Walgreen Co. v. City of Madison, 2008 WI 80

752 N.W.2d 687 (2008) · Supreme Court of Wisconsin · July 8, 2008 · No. 2006AP1859

Summary

The Supreme Court of Wisconsin held that the assessment of leased retail property under Wisconsin Statute § 70.32(1) must generally reflect the market rent and market value of the fee simple interest, rather than above-market contract rent. The court reaffirmed that the Wisconsin Property Assessment Manual must be followed absent conflicting law, reversed the court of appeals, and remanded for further proceedings. The court deemed the challenge to the 2004 assessments waived and moot and did not reach the uniformity-clause issue.

Holdings

  1. Under Wis. Stat. § 70.32(1), an income-approach assessment of leased retail property must generally use market rent rather than the property's actual contract rent when determining the market value of the fee-simple interest. Above-market lease terms resulting from unusual business or financing arrangements may not be used to increase the property's taxable real-property value.
  2. Assessors must distinguish unusual financing arrangements, development costs, and business value from taxable real-property value and may not rely solely on a lease's income stream to establish the assessment.
  3. Wis. Stat. § 70.32(1) requires adherence to the Wisconsin Property Assessment Manual absent conflicting law, and no conflict existed here that justified using above-market contract rents.
  4. The issue whether Walgreen failed to comply with Wis. Stat. § 70.47(7) was waived and moot because the Board of Review conducted a hearing and accepted the assessment evidence.

Questions Presented

  1. Whether Wisconsin property-tax law required Madison to assess the leased retail properties using market rents rather than the above-market contract rents under the income approach.
  2. Whether the City and lower courts improperly relied on the actual lease terms and unusual financing arrangements in determining the properties' taxable real-property value.
  3. Whether Walgreen was barred from challenging the 2004 assessments for failure to comply with Wis. Stat. § 70.47(7), or whether that issue was waived and moot.
  4. Whether the assessments violated the Wisconsin Constitution's uniformity clause.

Disposition

reversed_and_remanded

Cases Cited (12)

  • Flood v. Bd. of Review, 153 Wis. 2d 428, 451 N.W.2d 422 (1990)(followed)
  • State ex rel. Flint Building Co. v. Bd. of Review, 126 Wis. 2d 152, 376 N.W.2d 364 (Ct. App. 1985)(followed)
  • Metropolitan Holding Co. v. Bd. of Review, 173 Wis. 2d 626, 495 N.W.2d 314 (1993)(distinguished)
  • Darcel, Inc. v. Bd. of Review, 137 Wis. 2d 623, 405 N.W.2d 344 (1987)(distinguished)
  • City of West Bend v. Continental IV Fund Ltd. Partnership, 193 Wis. 2d 481, 535 N.W.2d 24 (Ct. App. 1995)(distinguished)
  • Adams Outdoor Advertising Ltd. v. City of Madison, 2006 WI 104, 294 Wis. 2d 441, 717 N.W.2d 803(followed)
  • ABKA Ltd. Partnership v. Board of Review, 231 Wis. 2d 328, 603 N.W.2d 217 (1999)(limited)
  • Waste Management v. Board of Review, 184 Wis. 2d 541, 516 N.W.2d 695 (1994)(limited)
  • State ex rel. N/S Associates v. Board of Review, 164 Wis. 2d 31, 473 N.W.2d 554 (Ct. App. 1991)(limited)
  • Bischoff v. City of Appleton, 81 Wis. 2d 612, 260 N.W.2d 773 (1978)(followed)

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