAS, the City’s Municipal Code Chapter 13.62 relating to Sewer Availability Charge and Chapter 27.09 relating to Impact Fee Schedules/Calculation have been amended to authorize fee amounts and adjustments by Council resolution; and WHEREAS, the City’s ordinances allow annual indexing of impact fees and sewer availability charges to keep fee amounts current; and WHEREAS, the following charts outline the current fees for 2022 and the proposed 2023 fees adjusted for the applicable index increases. City Impact Fees 2022 2023 Highways & Other Transportation Facilities Impact Fees (CCI .0569) Residential dwelling unit $421 $445 Commercial/Institutional per sq. ft. $1.563 $1.652 Industrial per sq. ft. $0.413 $0.436 Law Enforcement Facilities Impact Fee (CCI .0569) Single-family/duplex residential dwelling unit $461 $487 Multi-family residential dwelling unit $308 $326 Commercial/Institutional per sq. ft. $0.636 $0.672 Industrial per sq. ft. $0.122 $0.129 Parks, Playgrounds & Other Recreational Facilities Impact Fee (CCI .0569) Per residential dwelling unit $3,120 $3,298 Per resident at maximum occupancy for institutional residential $1,041 $1,100 development Per residential dwelling unit where 1,500 sq. ft. of land is dedicated for $1,780 $1,882 public parks as a condition of land subdivision (credit up to $1,416) Per resident at maximum occupancy for institutional residential $504 $532 development where 600 sq. ft. of land is dedicated for public parks as a condition of land subdivision (credit up to $568) Utility Impact Fees North Interceptor (adjusted by average annual LGIP rate – .0071) ⅝ or ¾ inch $2,131 $2,146 1 inch $7,929 $7,985 1 ½ inch $19,068 $19,204 2 inch $31,670 $31,895 3 inch or larger (per residential equivalent connection – REC) $2,131 $2,146 4  Sewer Availability Charge 2022 2023 Sewer Availability Charge (CCI .0569) Existing unconnected development annexed to City prior 6/30/91 $2,065 $2,182 (credit of $2,395) Undeveloped lots in City platted on or before 6/30/91 (credit of $3,635 $3,842 $735) Properties located outside City or properties annexed into City after 6/30/91 ⅝ or ¾ inch $4,331 $4,577 1 inch $16,117 $17,034 1 ½ inch $38,758 $40,963 2 inch $64,375 $68,038 3 inch or larger (per residential equivalent connection – REC) $4,331 $4,577 NOW THEREFORE, BE IT HEREBY RESOLVED, that the City Council affirms and sets forth by Resolution the fee amounts for Chapter 13.62 and Chapter 27.09 of the Municipal Code relating to Sewer Availability Charges and Impact Fee Schedules / Calculation effective January 1, 2023. BE IT FURTHER RESOLVED THAT, the fees set forth in this Resolution shall be in place until such time that the Council authorizes an amendment to such fees. DATED: December 6, 2022 CITY OF OCONOMOWOC By: _____________________________ Robert P. Magnus, Mayor ATTEST: Diane Coenen, Clerk 5  MEMORANDUM FINANCE DEPARTMENT Date: November 30, 2022 To: Finance Committee, Common Council and Mayor Magnus From: Laurie Sullivan, Finance Director Re: Revised Capitalization Policy RELATES TO THE STRATEGIC PLAN Strategic Goal – N/A BACKGROUND The City’s fixed asset capitalization policy was last updated in 1999. ADDITIONAL ANALYSIS The policy is being updated to increase the capitalization threshold and provide better guidance to the finance department when evaluating capital assets during the City’s annual financial reporting. The current policy in place has a capitalization threshold of $5,000, whereas the proposed policy has thresholds of $25,000 for infrastructure and $10,000 for all assets other than infrastructure. The increase better reflects the rising cost of capital asset additions due to inflation. This will result in efficient year-end analysis to appropriately reflect the increase in asset costs since the policy was last updated and eliminate tracking small-value items. FINANCIAL IMPACT N/A RECOMMENDATION Motion to recommend to the Common Council approval of the revised capitalization policy effective for fiscal year 2022. SUGGESTED MOTION Motion to adopt Resolution 22-R3088 revising Fixed Assets Capitalization Policy effective for fiscal year 2022. 1 6  RESOLUTION NO. 22-R3088 RESOLUTION REVISING FIXED ASSETS CAPITALIZATION POLICY EFFECTIVE FOR FISCAL YEAR 2022 WHEREAS, our current policy has been in place since 1999 and should be revised; and WHEREAS, the current policy has a capitalization threshold limit of $5,000; and WHEREAS, the Finance Department recommends thresholds of $25,000 for infrastructure and $10,000 for all other assets; and WHEREAS, the change better reflects the rising cost of capital asset additions due to inflation; and WHEREAS, the change will provide for efficient year-end analysis to appropriately reflect the increase in asset costs since the policy was last updated and eliminate tracking small-value items. NOW THEREFORE, BE IT HEREBY RESOLVED the revised Capitalization Policy that increases to $25,000 for infrastructure and $10,000 for all assets other than infrastructure be and the same is hereby approved and adopted to be effective for fiscal year 2022. DATED: ______________________ CITY OF OCONOMOWOC By: _________________________ Robert P. Magnus, Mayor ATTEST: _____________________________ Diane Coenen, Clerk Z:\City Administrator\Council Agenda\Resolution for Revised Capitalization Policy 22-R3088.docx 7  CITY OF OCONOMOWOC CAPITALIZATION POLICY Adopted by Council: 12/21/99 Revised by Council: 12/6/22 8 I. PURPOSE To establish a general policy for capitalized fixed assets including standards for valuation of assets with an estimated useful life of at least two years following the date of acquisition. II. POLICY This policy establishes the minimum cost value (capitalization amount) that shall be used to determine capital assets, including infrastructure assets that are to be recorded in the City’s annual financial statements. This policy also addresses other considerations for recording and depreciating capital assets. Capital assets include land, land improvements, buildings and building improvements, machinery, vehicles and equipment, construction work in progress, infrastructure, utility system and all other tangible or intangible assets that are used in operations that have initial useful life of at least two years. III. GENERAL GUIDANCE A. Capitalization Threshold Capital assets will be reported at historical cost. The cost of a capital asset includes the acquisition price plus the expenditures necessary to place the asset in its intended location and condition for use. Donated or contributed assets are recorded at their estimated fair value at the date of donation. Assets purchased, constructed, leased or donated must be uniformly grouped into capital asset categories. The following table summarizes the capitalization threshold and estimated useful lives for the City’s capital asset categories: ASSET CATEGORY THRESHOLD AMOUNT USEFUL LIFE Land $10,000 Indefinite, depreciation not applicable Machinery, Vehicles $10,000 2‐45 years and Equipment Infrastructure $25,000 20‐77 years Buildings and Building $10,000 10‐47 years Improvements Land Improvements $10,000 15‐20 years Utility System $10,000 26‐77 years Intangible Assets $10,000 2‐10 years / Indefinite 2 9  i. Generally, repairs will not qualify for changing the initial capitalized value. Only major replacements of components and/or additions which significantly change the initial capitalized value or significantly extend the expected useful life of any capitalized item shall be considered in order to substantiate any subsequent year value change of an asset maintained within the City’s record of capital assets. ii. For computer equipment, initial operating software shall be included but subsequent operating software and application software shall be excluded. iii. For capital assets funded with federal grants, the federal threshold of $5,000 will be used in place of the thresholds noted in the above table. iv. Capitalization thresholds and estimated useful lives established by the Wisconsin Public Service Commission for regulated utilities supersede this policy. B. Useful Life An asset qualifies for capitalization if the useful life is in excess of two years. The following will be considered when determining the useful life of the asset: i. The length of time similar assets have historically lasted ii. Anticipated changes in technology iii. Specific use of the asset iv. Maintenance practices – among City departments, similar assets may be assigned different useful lives, depending on asset use and maintenance The useful lives of capital assets will be reviewed annually and adjustments will be made as necessary. C. Salvage Value The salvage value of general capital assets is deemed to be immaterial to the financial statements. Therefore, generally the City will not record salvage value on capital assets. D. Depreciation/Amortization Depreciation and amortization of governmental capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation and amortization reflected in the statement of net position. Depreciation and amortization of utility capital assets is recorded as an expense in the proprietary funds statement of revenues, expenses and changes in fund net position, with accumulated depreciation and amortization reflected in the proprietary funds statement of net position. Depreciation and amortization is provided over the asset’s estimated useful life using the straight‐line method of depreciation or amortization. Land is not a depreciable capital asset. 3 10  E. Dedicated Assets Required installation of public improvements by a developer, including but not limited to storm sewer, streets, curb and gutter, street lights, street signs, sidewalks and utility infrastructure will be dedicated to the City upon completion. Recording of infrastructure assets will be made on the basis of actual costs, including all ancillary costs, based on vendor invoice or other supporting documentation provided by the developer or City Engineer. IV. CAPITAL ASSET COSTS A. Land Original purchase price or estimated acquisition value at time of purchase or donation, including professional fees (closing costs, title searches, appraisal fees, legal fees). B. Machinery, Vehicles and Equipment Furniture: Chairs, tables, bookcases, copiers or other furniture items which individually cost $10,000 or more. Computer and Specialized Equipment: Computer networks or specialized equipment that individually cost $10,000 or more. Vehicles and Equipment: All vehicles and equipment that individually cost $10,000 or more. All permanent or semi‐permanent attachments shall be included in the cost of the asset (i.e. snow plows, salt spreaders, etc.). Works of Art: sculptures and murals that individually cost $10,000 or more. C. Infrastructure Streets, curb and gutter, public right‐of‐way, street light systems, bridges, storm sewers, retaining walls, trails and culverts that individually cost $25,000 or more. D. Buildings and Building Improvements Permanent structures and mechanical equipment that individually cost $10,000 or more. E. Land Improvements Parks, athletic fields, tennis courts, parking lots, walking trails, boardwalks and lighting that individually cost $10,000 or more. F. Utility System Collection systems, mains, distribution systems, storage tanks, treatment facilities, interceptors, reservoirs, wells and springs, line transformers, services, poles, underground conduit, and conductors. 4 11 G. Intangible Assets Assets such as easements, land use rights, copyrights, and computer software that individually cost $10,000 or more. Intangible assets that have a limited useful life will be amortized over the useful life of the asset. Intangible assets with indefinite useful lives will not be amortized. Intangible assets will be considered to have an indefinite useful life if there are no legal, contractual, regulatory, technological, or other factors that limit the useful life of the asset. A permanent right of way easement is an example of an intangible asset that should be considered to have an indefinite useful life. 5 12 13  MEMORANDUM ADMINISTRATION Date: December 6, 2022 To: Mayor and Common Council From: Mark Frye, City Administrator Re: St. Jerome’s Assessment for the Extension of Thackeray Trail Resolution 22-R3086 RELATES TO THE STRATEGIC PLAN Strategic Plan: Section II: Improve and Maintain Our Infrastructure and Facilities Part C: Plan and Complete Street Extensions Item 1: Thackeray Trail BACKGROUND Funding for the extension of Thackeray Trail will be shared between the City and St. Jerome’s. The 2004 Developer’s Agreement for the construction of St. Jerome’s church and school contained the following language regarding the extension of Thackeray Trail: Developer understands that, in the future, the City may elect to construct a two-lane rural cross section street connecting the east/west street segment constructed by Developer under this Agreement· to the terminus of Thackeray Trail. Developer further understands and agrees that in the event the City undertakes such construction, Developer will be specially assessed for one-half (1/2) of the costs of construction of the extension of said street from the segment being constructed under this Agreement to the easterly limits of the Developer's Property. Developer acknowledges that, but for the postponement of the extension of the east/west street segment being constructed hereunder to the present terminus of Thackeray Trail, that the City would require Developer to install a one-lane street from the segment constructed hereunder to the present terminus of Thackeray Trail. Developer hereby agrees that, upon the adoption of a preliminary resolution by the City stating its intent to levy a special assessment for the extension of the east/west street, Developer will sign a waiver of special assessment notices and hearings and will enter into an agreement for the special assessment of the Developer's share of the street extension. The City hereby agrees that Developer shall have at least five years to pay such assessment at a rate of Interest not exceeding the rate then available to the City through the State Municipal Investment Pool plus two percent as the City's administrative costs. ADDITIONAL ANALYSIS N/A 1 14 FINANCIAL IMPACT RECOMMENDATION Suggested Finance Committee Motion: Motion to recommend to the Common Council approval of Resolution 22-R3086 for the assessment of the St. Jerome’s share of the Thackeray Trail Extension as agreed upon in 2004 and further agreed in 2019 to allow a ten-year term. SUGGESTED MOTION Suggested Common Council Motion: Motion to adopt Resolution 22-R3086. V:\City Projects\Thackeray Trail\St Jerome's Final Cost Allocation\Background Memo for St. Jerome's Special Assessment Resolution 12062022.docx 2 15 STATE OF WISCONSIN CITY OF OCONOMOWOC WAUKESHA COUNTY RESOLUTION NO. 22-R3086 FINAL RESOLUTION LEVYING SPECIAL ASSESSMENTS AGAINST BENEFITTED PROPERTY FOR THACKERY TRAIL PROJECT WHEREAS, the St. Jerome’s Congregation (“St. Jerome’s”) and the City of Oconomowoc (“City) entered into a Developer’s Agreement on July 15, 2003 (“Agreement”) establishing terms related to development of St. Jerome’s including street improvements; and WHEREAS, the Agreement, in part, stated that “…in the future, the City may elect to construct a two-lane rural cross section street connecting the east-west street segment constructed by [St. Jerome’s] … to the terminus of Thackery Trail; and WHEREAS, the Agreement, further stated that St. Jerome’s “will be specially assessed for one- half (1/2) of the costs of construction of the extension” and “will sign a waiver of special notices and hearings”; and WHEREAS, the City has constructed the two-lane rural cross section street connecting the existing street to Thackery Trail; and WHEREAS, St. Jerome’s signed a waiver of special assessment procedures on November 5, 2022; and WHEREAS, §66.0703 (7) (b) Wisconsin statutes provides that upon receipt of a waiver, the City may proceed to levy special assessments without notice or public hearing and may proceed to Final Assessment Resolution; and WHEREAS, the City and St. Jerome’s agree that St. Jerome’s share of the subject street connection project is $437,013.11; and WHEREAS, the City has determined that the cost of the improvements may be paid in equal installments of over ten years with interest accruing at the rate of five (5%) percent. St. Jerome’s – Final Resolution for Special Assessment – Thackery Trail Page 1 of 3 16  NOW, THEREFORE, BE IT RESOLVED by the City of Oconomowoc Common Council: 1. That the report of the City Engineer’s and any amendments or modifications thereto pertaining to the construction of the above-described public improvements, including plans and specifications thereto, are adopted and approved. 2. That payment for the improvements will be made by St. Jerome’s in the sum of $437,013.11. 3. That the assessments represent an exercise of the police power, have been determined on a reasonable basis and are hereby confirmed. 4. Assessments may be paid in a lump sum or in annual installments to the City Treasurer. Installment payments shall bear interest at a rate of 5.0% per annum on the unpaid balance. All assessments or installments which are not paid by November 10th of the year in which they come due shall be extended upon the tax roll as a special assessment and collected in the same manner as real estate taxes. 5. The City clerk shall publish this resolution as a class 1 notice under ch. 985, Stats., in the assessment district and mail a copy of this resolution and a statement of the final assessment against the benefitted property together with notice of installment payment privileges to St. Jerome’s. SEVERABILITY. The several sections of this resolution are declared to be severable. If any section or portion thereof shall be declared by a court of competent jurisdiction to be invalid, unlawful or unenforceable, such decision shall apply only to the specific section or portion thereof directly specified in the decision and shall not affect the validity of any other provisions, sections or portions thereof of the resolution. The remainder of the resolution shall remain in full force and effect. Any other resolutions whose terms conflict with the provisions of this resolution are hereby repealed as to those terms that conflict. St. Jerome’s – Final Resolution for Special Assessment – Thackery Trail Page 2 of 3 17 EFFECTIVE DATE. This resolution shall take effect immediately upon passage as provided by law. Dated this ____ day of _________ 2022. CITY OF OCONOMOWOC ______________________ Robert P. Magnus, Mayor ATTEST: _______________________ Diane Coenen, City Clerk St. Jerome’s – Final Resolution for Special Assessment – Thackery Trail Page 3 of 3 18  MEMORANDUM ADMINISTRATION Date: December 6, 2022 To: Mayor and Common Council From: Mark Frye, City Administrator Re: Payment in Lieu of Taxes Agreement with Lutheran Homes of Oconomowoc (LHO) RELATES TO THE STRATEGIC PLAN N/A BACKGROUND LHO is the owner and operator of a nursing home and assisted living facilities and is a 501(c)(3) corporation under the Internal Revenue Code and has been determined to be a nonprofit educational, religious and benevolent institution under §70.11 (4), Wis. Stats. As a nonprofit benevolent association, ten acres of LHO' s property is exempt from real estate and personal property taxes under §70.11(25), Wis. Stats. Exempt property is that property held by LHO and directly related to its exempt purpose. However, as a long-time corporate citizen of the City, and in consideration of the receipt of municipal services, LHO has been providing an annual contribution in lieu of taxes. Our existing agreement with Lutheran Homes of Oconomowoc (LHO) for receiving Payment In Lieu Of Taxes (PILOT) expired in 2021. They did continue to make their $100,000 payment in 2022. With the Western Lakes Fire District Referendum, we reached out to Dale Dahlke, CEO of LHO to discuss increasing the payment. FINANCIAL IMPACT LHO responded to our discussion with a plan to increase their annual contribution by $25,000/year as shown below, going from $100,000 in 2022 to $250,000 in 2028. 2023 - $125,000 2024 - $150,000 2025 - $175,000 2026 - $200,000 2027 - $225,000 2028 - $250,000 1 19 RECOMMENDATION Suggested Finance Committee Motion: Motion to recommend to the Common Council approval of Agreement for Payment In Lieu Of Taxes from Lutheran Homes of Oconomowoc to increase $25,000/year through 2028. SUGGESTED MOTION Suggested Common Council Motion: Motion to approve the Agreement for Payment In Lieu Of Taxes from Lutheran Homes of Oconomowoc. Z:\City Administrator\Pilot Agreements\Background Memo for LHO PILOT Agreement 12062022.docx 2 20  AGREEMENT FOR PAYMENTS IN LIEU OF TAXES This Agreement is made this 6th day of December 2022, by and between Lutheran Homes of Oconomowoc, Inc., a Wisconsin not-for-profit corporation, which operates the Shorehaven Health Care Center and related facilities (hereinafter referred to as "LHO"), and the City of Oconomowoc, a Wisconsin municipal corporation (hereinafter referred to as the "City"). 1. RECITALS 1.1 LHO is the owner and operator of a nursing home and assisted living facilities located in Oconomowoc, Wisconsin. LHO is a 501(c)(3) corporation under the Internal Revenue Code and has been determined to be a nonprofit educational, religious and benevolent institution under §70.11 (4), Wis. Stats. LHO anticipates the continued utilization of its facilities as a nonprofit benevolent association in the future. 1.2 The City is a municipal corporation duly organized and operated under the Wisconsin Statutes. The City has the authority to levy taxes upon all general property located within its jurisdiction unless such property is exempt from taxation under the Statutes. 1.3 As a nonprofit benevolent association, ten acres of LHO' s property is exempt from real estate and personal property taxes under §70.11(25), Wis. Stats. Exempt property is that property held by LHO and directly related to its exempt purpose. However, as a dedicated corporate citizen of the City, and in consideration of the receipt of municipal services, LHO wishes to pay to the City a contribution in lieu of taxes. 1.4 The parties to this agreement desire to enter into this agreement in order to provide a full statement of their respective responsibilities during the term of this agreement. 2. AGREEMENTS 2.1 Payment In Lieu of Taxes. LHO agrees to pay to the City the sums set forth in Section 3.01 as contributions to the City in lieu of real estate and personal property taxes on LHO's exempt property. This payment is in consideration of the municipal services that LHO 1 21 receives. Additionally, this payment is an acknowledgement of the importance of such municipal services. 2.2 Nonexempt Property. LHO is limited to ten acres of building footprint and land convenient to the buildings as exempt property and the balance of LHO's property is nonexempt property. LHO will continue to pay taxes to the City on LHO's nonexempt property. 3. FINANCIAL MATIERS 3.1 Contribution Level. LHO shall contribute to the City in lieu of the payment of real estate and personal property taxes on LHO's exempt properties the following sums. This amount shall be paid to the City Treasurer by January 31 of the applicable year. 2023 - $125,000 2024 - $150,000 2025 - $175,000 2026 - $200,000 2027 - $225,000 2028 - $250,000 3.2 Future Contributions. It is the intention of LHO to contribute similar sums to the City in the future. Both parties agree to revisit this agreement in 2028 to determine future contribution amounts. No changes shall be made in the contributions without the mutual agreement of the parties. Changes, if any, shall be based upon budgetary requirements of LHO, the scope of municipal services rendered and received, and the budgetary requirements of the City. 4. GENERAL PROVISIONS 4.1 Maintenance of Tax-Exempt Status. This agreement is conditioned upon LHO maintaining its 501(c)(3) tax-exempt status as well as its exemption under §70.11, Wis. Stats. In the event LHO does not maintain its exempt status, this agreement shall be terminated forthwith. Additionally, this agreement is conditioned upon the City recognizing LHO's tax- exempt status. In the event the City would attempt to tax any portion of LHO's exempt property under §70.11, Wis. Stats., this agreement shall be terminated forthwith. 2 22  4.2 Term. This agreement shall remain in force and effect for a term of four years beginning as of the 1st day of January, 2023. This agreement shall be automatically renewed for one-year extended terms unless terminated under paragraph 4.01 or by either party upon notice given no later than October 31 of each year. IN WITNESS WHEREOF, LHO and the City have executed this agreement the day and year first above written. Lutheran Homes of Oconomowoc City of Oconomowoc By: By: Dale R. Dahlke, CEO Robert P. Magnus, Mayor By: Attest: Diane Coenen, City Clerk Z:\City Administrator\Pilot Agreements\LHO PILOT Agreement 2022.docx 3 23