By: GRGB Partners Christopher Strohbehn and Russell Karnes
In a recent decision by the Wisconsin Supreme Court related to property taxes for large stores, the Court stated “[w]e do not read the Manual to strictly prohibit the use of vacant properties as comparable to occupied properties. The language of ‘should avoid’ is not mandatory.”
The long-awaited decision in Lowe’s Home Centers, LLC v. City of Delavan, 2023 WI 8, will address whether big box stores can be taxed by comparing the value of property to the value of vacant buildings. Despite what the League of Wisconsin Municipalities or other local municipalities state, this decision is not a panacea that is going to solve all their problems. In fact, it will likely create new ones for them as the law develops.
While there were many distinct facts that led to the Court affirming the trial court’s decision, there were moments of nuance that suggest it’s not simply smooth sailing for municipalities in the future.
Id. at ¶71 In fact, the Court observed that language “to mean that the comparability of vacant properties to occupied properties exists along a continuum depending on how long the property has been vacant as compared to the normal exposure time for a property of that type in the same geographic area.” Id.
Why is that nuance so important? If you practice and deal with assessors often as it relates to big-box retailers, you will have heard an assessor or appraiser dismiss vacant comparable sales with a brush of their hand because they are “dark.” The Court recognized the practical confusion that had been occurring and clarified the issue by stating that “[w]e acknowledge that the Manual may not be a model of clarity on the subject, but its language does indicate that ‘vacant’ and ‘dark’ are not synonymous…In other words, all dark stores are vacant, but not all vacant stores are dark.” Id. at ¶¶45-46.
With this decision, the Court has shed light on the proper use of critical terminology by assessors as they determine the value of stores that are open and operating. Fair assessors will be forced to consider that vacant stores that are sold on the market might be good comps. This new reality can only help retailers as they pursue fair assessments based on comparable sales going forward.
While the Court ultimately affirmed the assessment, it did so on the record it had before it. Id. at ¶69. It further said, “[w]e emphasize that our determination is based on the facts and circumstances presented to the circuit court, and the circuit court’s evaluation of those facts and circumstances” Id. at ¶70.
Last, it is important to note that the defense expert in the Lowe’s case used comparable sales. In practice, the defense expert is not always relying on comparable sales; instead, we often see the focus on the cost or even the income approach even when comparable sales exist. It is always good to see the Court acknowledge, even tacitly, that we should be looking at sales first to determine the fair values.
How will the courts interpret these challenges in the future? That is yet to be seen. This is why it is important to retain appropriate counsel to challenge the flawed methodology that assessors are using to substantiate excessive assessments.
Contact Our Milwaukee, WI Property Tax Assessment Lawyers
At GRGB Law, we provide representation to businesses in property tax assessment litigation, working to help them challenge unfair assessments and ensure that they will not be required to pay excessive property taxes. We can help take the recent Supreme Court ruling into consideration, and we can build successful strategies to ensure that the value of a business’s property is assessed correctly. To learn more about how we can assist with these cases, contact our Milwaukee property tax litigation attorneys at 414-271-1440.