HOUGHTON — Houghton’s battle with Walmart over taxes is nearing an end.

The Houghton City Council Wednesday approved a settlement agreement with Walmart regarding the city’s civil suit in U.S. District Court.

The settlement lays out the terms of a new service agreement with Walmart that will replace the development agreement it made with the city upon expanding to a Supercenter in 2004.

“Based on discussions with our attorneys and assessor and working together with them on this for more than a year, it’s my recommendation the council approve this service agreement to settle the matter,” City Manager Eric Waara said.

In 2018, Walmart sought to lower its tax valuation through the Michigan Tax Tribunal, making the “dark store” argument that its value should be based on that of the empty building, based on the likely difficulty of finding another buyer if the store closed.

The case was put on hold after the Father’s Day Flood, but picked up again this year. The two sides eventually reached an agreement in June prior to a scheduled hearing.

Earlier this year, the city also sued Walmart in federal court alleging it had violated the terms of the 2004 development agreement.

In that agreement, the city agreed to transfer property, conduct capital and public service improvements, and also provide environmental services, such as environmental monitoring in perpetuity. In exchange, Walmart agreed to a property tax increase of at least $1.95 million, which brought it to more than $4.5 million in 2005.

The amount Walmart sought was below that amount. The settlement on the Tax Tribunal case reached in June retroactively adjusted the 2018 taxable value to $2,354,975 — slightly more than half what it had been.

Under the new service agreement, Houghton will continue to provide environmental monitoring service, as required under the Department of Environmental Quality permit for construction around the Huron Creek wetlands. The city also agreed to continue providing municipal bus service to and from Walmart.

The new agreement also includes an annual $40,000 service fee Walmart will pay to Houghton for the services it provides. That fee will also be applied retroactively to each year since 2018, when Walmart began trying to lower its property taxes.

The fee is not a property tax, but will go back to the city’s Tax Increment Finance Authority district on advice of the city’s attorney, Waara said.

Future property tax agreements with Walmart are also regulated by the agreement. It will not contest true cash, assessed or taxable values in a year where its taxable value does not increase by more than 4%.

If it does, Walmart can take a dollar-for-dollar credit against the annual service fee for every dollar above 4%, or file an appeal with the Tax Tribunal.

The agreement also lays out procedures for the two sides to resolve disputes about the taxable value, including a meeting between the two sides and arbitration.

Similar procedure will be in place if Walmart’s tax liability exceeds 4%.

After the council’s approval Wednesday, the city’s attorneys will file to dismiss the court case.