State Bar of Wisconsin

Message from the Section Chair

Judith Schmidt-Lehman, De Pere City Attorneys Office

Welcome to all new and returning section members!

I have been given the honor of chairing your section for 2008-09. A big thank-you goes out to Immediate Past Chair Attorney Larry Bechler for all his work as Section Chair during the past year. He left big shoes for me to try to fill as we move forward into this year.

I also want to take some space to thank former Board Member and past Chair Attorney Chris Jaekels for his dedicated service to the Section over the past six years. Chris, who has hit the two consecutive term limit on the Board, will be missed for his dedication and leadership to the Section. Thank you Chris!

As sad as the Section is to see Chris leave, we are also very happy to announce and send congratulations to Attorney Bruce Schrimpf who was elected in June to fill the Board seat vacated by Chris. Bruce has much experience in administrative and local government law as a hearing examiner with the Department of Industry, Labor and Human Relations (now known as the Department of Workforce Development), as an Assistant City Attorney for the City of Milwaukee and as a Judge Advocate General and Assistant Adjunct General with the Wisconsin Army National Guard.

Also re-elected this spring to another term on the Board are Attorney Harley (Frog) Prell III, Superior City Attorney, and Attorney Jesse Wesolowski, Wesolowski, Reidenbach, Fleming & Sajdak SC, Franklin! Congratulations and thanks to Frog and Jesse for the time and energy they commit to the Section.

Your Section Board brings this newsletter to you twice a year. Inside you will see thoughtful articles from Board members on areas of interest to administrative and local government attorneys. I have also included an article in this edition regarding the outstanding activities your Section offers to its members and seeking input from you on whether you are interested in a Section electronic mail list. Take a look at this newsletter and see what your Section is up to. If you see something you like, let us know; if you see something you would like to have changed, let us know that too! We want your input to know if we are meeting your needs as an administrative and local government attorney.

Thanks and enjoy the newsletter!

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See What We’ve Been Up to Lately

Judith Schmidt-Lehman, De Pere City Attorneys Office

Electronic mail list anyone?

The Administrative & Local Government (ALG) Section wants to be proactive and provide services its members want and need. Through the WisBar website, our section can create an electronic mail list, which is a way to communicate through email with colleagues on issues of interest to ALG lawyers. The electronic mail list is for section members only and is very inexpensive to operate (meaning your dues won’t go up to fund it).

Is an ALG electronic mail list something you want?

Click here for “yes, bring on the electronic mail list”

While some members may be on other electronic mail lists already, an ALG Section electronic mail list could provide access to hundreds of practitioners and their collective experience simply by sending an email question. If the response is good, we will get it up and get it running as soon as possible. Watch your email for information!

I say, is that seminar for me?

Your section has done a fantastic job of creating exciting and timely CLE seminars. We partner with other divisions or sections when a topic of common interest surfaces. This year, look for even more dynamic CLE offerings, including our first web-based CLE offering that we hope to launch in spring. Finally, work (and it is work) has also just begun on our CLE offering for the May Convention, so if you have a topic you can’t wait to hear about or if you have the itch to be a presenter at the convention in May, now is the time to make yourself known!

Where are all the new ALG attorneys?

Many ALG attorneys remember getting their first local government or administrative assignment and thinking to themselves “why didn’t I take Admin. Law?” Law students’ access and interest in ALG topics seem to have stagnated in recent years, and your Section wants to close that gap. So far we have:

* rolled-out the inaugural Administrative & Local Government Student Writing Competition during the 2007-2008 academic year. Congratulations go out to Ms. Anna Short, currently a second year law student at the U.W. School of Law. Ms. Short’s submission of the article “Whether anti-smoking ordinances give cigar bars a viable takings claim under the Fifth Amendment of the United States Constitution and Article I, Section 13 of the Wisconsin Constitution” earned the top prize of $1,000. The second place prize of $500 was not awarded. The 2008-2009 competition will hopefully cement the program as a yearly bridge between the law school experience and work after bar admission.

* begun working with the “Lunch with Lawyers” program sponsored through the State Bar at both of the law schools. This is a great opportunity to meet with law students and talk about your practice. ALG Board members will do just about anything for a few free slices of pizza!

Read anything good lately?

Finally, and as you know, the Section brings this publication to you. It really is filled with interesting information, timely articles and case synopses. Last year we ditched the paper form in favor of this electronic version that we think gets you the information you are looking for on a user-friendly and timely basis. We should all remember to thank our editor, Professor Ramon A. Klitzke, for his work in getting these newsletters to all of us.

The ALG Board is hard at work to give our practice niche visibility. Remember to look for your Section’s CLE offerings and other initiatives. You will not be disappointed!

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Sex Offender Residency Restrictions Ordinances Enforcement Litigation

Jesse A. Wesolowski, Wesolowski, Reidenbach, Fleming & Sajdak, S.C., Franklin
Administrative & Local Government Law Section Board Member

The Spring 2008 Section newsletter provided an update on developing case law around the country on the subject of sex offender residency restriction challenges, reported on the introduction of AB 702 “An Act to create 66.0408 of the statutes; relating to: prohibiting political subdivisions from regulating the placement of sex offenders,” and provided a status report on the then pending City of Franklin v. Hanke, Milwaukee County Circuit Court Case No. 07CV009978, an action by the City of Franklin seeking to enforce the sex offender residency restrictions in its ordinances. AB 702 was laid on the table and was “dead” with the end of the Legislative Session on March 13, 2008. No subsequent legislation upon the subject matter has been (re)introduced as of the date of this writing. This article reports on the disposition of the Circuit Court action.

The city’s complaint asserted three causes of action: i) Public Nuisance, in that the residency of defendant presented an activity or use of property that interfered substantially with the comfortable enjoyment of life, health, and safety of another or others and was a public nuisance as set forth under the City’s “public safety ordinance” as it was termed by the Court; ii) Zoning Ordinance Violation Abatement, in that the residency of defendant additionally violated the City’s zoning ordinance proscribing residency restrictions, enforceable under Wis. Stat. §§62.23(7)(f)2. and 62.23(8); and iii) Forfeiture for a continuing ordinance violation under the zoning ordinance incorporating the general penalty provisions of the Municipal Code. The responsive pleadings asserted 10 constitutional challenges including a state law preemption challenge; alleged among the affirmative defenses: violations of substantive and procedural due process rights under the 5th and 14th Amendments to the United States Constitution, the proscription against cruel and unusual punishment under the 8th Amendment to the United States Constitution, the proscription against double jeopardy under the 5th and 8th Amendments to the United States Constitution, the proscription against ex-post facto punishment under the 5th Amendment to the United States Constitution, and the taking of property without just compensation under the 5th Amendment to the United States Constitution; and a counterclaim had also been asserted alleging a violation of constitutional rights pursuant to 42 U.S.C. §1983.

The parties had filed cross-motions for summary judgment and the hearing was held on April 14, 2008, before the Hon. John Franke. Subsequent to a status conference held on May 13, 2008, the Court issued a 30 page decision on July 2, 2008. The Court’s Memorandum Decision found that the defendant’s constitutional objections were without merit, granted the City’s motion for summary judgment on the second and third claims, denied the defendant’s motion for summary judgment, and though disposing of any constitutional challenge to the City’s first claim, reserved ruling on the issues related to the City’s use of a public nuisance theory to enforce the ordinance under its first cause of action.

The Decision addressed constitutional challenges to four grounds (the others set forth in the answer not being briefed and therefore waived): i. The ordinances violate defendant’s substantive due process rights under the federal constitution; ii. The ordinances violate the ex post facto clause of both the state and federal constitutions; iii. The ordinances are preempted by state law, in violation of the state constitution; and iv. The ordinances constitute an unconstitutional taking of property without compensation.

Upon the substantive due process challenge, the Court decided that the ordinances were not subject to a strict scrutiny analysis as they did not infringe upon a fundamental right and that the question therefore was whether the law “rationally advances a legitimate governmental purpose”, which standard was applied by the Court together with the presumption of constitutionality in reviewing in detail the voluminous submissions of the parties and deciding the challenge did not demonstrate that the ordinances were not supported by a sufficiently rational basis.

The Court also noted that an equal protection argument would fail for the same reasons the defendant’s due process argument failed. Upon the ex post facto clause challenge, the Court decided that the ordinances supported a legitimate governmental purpose and were not intended to be punitive and as such, did not constitute punishment in violation of the ex post facto clause; and the Court’s determination did not change following its further analysis as to whether, in its necessary operation, the regulatory scheme has been regarded in our history and traditions as a punishment, imposed an affirmative disability or restraint, promoted the traditional aims of punishment, had a rational connection to a nonpunitive purpose, or was excessive with respect to that purpose.

Upon the preemption challenge, the Court decided that the local residency restrictions at bar did not logically conflict with, defeat the purpose of, or violate the spirit of Wis. Stat. Ch. 301 in its provisions that govern the supervision and placement of sex offenders. Upon the takings challenge, the Court decided that the facts of this case were distinct from those in Mann v. Georgia Department of Corrections, 282 Ga. 754 (2007), where the Georgia Supreme Court determined the Georgia residency restriction statute in application constituted a taking without just compensation, whereas, in this case, as the ordinances were adopted before the defendant purchased the property, any “taking” occurred prior thereto. The Decision concluded with the direction to the Clerk to schedule a hearing on the amount of any forfeiture to be imposed as to the third claim and for consideration of the public nuisance issues related to the first claim.

The directed hearing was held on July 24, 2008. Upon the further hearing of the public safety ordinance nuisance first cause of action, the Court heard further arguments and the submission by the City of Town of Rhine v. Bizzell, 2008 WI 76, __ Wis. 2d __, 751 N.W.2d 780, decided on July 1, 2008, the day before the Circuit Court Decision in the Franklin case. The Supreme Court in Town of Rhine deferred to the Town’s definition of a public nuisance instead of applying the common-law definition, in determining the proper law to apply. Judge Franke noted that the local code definition of a public nuisance in Town of Rhine was verbatim to the Franklin Municipal Code definition and that it was “very broad”. The Circuit Court went on to rule from the Bench in favor of the City upon the public nuisance cause of action, and in setting forfeitures upon the third cause of action.

The Order for Judgment (Judgment entered Aug. 28, 2008) provides in part: upon the first cause of action, that judgment be entered declaring the defendant’s occupation of the subject property a public nuisance pursuant to Wis. Stat. § 823.02, Chapter 167 of the Municipal Code of the City of Franklin, the common law and the home rule authority of the City of Franklin, and permanently enjoining the defendant from violating Chapter 167 of the Municipal Code of the City of Franklin and ordering his removal from the residence not later than Sept. 22, 2008; upon the second cause of action, that judgment be entered permanently enjoining the defendant from violating the Unified Development Ordinance of the City of Franklin and likewise ordering his timely removal from the residence; and upon the third cause of action, that judgment be entered imposing a forfeiture of $40 per day upon the defendant for each day that he violated the Unified Development Ordinance of the City of Franklin from June 1, 2007 through Sept. 22, 2008 (or any earlier date of vacating the premises), which imposition was stayed and shall remain stayed unless and until defendant violates the terms of the permanent injunction Ordered, upon which occurrence the full amount shall be due together with a forfeiture of $500 per day for each day of violation thereafter.

On Sept. 18, 2008, defendant brought a motion for relief to extend the time for removal from the residence. The motion was heard on Sept. 25, 2008 before the Hon. Maxine A. White. The motion was denied. No appeal has been filed as of the date of this writing.

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Establishing ‘Public’ Highways in Wisconsin

John R. Orton, Curran, Hollenbeck & Orton SC, Mauston
Administrative & Local Government Law Section Board Member

There seems to be an increase in litigation, especially in rural areas, regarding roads. More and more people are purchasing or building homes in rural areas without addressing whether their property has access to a “public” road. Many purchasers just assume that if there is a road to their property, it must be a “public” road, which they have the right to use and which will be maintained by the taxpayers. Other purchasers mistakenly rely on title insurance to address access issues, unaware of the standard “Exceptions” which effectively exclude coverage for most access issues.

This article briefly summarizes the legal theories by which a “public” highway may be established, of which there are at least six (6). A public highway may be created:

1. By conveyance,
2. By plat or certified survey map,
3. By highway order,
4. By 10 years of work,
5. By common law dedication, or
6. By prescription or adverse use.

1. By Conveyance: A municipality may establish a public street by obtaining a written conveyance which either conveys fee title or an easement for highway purposes. This is the most straight forward method. It creates the fewest legal problems because it generates a clear chain of title, which owners, lawyers, and title companies understand.

2. By Plat or Certified Survey Map (CSM): A municipality may establish a public highway by properly accepting a highway which has been properly dedicated on a recorded plat or certified survey map as a public highway.

For plats, §236.29 Wis. Stats. makes clear that “approval” of a plat by the municipality constitutes “acceptance” of the highways shown thereon, and recording of the plat constitutes a conveyance of the highways to the municipality. This statute is a change in the common law, which previously provided that “approval” of a plat did not constitute “acceptance” by the municipality of the highway shown on the plat. Under common law, something more than approval of the plat itself was needed to establish “acceptance” of the highway. Formal resolution of the municipality, or public use of the road was required in addition to approval of the plat. Hence, just because a road is shown on an old plat does not necessarily mean that it is a public highway. Lawyers dealing with old roads created by old plats need to determine whether the plat in question was created before or after §236.29 altered the common law, because they may be dealing with a platted road that was never formally “accepted” and, therefore, does not legally exist, even though it is clearly shown on a recorded plat.

For certified survey maps, §236.34(1)(e) Wis. Stats. incorporates §236.29, and so the rules are the same. A CSM which is approved by the municipality and then recorded has the same effect as a plat regarding the creation of public highways identified on the CSM.

3. By Highway Order: A municipality may establish a public highway, pursuant to the procedures contained in §82.10 through §82.17 Wis. Stats., by formally issuing a “highway order” laying out a public street, and by then using its power of eminent domain (32.05 Wis. Stats.) to acquire the right of way. This process, once completed, rarely leaves any confusion regarding the existence and location of the public highway.

4. By 10 Years of Work: A public highway may be established by a municipality working a road as a public highway for 10 years, pursuant to the requirements of §82.31(2) Wis. Stats.

82.31 Validation of Highways.
(2) UNRECORDED HIGHWAYS.  (a) Except as provided in pars. (b) and ©, any unrecorded highway that has been worked as a public highway for 10 years or more is a public highway . . . .

Under this statute, the central question is whether the road has been “worked” as a “public” highway. The term “worked” is defined by §82.01(11) Wis. Stats.:

82.01 Definitions.
(11) “Worked” means action of the Town in regularly maintaining a highway for the public use, including hauling gravel, grading, clearing, or plowing, and any other maintenance by or on behalf of the Town on the road.

Obviously, whether a road has been “worked” is a question of fact. Mushel v. Town of Molitor, 123 Wis.2d 136, 144 (App. Ct. 1985).

Also, whether a road has been worked as a “public” highway is a question of fact. “Work done by a public agency for the benefit of a private party does not constitute work ‘as a public highway’ under §80.01(2) [now 82.31(2)].” Ruchti v. Moore, 83 Wis.2d at 556; Town of Minocqua v. Neuville, 174 Wis. 347 (1921).

In County of Langlade v. Kaster, 202 Wis.2d 448 (Ct. App. 1996), the County claimed that a road was a public highway because the County had replaced a bridge on the road and had required loggers to restore the road after logging on adjacent county land. The Court disagreed, and held that the County did not establish under §80.01(2) (now 82.31(2)) that it had worked the road as a public highway for 10 years. The Court held: “We conclude that even if the loggers’ work is attributed to the County for purposes of §80.01(2) the law requires the public entity to work the road in a manner that demonstrates ownership.” 202 Wis.2d at 454. The Court went on to state as follows:

The test is whether the work demonstrates the public’s ownership of the road so that the public’s use of the road is not merely permissive. See Ruchti, 83 Wis.2d at 556, 266 N.W.2d at 313. This test gives the land-owner sufficient notice to claim the road as his or her own if a public entity works the road. Without establishing a bright-lined test for the “worked” requirement, we note that continuous work on a road by a public entity is more likely to demonstrate ownership than sporadic work.

In many cases, it is clear that the municipality has “worked” a road for 10 years. Usually the municipality can prove that it has snow plowed, graded, graveled, mowed and/or patrolled the road, on a continuous basis, for at least 10 years. But in other cases, it can be far less clear. For example, many rural roads are ignored, except for irregular snow plowing in the winter. Evidence that a municipality plowed a disputed road will have limited probative value if the municipality also plowed private roads and driveways, a common practice in rural areas.

5. By Common Law Dedication: The doctrine of “common-law dedication” is well-established in Wisconsin.

The essential requisites of a valid common-law dedication are there must be an intent to dedicate on the part of the owner and an acceptance of the dedication by the proper public authorities or by the general public user.

Nox v. Roehl, 153 Wis. 239, 243 (1913), affirmed by numerous cases, including Galewski v. Noe, 266 Wis. 7, 12 (1954); Gogolewski v. Gust, 16 Wis. 2d 510, 514 (1962); Poynter v. Johnston 114 Wis. 2d, 439, 448 (1983); County of Langlade v. Kaster, 202 Wis. 2d, 448 (Ct. App. 1996); City of Beaver Dam v. Cromheecke, 222 Wis. 2d, 608, 614 (Ct. App. 1998).

“There must be an absolute and complete dedication which means an offer of the land for public use and an acceptance thereof. Poynter v. Johnston, 114 Wis. 2d at 448. “Dedications or offers thereof need not be in writing, nor in any particular form. The intention of the owner to dedicate and acceptance thereof by the public are the essential elements of a complete dedication” Galewski v. Noe, 266 Wis. at 12. The intention to dedicate the land is a question of fact which must be resolved at trial. County of Langlade v. Kaster, 202 Wis.2d 448.

Acceptance of a dedication may be accomplished either by the actions of the proper public authority or by general public user. “The general public itself may accept an offer of dedication by using the offered property for a ‘considerable length of time.’” City of Beaver Dam v. Cromheecke, 222 Wis.2d at 615, quoting Galewski v. Noe, 266 Wis. at 14.

A valid acceptance of a Plat dedication by public user does not require a duration of user equivalent to the statute of limitations [i.e. 20 years] necessary to establish a public highway by adverse user alone. [Citation omitted] It is a mere coincidence that in the two leading Wisconsin cases in which acceptance by user was found [citations omitted] such user did extend over a period of more than twenty years. However, public use ought to be for such length of time that the public accommodation and private rights might be materially affected by an interruption of the enjoyment. Gogolewski v. Gust, 16 Wis.2d at 518.

The mere approval of a plat by a municipality and the subsequent recording of the plat, does not constitute an acceptance of platted streets as public highways. Gogolewski v. Gust, 16 Wis.2d at 516-517.

Finally, “an offer to dedicate may be withdrawn at any time before it is accepted.” City of Beaver Dam v. Cromheecke, 222 Wis.2d at 614; Galewski v. Noe, 266 Wis. at 14. This language is consistent with numerous cases holding that “until a proprietor’s dedication of a proposed street is accepted in the manner required by law, it is merely an offer which can be withdrawn at any time before acceptance.” In re Vacation of Plat of Garden City, 221 Wis. 134,138-40 (1936).

This theory is most commonly used by private parties, who can prove that a road has been used for many years by the public, but who can not prove that the road was “worked” by a municipality. It is obviously a fact-intensive theory.

6. By Prescription: A public highway may be established by satisfying the common law elements of prescription or adverse use. Establishing a public road “by prescription,” or “by user,” or “by adverse user,” mean the very same thing. State v. Town Board, 192 Wis. 186, 193 (1927). In County of Langlade v. Kaster, 202 Wis.2d, 448, 457 (Ct. App. 1996), the Court recited the test for establishing a public road by prescription or adverse use:

Next, the County contends that it acquired the right to use the road by prescription. The County bases its claim on testimony that the public used the road for more than twenty years. See§893.28(1), STATS. A prescriptive easement requires the following elements: (1) adverse use that is hostile and inconsistent with the exercise of the titleholder’s possessive rights (2) that is visible, open and notorious (3) under an open claim of right (4) and is continuous and uninterrupted for 20 years. Mushel v. Town of Molitor, 123 Wis.2d 136, 144, 365 N.W.2d 622, 626 (Ct. App. 1985). Hostile intent does not exist if the use is pursuant to the permission of the true owner. Northwoods Dev. Corp. v. Klement, 24 Wis.2d 387, 392, 129 N.W.2d 121, 123 (1964) Pursuant to § 893.28(3), STATS., the use of a way over unenclosed land is presumed to be permissive and not adverse. A user must present positive evidence to establish a prescriptive easement, and every reasonable presumption must be made in favor of the landowner. Mushel,123 Wis.2d at 145, 365 N.W.2d at 626.

As a matter of public policy, it has always been difficult in Wisconsin to establish a public road by prescription. This public policy was best stated long ago in State v. Town Board, 192 Wis. 186 (1927):

The law affords ample opportunity for the establishment of highways where needed. It is not necessary to penalize a considerate owner who has permitted travel over his unenclosed lands in order that the neighborhood may have highways. The Town authorities are clothed with power to lay out highways wherever public necessity requires. While it may involve some public expense, moral considerations require that such expense be borne by the public rather than that fanciful considerations be invoked to impose a burden on a landowner by reason merely of his neighborly indulgence. State v. Town Board, 192 Wis. at 195.

In conclusion, access issues continue to be a problem, especially in rural areas. A call to the town clerk is rarely helpful because many town roads are “unrecorded.” Although the clerk usually has an opinion about whether a road is public, the clerk rarely knows how or why the road is public. Usually the clerk’s opinion is simply based upon the fact that the 5own currently “works” the road, and not upon any official record or action of the 5own. In this regard, many municipalities would benefit from the passage and recording of an ordinance which officially identifies and accepts those roads which the municipality considers “public.”

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Summaries of Recent Wisconsin Cases

Stacy Schlemmer, Marquette Third Year Law Student

Supreme Court Will Afford Tax Appeals Commission Due Weight Deference on its Interpretation of General Sales and use Tax Statute When the Interpretation is Reasonable and Not Contrary to the Plain Meaning of the Statute

Wisconsin Dept. of Revenue v. Menasha Corp., 2008 WI 88

Facts: Menasha, a Wisconsin corporation, purchased the R/3 Computer Software System. The R/3 System was delivered on multiple CD-ROM disks, installed, and downloaded. Upon delivery, the R/3 System did not provide adequate processing for Menasha and the implementation of the system took several years and cost several million dollars. Two years after Menasha finished installing and downloading the System, the Department of Revenue audited SAP and determined that the R/3 System was non-custom and thus taxable. In the course of the audit, SAP and DOR agreed that SAP’s sales of R/3 software in Wisconsin were subject to Wisconsin’s sales tax as sales of non-custom software. Menasha initially paid sales and use tax for the R/3 System, but filed a refund claim with the DOR for the taxes paid, which the DOR denied. After the DOR’s subsequent denial of Menasha’s petition for redetermination, Menasha requested that the Tax Appeals Commission review the DOR’s determination.

The Commission concluded that the R/3 System was a custom computer program under Wis. Admin. Code § Tax 11.71(1)(e), and thus, the R/3 System was exempt from sales and use tax. The DOR appealed to the circuit court, which reversed the Commission’s decision and concluded that the R/3 System was a non-custom software program, and thus, was taxable as tangible property. The court of appeals reversed, thereby affirming the Commission’s initial decision that the R/3 System was custom and exempt from sales and use tax. The Supreme Court affirmed.

Holding: The Wisconsin Supreme Court held that the Commission should be given due weight deference on its interpretation of the general sales and use tax statute defining tangible personal property. Additionally, the court would give controlling weight deference to the Commission’s interpretation of the DOR’s rule defining custom computer programs for sales and use tax purposes. As a result, the court determined that the R/3 System was a “custom program” exempt from sales and use tax, was not a “prewritten program,” and was not an “existing program” selected for modification.

The dissent argued that deference should not be given to the Commission’s interpretation of the statute and rule governing computer software and custom computer software because it is inconsistent with the language, meaning, and purport of the statute and the administrative rule is not reasonable. Further, the Commission’s decision yields unreasonable and absurd results. Thus, the R/3 System is not a “custom program” as that term is defined in the text of the rule.

Rationale: The Commission determined the R/3 System was custom based on all the facts and circumstances, including the seven factors listed in § Tax 11.71. “Tangible personal property” includes all tangible personal property of every kind and description and includes computer programs, except custom computer programs under § 77.51(20) and is subject to Wisconsin sales and use tax. Thus, as a custom program, the R/3 System is subject to Wisconsin sales and use tax. When applying the controlling weight deference standard to the Commission’s interpretation of Wis. Admin. Code § Tax 11.71(1)(e), the Commission reasonably interpreted the rule and concluded that the R/3 System was custom. Since the Commission’s conclusion was reasonable, the court will not substitute its judgment for that of the Commission.

Real Property Assessments of the Fair Market Value of a Fee Simple Interest Generally Must be Based on Market Rate Rents Rather than Contract Rents, Absent an Encumbrance Bringing the Leased Fee Value Below Actual Market Rents

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

Facts: Walgreen leases properties in Madison and is responsible for making lease payments and paying property taxes for those properties. Walgreen’ lease payments include compensation to the property developers for financing, land acquisition, construction, development, and financing costs, together with a profit margin. The parties agree that inclusion of such costs into lease terms results in higher than market rate rental payments. The City tax assessments use an income approach utilizing a “direct capitalization” method, based on actual income, but using market-based expense and vacancy estimates.

Walgreen attempted to appeal the 2003 assessments to the Madison Board of Review, but the assessments were sustained. After another unsuccessful appeal to the Board of Review for excessive assessments in 2004, Walgreen filed suit in circuit court under Wis. Stat. § 74.37 seeking a refund and litigation expenses for the alleged excess taxes paid for 2003 and 2004. The circuit court and court of appeals both upheld the City’s assessments. The Supreme Court reversed and remanded.

Holding: The Wisconsin Supreme Court held that the City’s assessor was required to determine value of leased properties under the income approach using market rather than contract rates, and the assessor could not include real estate’s unusual financing or above-market rent when assessing the property under the income approach.

Rationale: The lower courts failed to correctly apply the relevant statutory language of Wis. Stat. § 70.32(1) and pertinent provisions of the Wisconsin Property Assessment Manual, case law, and persuasive authorities that address the assessment of leased property in consistent terms. The circuit court erred in failing to apply the manual’s requirement that income approach assessments base valuations on market rates rather than contract rates and failing to apply relevant case law. Case precedent establishes that unique financing arrangements are not part of the ordinary conditions in the market establishing “full value” within the meaning of § 70.32(1).

A transfer of lease terms that incorporates reimbursement of a developer’s costs at an amortized rate, resulting in above-market rent rates, is not an “ordinary” condition of sale under § 70.32(1), nor is it reflective of conditions “typical of normal financing and payment arrangements prevalent in the market.” Real property assessments should not be based on factors such as unusual financing or above-market rents that are not normal conditions of sale reflected in the value of a fee simple property interest. Additionally, the lower courts failed to recognize the rule that it is erroneous to rely solely on the income approach in property assessment and bad policy to rely on the income approach when it has the effect of taxing business efforts instead of property.

Municipalities May Not Avoid Liability under the Open Records Law by Contracting with an Independent Contractor Assessor for the Collection, Maintenance, and Custody of Assessment Records and Then Directing Requesters of Those Records to the Independent Contractor Assessor Who has Custody of the Requested Records

WIREdata, Inc. v. Village of Sussex, 2008 WI 69, 751 N.W.2d 736

Facts: A company, WIREdata, made a series of open records requests to Sussex, Thiensville, and Port Washington for information about each municipality’s property assessments. The municipalities had contracted with private, independent contractor assessors to complete their property assessments. WIREdata’s initial requests to Sussex and Thiensville asked the municipalities to provide the data to the company in an “electronic/digital” format, while the initial request to Port Washington did not specify a requested format. WIREdata later made requests directly to the assessors asking for the information in the format created and maintained by the assessors in a computerized database (“enhanced” requests). Sussex directed the request to Grota Appraisals, LLC, which stored the appraisal data in a computer software program, which then forwarded the request to the owner of the private computer programming firm that programmed the software. The owner informed Sussex’s counsel of the difficulties, time, and expense associated with providing the “enhanced” data requested of him, directly, by WIREdata. All three municipalities gave WIREdata access to the requested data using written, PDF, format which complied with WIREdata’s initial requests. WIREdata was not satisfied with the provision of the data using the PDF format.

Two months after making the requests, WIREdata filed a mandamus action against Sussex and its appraiser. The circuit court granted WIREdata’s motion for summary judgment but denied requests for punitive damages. Sussex and its assessor appealed. WIREdata filed separate mandamus actions against Thiensville and Port Washington and their independent contractor assessors. After the actions were consolidated, the circuit court granted summary judgment in favor of the village, city, and assessors and imposed costs on the requester. WIREdata appealed.

The court of appeals considered the two appeals together, holding that the municipalities had violated the open records law when they did not provide the requested data, and only the municipalities, not their independent contractor assessors, were liable for open records law violations. The municipalities and appraisers appealed. The Supreme Court reversed in part and affirmed in part.

Holding: The Wisconsin Supreme Court held that the municipalities are the responsible authorities under the open records law; that such responsibility cannot be shifted to independent contractor assessors; and that the initial written requests of WIREdata were valid and, thus, were not insufficient as to subject matter and length of time.

Rationale: The Court’s analysis of Wisconsin’s open records law focused on the language of Wis. Stat. §§ 19.31-19.39. Independent contractor assessors of a municipality are not authorities under the open records law so they are not proper recipients of open record requests. Municipalities may not avoid liability under the open records law by contracting with an independent contractor assessor for the collection, maintenance, and custody of assessment records and by then directing requesters of those records to the independent contractor assessor who has custody of the requested records.

WIREdata did not properly commence the mandamus actions against the municipalities under the open records law, pursuant to Wis. Stat. § 19.37(1), because the municipalities had not denied WIREdata’s requests for the records before WIREdata filed the mandamus action. The municipalities fulfilled WIREdata’s open records requests once they produced PDFs with the requested information and give those files to WIREdata because it is sufficient for an authority to provide a copy of the relevant data in an appropriate format. Additionally, although an authority may charge a requester for actual costs in complying with a request, no fees were charged to WIREdata, so the municipalities are in compliance with that aspect of the open records law. Thus, the municipalities are not liable for damages in the present action.

“Permit Use Only Zone” is Unconstitutional, as a Matter of Substantive Due Process, When it is Clearly Arbitrary and Unreasonable, Having No Substantial Relation to the Public Health, Safety, Morals or General Welfare

Town of Rhine v. Bizzell, 2008 WI 76, 751 N.W.2d 780

Facts: An off-road vehicle club purchased land in the Town of Rhine within a “permit use only zone.” After Town informed Club of its need for a conditional use permit for “any use of the land,” the Club applied for a conditional use permit to use the property for recreational activities. The permit was denied, and six Club members were issued citations for violating Town’s public nuisance ordinance within weeks of the denial. A consolidated trial was held for all six defendants, and the municipal court dismissed the violation due to insufficient evidence.

Town appealed and filed a complaint in circuit court asking for de novo review and determination of whether Club was violating Town’s zoning code. The circuit court found the zoning ordinance unconstitutional because it barred all uses within a district. Town appealed, and the court of appeals certified case to the Supreme Court to resolve whether Town’s zoning ordinance was unconstitutional and whether the circuit court properly dismissed the nuisance ordinance violations. The Supreme Court affirmed in part, reversed in part, and remanded.

Holding: The Wisconsin Supreme Court held that the Town’s “no permitted uses” zoning ordinance is unconstitutional because it is arbitrary and unreasonable in that it precludes any use as of right in the zoned district and such limitation bears no substantial relation to the public health, safety, morals or general welfare, and remanded the public nuisance issue based on improper application of a common-law definition of nuisance by the circuit court in its analysis.

Rationale: The Court’s analysis of the zoning ordinance focused on the rational basis test of Village of Euclid, Ohio v. Ambler Realty Co., which requires an ordinance to be invalidated as a matter of substantive due process, if it is has no substantial relation to the public health, safety, morals, or general welfare. The Town failed to acknowledge its ability to both regulate where undesirable uses develop and provide for permitted uses as of right, which demonstrates beyond a reasonable doubt that the ordinance is arbitrary and unreasonable. Precluding any use as of right in the zoned district is not only arbitrary and unreasonable, but the limitation bears no substantial relation to the public health, safety, morals or general welfare.

Factors Considered under a Totality of the Circumstances Test to Determine Whether an Entity is a Quasi-Governmental Corporation Subject to Wisconsin Open Meetings and Public Records Laws

State v. Beaver Dam Area Development Corporation, 2008 WI 90, 752 N.W.2d 295

Facts:Beaver Dam Area Development Corporation (BDADC) is a non-profit corporation organized under Wisconsin law, and its bylaws state that its exclusive purpose is to engage in economic development and business retention within the corporate limits and lands which could become part of the limits of the City of Beaver Dam. The City had a cooperation agreement with BDADC. Under that agreement, City provided funding and assistance to BDADC in return for BDADC undertaking and assisting economic development within the city.

The State of Wisconsin sought judgment declaring that BDADC was subject to the open meetings and public records laws and an order requiring BDADC to comply with those laws. The circuit court held that BDADC is not subject to the open meetings and public records laws because it does not meet the definition of a “quasi-governmental corporation” under Wisconsin statutes. The court of appeals requested certification.

Holding: The Wisconsin Supreme Court held that BDADC is a quasi-governmental corporation subject to Wisconsin open meetings and public records laws, and the new rule adopted by the Court was to be applied prospectively only.

Rationale: The Court relied on statutory language, principles of statutory construction, history of Wisconsin open meetings and public records laws, and interpretations by the attorney general and other courts to determine that an entity is a quasi-governmental corporation within the meaning of Wisconsin law if, based on the totality of the circumstances, it resembles a governmental corporation in function, effect, or status.

The specific factors considered by the Court were entity funding or finances, whether entity serves a public function, whether entity appears to the public to be a government entity, whether entity is subject to government control, and degree of access that government bodies have to entity records. This list is not exhaustive, and no single factor is outcome determinative. The Court emphasized the need for examination of the totality of the circumstances on a case-by-case basis. Knowing the factors that are considered by courts allows entities to change how they are organized if they do not want to be considered a quasi-governmental corporation.

Bridge Aid Statute Requires that Town Bridge Construction or Repair be on an Existing Highway to Qualify for Financial Assistance from County

Town of Madison v. County of Dane, 2008 WI 83, 752 N.W.2d 260

Facts: The Town submitted a petition to the County Bridge Aid Program requesting financial assistance for a new railroad overpass bridge to be constructed. The plan was to build a bridge before any highway was built to which the bridge would be directly connected. The County denied the Town’s request, stating that the bridge did not qualify for the bridge aid program. Despite the County’s denial of aid, the Town built the bridge and extended a frontage road to connect to the bridge. After the bridge was built, but before it was connected to the frontage road, the Town filed suit against the County.

Circuit court granted summary judgment to the Town, concluding that Wis. Stat. § 81.38 does not preclude funding for a maintainable highway not yet in existence. The court of appeals affirmed, holding that § 81.38 includes aid for bridge construction where there is no preexisting highway if the completed bridge is ‘on a highway maintainable by the town.’ The Supreme Court reversed and remanded.

Holding: The Wisconsin Supreme Court held that the bridge aid statute requires counties to fund only those bridges constructed or repaired on highways maintainable by towns. For a bridge to be on a highway “maintained by a town” within the meaning of bridge aid statute, the bridge must be constructed or repaired on an existing highway.

Rationale: The Court relied on the language and history of § 81.38 to determine that bridges must be on existing highways to receive funding for bridge construction or repair. The bridge aid statute does not provide for the funding of bridges that may connect to a highway in the future.

The Town’s petition described funding for the bridge alone rather than funding to connect the bridge to a highway, and the bridge failed to connect to a highway maintainable by Town upon its completion. Therefore, the bridge falls outside the scope of the requirements of § 81.38.

Recent Arm’s-Length Sale of Property Is Best Evidence Of Value For Town Tax Assessments, as Long As Sale, and Value, is of The Same Property

Forest County Potawatomi Community v. Township of Lincoln, 2008 WL 4210547 (Wis.App.)

Facts: The Forest County Potawatomi Community and Sokaogon Chippewa Community appeal a summary judgment dismissing their claim against the Township of Lincoln for excessive tax on two 40-acre parcels. The Tribes challenged the assessed value of the land, which was determined based on an assessment by the Department of Revenue. The DOR analyzed an April 2003 sale of the mining company that owned the land, which involved the sale of a variety of assets, and allotted an amount of the sale to property in the Town. The Town’s assessor allocated that amount among all the mining company’s land and split the price equally between the two parcels to arrive at the fair market value used for the tax assessments. The circuit court concluded the sale was a recent arm’s-length sale of the property. The Supreme Court reversed and remanded.

Holding: The Wisconsin Supreme Court held that the sale of the mining company included not just the two 40-acre parcels, but also substantial land and company assets; therefore, the sale was not a sale of “the property.” Further, there is “significant contrary evidence,” which rebuts the presumption in favor of the Town’s assessment.

Rationale: Wis. Stat. § 70.32(1) requires that assessors value property “in the manner specified in the Wisconsin property assessment manual.” The “best information” of a property’s fair market value is a sale of the property or, if there has been no such sale, then sales of reasonably comparable property. A recent arm’s-length sale of property is the best evidence of value; however, value derived by analyzing a complex corporate transaction involving the sale of a variety of assets is not equivalent to the price obtained in a sale of one component of that transaction.

The DOR’s assessor used his judgment to allocate what he believed was the portion of the April 2003 sale attributable to taxable land in the Town, and the Town’s assessor then used his own judgment when he treated the amount of the sale the DOR had allocated to the land as the “sales price” of the properties. Thus, the sale did not prove the valuation by facts which assessors had no part in establishing or shaping.

The Tribes presented evidence that mining is not the highest and best use of the properties, that the mineral core adds little value to the land, and that the properties were assessed at a much higher level than reasonably comparable properties. Because the Town’s assessment was not based on a recent arm’s-length sale of the properties as it claimed it was, and the Tribes have shown significant contrary evidence rebutting the presumption in favor of the Town’s assessment, the circuit court incorrectly disregarded other evidence of the land’s value and erred by granting summary judgment in favor of the Town.

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