For individuals and businesses throughout the state of Wisconsin, property taxes can be a serious issue. The requirement to pay these taxes can place a significant financial burden on property owners, especially when taxes are increased significantly or when other related fees are imposed. In some cases, cities and towns have attempted to levy additional taxes or fees in order to fund utilities, improvements, and other expenses. However, the state of Wisconsin places limits on increases in property taxes. In a recent decision, the Wisconsin Supreme Court addressed attempts by the town of Buchanan to get around these limits, and it forced the town to comply with the levy limits that have been put in place in Wisconsin law.

Wisconsin Property Taxpayers, Inc. v. Town of Buchanan

In 2019, the town of Buchanan sought to increase revenue that would be used to maintain and reconstruct roads in the area. To do so, it used a referendum to allow voters to decide between raising property taxes, putting a special assessment in place, or creating a Transportation Utility Fee (TUF). Voters chose the TUF, and the town put an ordinance in place creating a Transportation Utility District that would be funded by these fees.

The town’s Transportation Utility Fee was imposed in addition to the property taxes the town collected. While property taxes are based on the value of a property, the TUF was based on the usage of the town’s roads that a property was estimated to generate. The annual fee ranged from around $300 for most residential homes to $8,000 for certain commercial properties.

Wisconsin Property Taxpayers, Inc. (WPT), an organization that represents property owners in property tax disputes, filed a lawsuit against Buchanan seeking to halt the collection of the TUF. It claimed that this fee was an illegal increase in property taxes that exceeded the levy limits put in place by Wis. Stat. § 66.0602. It also argued that the TUF was illegal because it was not based on the value of property. A circuit court judge ruled in favor of WPT, declaring that the TUF was a property tax subject to the town’s levy limit and preventing the town from collecting or enforcing the TUF in amounts above this limit. The town appealed this decision to the Wisconsin Supreme Court.

When considering this case, the Supreme Court looked at whether the TUF could be considered a property tax. It noted that Wis. Stat. § 66.0827 states that utility districts created by towns can be funded by “taxation of the property in the district.” Because “taxation of the property” is functionally equivalent to property tax, the fees collected by Buchanan to fund its utility district were considered to be property taxes. While the town argued that the TUF was a special tax separate from property taxes, the Supreme Court disagreed, and it determined that these taxes were subject to the applicable levy limits.

The court also ruled that the TUF violated the law in other ways. Wisconsin law requires property taxes to be calculated based on a property’s market value, but the TUF was calculated based on the class of a property and its commercial characteristics. In addition, the TUF applied to all developed properties in the district, including those that had tax-exempt status. For these reasons, the court found that the TUF was unlawful, and it upheld the lower court’s decision.