Collison v. City of Milwaukee Board of Review
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The Supreme Court affirmed the decision of the court of appeals affirming the determination of the City of Milwaukee Board of Review that Petitioner's property was properly assessed at a value of $31,800, holding that the assessor properly considered the impairment of the property's value due to contamination in arriving at a valuation pursuant to Wis. Stat. 70.32(1m).
On appeal, Petitioner argued that because the property was contaminated he could not sell it, and therefore, the assessed value should be zero dollars. Further, Petitioner argued that the City of Milwaukee Environmental Contamination Standards (CMECS) conflict with Wis. Stat. 70.32. The Supreme Court affirmed, holding (1) by utilizing the income approach to value the property according to its highest and best use as a parking lot, the assessor properly considered the contained nature of the property in arriving at a valuation; and (2) this Court declines to address Petitioner's challenge to the CMECS because the assessor did not rely on the CMECS in the assessment of Petitioner's property.
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2021 WI 48 SUPREME COURT OF WISCONSIN CASE NO.: 2018AP669 COMPLETE TITLE: State of Wisconsin ex rel. Ronald L. Collison, Petitioner-Appellant-Petitioner, v. City of Milwaukee Board of Review, Respondent-Respondent. REVIEW OF DECISION OF THE COURT OF APPEALS Reported at 388 Wis. 2d 621,935 N.W.2d 553 (2020 – unpublished) OPINION FILED: SUBMITTED ON BRIEFS: ORAL ARGUMENT: SOURCE OF APPEAL: COURT: COUNTY: JUDGE: June 2, 2021 January 11, 2021 Circuit Milwaukee Glenn H. Yamahiro JUSTICES: ANN WALSH BRADLEY, J., delivered the majority opinion of the Court, in which DALLET, HAGEDORN, and KAROFSKY, JJ., joined. ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER, C.J., and REBECCA GRASSL BRADLEY, J., joined. NOT PARTICIPATING: ATTORNEYS: For the petitioner-appellant-petitioner, there were briefs filed by James E. Goldschmidt and Quarles & Brady LLP, Milwaukee. There was an oral argument by James E. Goldschmidt. For the respondent-respondent, there was a brief filed by James M. Carroll, assistant city attorney; with whom on the brief was Tearman Spencer, city attorney. There was an oral argument by James M. Carroll. An amicus curiae brief was filed on behalf of The Wisconsin Realtors Association and NAIOP-Wisconsin by Thomas D. Larson, Madison. 2 2021 WI 48 NOTICE This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports. No. 2018AP669 (L.C. No. 2017CV4572) STATE OF WISCONSIN : IN SUPREME COURT State of Wisconsin ex rel. Ronald L. Collison, Petitioner-Appellant-Petitioner, FILED v. JUN 2, 2021 City of Milwaukee Board of Review, Sheila T. Reiff Clerk of Supreme Court Respondent-Respondent. ANN WALSH BRADLEY, J., delivered the majority opinion of the Court, in which DALLET, HAGEDORN, and KAROFSKY, JJ., joined. ROGGENSACK, J., filed a dissenting opinion, in which ZIEGLER, C.J., and REBECCA GRASSL BRADLEY, J., joined. REVIEW of a decision of the Court of Appeals. ¶1 ANN WALSH BRADLEY, J. The Affirmed. petitioner, Ronald Collison, seeks review of an unpublished per curiam decision of the court of appeals affirming the City of Milwaukee Board of Review's (Board) determination that his property was properly No. assessed at a value of $31,800.1 the property is contaminated 2018AP669 Collison argues that because he cannot sell it, and that accordingly the assessed value should be zero dollars. ¶2 erred Specifically, by basing the Collison contends assessment on the that the property's assessor income- generating potential as a parking lot without reducing the value to account for the contamination that is present. He further argues that the City of Milwaukee Environmental Contamination Standards (CMECS) conflict with Wis. Stat. § 70.32 (2017-18).2 ¶3 We conclude that by utilizing the income approach to value the property according to its highest and best use as a parking lot, the assessor properly considered the impairment of the value of the property due to contamination in arriving at a valuation pursuant to Wis. Stat. § 70.32(1m). Further, we decline to address Collison's challenge to the CMECS because the assessor did not rely on the CMECS in the assessment of Collison's property. ¶4 Accordingly, we affirm the decision of the court of appeals. State ex rel. Collison v. City of Milwaukee Bd. of Rev., No. 2018AP669, unpublished slip op. (Wis. Ct. App. Aug. 27, 2019) (per curiam) (affirming the order of the circuit court for Milwaukee County, Glenn H. Yamahiro, Judge). 1 All subsequent references to the Wisconsin Statutes are to the 2017-18 version unless otherwise indicated. 2 2 No. 2018AP669 I ¶5 Since 1979, Collison has owned a piece of property in downtown Milwaukee. Located two blocks from Fiserv Forum, the new Milwaukee sports arena, it includes a two-story steel and wood framed commercial building and an asphalt parking lot with space for approximately 12-15 vehicles. housed a dry cleaning business that The building previously closed in 2005 and is currently vacant. ¶6 removal In 2012, the City of Milwaukee issued a permit for the of four underground storage tanks on the property. After removal of the tanks, a subsequent soil analysis found contamination from petroleum and perchloroethylene solvents. The soil analysis did not include a statement regarding how much it would cost to remediate the property, and the circuit court ultimately determined that there was no evidence that the soil analysis was presented to the Board during its proceedings. ¶7 For the 2016 assessment year, the City assessed the property and determined the fair market value to be $31,800. As part of this assessment, the City found that the building had no value. In arriving at the $31,800 valuation, the City's assessor used the "income approach," basing the assessment on rental income that could existing parking lot. be obtained from the property's The assessor examined other comparably assessed downtown parking lots and observed that rental income had indeed been collected from the property in the past, as Collison had previously rented nine generating $540 per month in income. 3 of the parking spaces, No. ¶8 2018AP669 Collison appealed the assessment to the Board. The Board held a hearing, at which Collison and the assessor offered testimony. ¶9 Before the Board,3 Collison contended "that the property has no assessed value at this time because it has no market value." He explained, "People are not interested in purchasing a property, such as this one, simply because it has contamination on it." Further, Collison asserted that the amount of contamination on the property is such "that anyone that would purchase the property would have to pay for the remediation[,]" the cost of which could reach "perhaps even into the millions of dollars." ¶10 error Legally, Collison argued that the assessment was in because it contravenes Wis. Stat. § 70.32(1m).4 In Collison's estimation, the assessor did not follow the statute's dictate to consider the impairment of the property's value due to the contamination in arriving at a valuation, and instead followed the CMECS,5 which indicate that a property is to be Collison represented himself through the petition for review stage of this case, appearing pro se before the Board, the circuit court, and the court of appeals. 3 Wisconsin Stat. § 70.32(1m) provides: "In addition to the factors set out in sub. (1), the assessor shall consider the impairment of the value of the property because of the presence of a solid or hazardous waste disposal facility or because of environmental pollution, as defined in s. 299.01(4)." 4 5 In relevant part, the CMECS set forth: Burden of Proof on Taxpayer . . . Contamination must be substantiated through an independent environmental (continued) 4 No. 2018AP669 valued as if it were uncontaminated unless the landowner pays for a "phase II" environmental site assessment detailing the contamination. ¶11 The assessor also testified before the Board. He recognized that the property is contaminated, but stated that "[i]t's just an unknown extent and/or cleanup costs associated with the necessary cleanup with the documentation to contamination." establish the Regarding extent of the the contamination, the following exchange occurred between several Board members and the assessor: Mr. Evans [Board member]: So, if the contamination was factually known, would that affect the assessment, value assessment of the property? Mr. Wiegand [Assessor]: Yes. Mr. Volkman [Board member]: Will you accept only a phase one, phase two? Or will you accept somebody giving you a quote, as to what it takes? Mr. Wiegand: Um, we will accept verifiable evidence done by an expert. any written, expert. This step is no different from providing independent appraisals to defend values on appeal. The minimum level of acceptable substantiation will be a comprehensive Phase II Audit, setting forth (among other pertinent information) the type, level and source of contamination and the suggested method or methods for remediation. Without this information, property must be valued as if uncontaminated. All information we obtain from owners/agents regarding potential contamination will be considered open records to the public. 5 No. ¶12 2018AP669 With regard to his use of the income approach and the consideration of the rental income that could be generated by the on-site parking lot, the assessor testified: [T]here is a great need for parking in this area and contaminated sites can be encapsulated and used as parking lots. I think as long as there is potential to——or the owner is using it as a parking lot, we could consider using . . . the income approach, as long as there's income being derived from the site. ¶13 He further explained, "I don't contamination is $50,000, or $800,000. the vehicles at this point, if the We're valuing the, the parking lot based on its income potential. park know The potential to whether contaminated or not . . . and that's how the city is assessing the property." ¶14 The Board ultimately upheld the assessment and Collison sought certiorari review in the circuit court. He renewed the same arguments he made before the Board, namely that the CMECS conflict with Wis. Stat. § 70.32(1m) and that the assessor did not consider the impairment of the property's value due to the contamination as required by § 70.32(1m) and the Wisconsin Property Assessment Manual (WPAM). ¶15 The circuit court affirmed the Board. It did not squarely address Collison's contention that the CMECS conflict with Wis. record did Stat. not § 70.32(1m) demonstrate because, that the in its Board actually relied on the CMECS requirements. estimation, or the the assessor In other words, the circuit court determined that Collison's "arguments fail because the assessor and the Board recognized the contamination even though Petitioner has not completed or sought a Phase II audit." 6 No. It further provision explained could that "[w]hile conceivably the result in 2018AP669 challenged an CMECS assessment that disregards evidence of contamination if a Phase II Audit is not provided, this did not occur with Petitioner's assessment." ¶16 Next, the circuit court determined that "[t]he record does not reveal any error by the assessor in applying the WPAM or the statutes, and Petitioner fails to establish City's 2016 assessment deviates from either." how the In the circuit court's estimation, Collison failed to bring forward "credible evidence to challenge the assessor's conclusion that use of the Income Approach results in an assessed value of $31,800." It reached this conclusion because "Petitioner did not provide the Board with any data contradicting the assessor's calculations, nor did Petitioner suggest an alternative valuation method that would have better value. . . . A mere reflected assertion the that property's no one will fair market purchase the property is insufficient." ¶17 The circuit court further stated that "[t]he assessor did not fail to take into consideration the impairment of the property's value due to contamination as required by Wis. Stat. § 70.32(1m)." the income Indeed, it concluded that the assessor's use of approach contamination: was driven by the presence of the "By determining that the property's highest and best use was to produce income from existing parking spaces, the assessor recognized the very poor condition of the land and difficulty of future development for a better use such as a high end apartment building or similar commercial use." 7 No. ¶18 2018AP669 Collison appealed, and the court of appeals affirmed. State ex rel. Collison v. City of Milwaukee Bd. of Rev., No. 2018AP669, unpublished slip op. (Wis. Ct. App. Aug. 27, 2019) (per curiam). The court of appeals determined that "Collison has not shown why his unsubstantiated claim that the property has a market value of zero dollars is more accurate than [the assessor's] decision to use an income approach to determine market value based on the best use of the property as a parking lot." Id., ¶6. Further, the court of appeals agreed with the circuit court's determination that the challenge to the CMECS was not ripe for determination. that "the property assessor in did valuing contamination in not it, and upholding Id., ¶7. ignore the the Board that It thus concluded contamination did not valuation." of the ignore the Id. Collison petitioned for this court's review. II ¶19 This "Certiorari validity case is of a a arrives mechanism decision here by on which rendered a by certiorari court a test the municipality, an administrative agency, or an inferior tribunal." may review. Ottman v. Town of Primrose, 2011 WI 18, ¶34, 332 Wis. 2d 3, 796 N.W.2d 411. ¶20 On certiorari review, we examine the decision of the board of review, not the decision of the circuit court or court of appeals. 9, ¶5, Sausen v. Town of Black Creek Bd. of Rev., 2014 WI 352 § 70.47(13). actions were: Wis. 2d 576, Our review 843 is N.W.2d 39; limited to see whether Wis. the Stat. board's (1) within its jurisdiction; (2) according to 8 No. 2018AP669 law; (3) arbitrary, oppressive, or unreasonable and represented its will and not its judgment; and (4) supported by evidence such that the board might determination in question. ¶21 In our interpretation. question of law appeals. rendered Hinrichs we must interpretation this v. make the order or Sausen, 352 Wis. 2d 576, ¶6. review, The determinations reasonably court by DOW engage of reviews the a statutory statute presents independently circuit Chem. in Co., court 2020 and WI 2, of a the court of ¶26, 389 Wis. 2d 669, 937 N.W.2d 37. III ¶22 We begin with a review of the statutory background underlying this methodology pursuant precedent. case, to including Wis. Subsequently, Stat. we general § 70.32 discuss tax and the law assessment this court's related to contaminated property and examine Collison's contention that the assessment in this case contravened the statutory mandate that contamination of property be considered in arriving at a valuation. A ¶23 is Valuation of real estate for tax assessment purposes governed by Wis. Stat. § 70.32. Subsection (1) of this statute dictates that property shall be valued "in the manner specified in the Wisconsin property assessment manual" and additionally sets forth a hierarchical valuation methodology. Metro. Assocs. v. City of Milwaukee, Wis. 2d 141, 905 N.W.2d 784. 9 2018 WI 4, ¶31, 379 No. ¶24 2018AP669 As clarified in State ex rel. Markarian v. City of Cudahy, 45 Wis. 2d 683, 686, 173 N.W.2d 627 (1970), the text of Wis. Stat. § 70.32(1) lists three sources of information in a specific order, with this order being indicative of the quality of information each Wis. 2d 141, ¶31. source provides. Assocs., 379 This methodology has been described by courts as providing three "tiers" of analysis. ¶25 Metro. Id. (citation omitted). The best information of a property's fair market value is an arm's-length sale of the subject property. Id., ¶32. Examination of a recent arm's length sale is known as a "tier 1" analysis. Id. This is the first source of information an assessor should look to in conducting an assessment. If there is no recent sale of the subject property, the appraiser then moves to tier 2, examining reasonably comparable approach"). Id., ¶33. ¶26 When both recent, properties tier 1 and assessor then moves to tier 3. arm's-length (the tier 2 "sales are Id., ¶34. sales of comparison unavailable, an Under tier 3, an assessor may consider all the factors collectively which have a bearing on value of the property in order to determine its fair market value. Id. These factors include cost, depreciation, replacement value, income, industrial conditions, location and occupancy, sales of like property, book value, amount of insurance carried, value asserted in a prospectus and appraisals produced by the owner. Id. (citing State ex rel. Mitchell Aero, Inc. v. Bd. of Rev. of City of Milwaukee, 74 Wis. 2d 268, 278, 246 N.W.2d 521 (1976)). As relevant here, the income approach, 10 No. 2018AP669 "which seeks to capture the amount of income the property will generate over its useful life," fits under the umbrella of tier 3 analysis. Metro. Assocs., 379 Wis. 2d 141, ¶34. B ¶27 With this necessary general background on assessment methodology in hand, we address next the law related to contaminated property and examine Collison's argument that the assessor did not properly consider the contaminated nature of the property in arriving at a valuation. Viewed within the certiorari review framework, Collison's argument is one that the Board did not act according to law when it upheld the assessment. ¶28 The requirement that an assessor consider a property's contamination arises from Wis. Stat. § 70.32, which contains a provision directed at contaminated properties. § 70.32(1m) sets forth: Specifically, "In addition to the factors set out in sub. (1), the assessor shall consider the impairment of the value of the property because of the presence of a solid or hazardous waste disposal facility or because of environmental pollution, as defined in s. 299.01(4)."6 Pursuant to Wis. Stat. § 299.01(4), "environmental pollution" is defined as "the contaminating or rendering unclean or impure the air, land or waters of the state, or making the same injurious to public health, harmful for commercial or recreational use, or deleterious to fish, bird, animal or plant life." 6 11 No. ¶29 by the property 2018AP669 Guidance on valuing contaminated property is provided WPAM. See Wis. Stat. be valued by "shall § 70.32(1) the assessor (explaining in the that manner specified in the Wisconsin property assessment manual"). It acknowledges by contaminated the property contamination. (2016).7 "unique 1 due valuation to Wisconsin the problem" difficulty Property in Assessment posed identifying Manual 8-42 Despite the identified difficulty, the WPAM reinforces that "[b]oth Wisconsin Statutes and appraisal principles require the assessor to consider the effect of contamination on the value of real estate." ¶30 Id. at 8-43 (citing § 70.32(1m)). Largely, the WPAM addresses "more common situations where the extent of contamination and its effect on value are readily identified and measured." Id. at 8-46. However, it also recognizes that "there may be some situations where the extent of contamination is unknown and thus the effect on value is difficult to measure." Id. In such a situation, "it is not possible to develop specific procedures for dealing with this uncertainty," but the WPAM provides assessors with a framework for gathering information contamination on value." ¶31 "to help estimate the effect of Id. By way of example, the WPAM provides: [A]lthough there may not be sales of truly comparable contaminated property, there may be sales of other contaminated property indicating a range of values or, All references to the Wisconsin Property Assessment Manual are to the 2016 version unless otherwise indicated. 7 12 No. 2018AP669 possibly, a percentage adjustment the assessor can use to reflect the contamination. Similarly, although an environmental engineer may not be able to estimate a specific cost to cure the contamination, the engineer may be able to estimate a range of costs and what are the probabilities that the cost to cure lies on the high or low end of the range. Properties with a great deal of uncertainty should be closely monitored and reviewed each year as more information becomes available to reduce the degree of uncertainty. Id. ¶32 In this case, the parties agree that the subject property is contaminated, but the extent of that contamination is unknown. utilized As to the method of valuation, the assessor here the income approach to value Collison's property. There had been no arm's length sale of the property, and the assessor testified that "[t]he cost approach and the sales comparison approach were not applicable." ¶33 Collison argues that the assessor did not properly consider the property's contaminated nature in arriving at the valuation of $31,800. contamination cannot In equate Collison's with view, merely considering using the the income approach instead of the sales approach, and it cannot equate with merely assigning no value to the building. contrary to the assessor's determination, that He argues, the property actually has no value whatsoever because it cannot be sold. ¶34 to We are unpersuaded by Collison's argument. Collison's contention, the fact that the Contrary property is contaminated drove the entire assessment in this case, as will be further explained below. 13 No. ¶35 2018AP669 As we must, we begin with the language of Wis. Stat. § 70.32(1m) and its requirement that the assessor "consider the impairment of the value of the property" due to contamination. See State ex rel. Kalal v. Circuit Court for Dane Cnty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681 N.W.2d 110. "Statutory language is given its common, ordinary, and accepted meaning, except that technical or specially-defined words or phrases are given their technical or special definitional meaning." Id. We also interpret statutory language "in the context in which it is used; not in isolation but as part of a whole; in relation to the language of surrounding or closely-related statutes; reasonably, to avoid absurd or unreasonable results." ¶36 and Id., ¶46. In the context of this case, we must determine what it means for the assessor to "consider" the impairment of the value of the property caused by the contamination. Looking to an established observe dictionary for assistance, we "consider" is defined as "to take into account."8 determine impairment whether of the the assessor value of here the took property into that Thus, we must account caused by the the contamination in arriving at the valuation of $31,800. Consider, Merriam-Webster Online Dictionary, https://www.merriam-webster.com/dictionary/consider (last visited May 27, 2021); see also State v. Sample, 215 Wis. 2d 487, 499, 573 N.W.2d 187 (1998) ("For purposes of statutory interpretation or construction, the common and approved usage of words may be established by consulting dictionary definitions."). 8 14 No. ¶37 2018AP669 In this task, we begin with the proposition that "real estate must be valued at its highest and best use." Allright Props., Inc. v. City of Milwaukee, 2009 WI App 46, ¶18, 317 Wis. 2d 228, 767 N.W.2d 567. Applied here, the assessor determined that, given the property's location and taking into account the presence of contamination, the highest and best use in its current state is a parking lot. ¶38 Indeed, the assessor testified about the potential for income: [T]here is a great need for parking in this area and contaminated sites can be encapsulated and used as parking lots. I think as long as there is potential to——or the owner is using it as a parking lot, we could consider using . . . the income approach, as long as there's income being derived from the site. Thus, as this testimony demonstrates, it was the contamination that drove the assessor's decision to use the income approach to value the property, and to value the property according to its highest and best use as a parking lot. ¶39 The record reflects a recognition that the property could have been valued much higher but for the contamination. The property is in a prime location near the new Milwaukee Bucks stadium. "with One of the Board members stated at the hearing that all the development that's happening in that area, . . . this property could be worth a lot of money once the groundwater and the soil has been remediated." ¶40 It follows from this that if the property were not contaminated, a parking lot would no longer be the highest and best use of the property. By valuing the property as a parking 15 No. 2018AP669 lot using the income approach, the assessor took into account, or "considered," the impairment of the value of the property due to contamination in accordance with Wis. Stat. § 70.32(1m).9 ¶41 Although the WPAM itself provides no specific procedure for dealing with uncertainty like that presented here, see 1 Wisconsin Property Assessment Manual 8-46, the assessor's consideration of the impairment of the value of the property due to contamination by valuing the property as a parking lot using the income approach was consistent with the International Association of Assessing Officers (IAAO) standards, which are incorporated by the WPAM.10 Specifically, IAAO Standard on the Valuation of Properties Affected by Environmental Contamination § 4.1 discusses the value in use of a contaminated property and provides in relevant part that "[v]alue in use suggests that a property which is still in use, or which can be used in the near future, has a value to the owner." "[t]his would be true even if It further specifies that costs to cure environmental The dissent contends that in order to "consider" the impairment of the value due to contamination, the assessor's report must demonstrate a reduction in value by a specific number. See dissent, ¶¶68, 74. Such a requirement finds no support in the text of Wis. Stat. § 70.32(1m). The statute requires only that the assessor "consider" the impairment of value due to contamination, not that he "reduce the value by a certain number from the value of the property if it were not contaminated." See Wis. Stat. § 70.32(1m). 9 "Whether or not the IAAO Standards appear in the WPAM, the most current version in effect on January 1 of a given assessment year is incorporated by reference in the manual." 1 Wisconsin Property Assessment Manual 1-3. 10 16 No. problems exceed the nominal, unencumbered value. use will most nearly property . . . ." on the reflect the market 2018AP669 The value in value of the Int'l Ass'n of Assessing Officers, Standard Valuation of Properties Affected by Environmental Contamination § 4.1 (2016).11 ¶42 The assessment here is consistent with this principle. It recognizes that the highest and best use of the property as a parking lot has value to the owner even if the cost to cure environmental problems exceeds the value of the property. ¶43 has no First, Additionally, value it methodology. Collison's whatsoever ignores By the arguing is argument unpersuasive established that the that property two reasons.12 three-tiered valuation value for the is zero because it cannot be sold, Collison urges the court to require the assessor to use either an arms-length sale or sales comparison approach and go no further. Collison's proposed approach ignores the tier 3 approaches that the law dictates the assessor must use in the absence of information on tiers 1 and 2. All references to the IAAO Standard on the Valuation of Properties Affected by Environmental Contamination refer to the 2016 version unless otherwise indicated. 11 See also Bonnie H. Keen, Tax Assessment of Contaminated Property: Tax Breaks for Polluters?, 19 B.C. Env't Aff. L. Rev. 885, 906-08 (1992) (explaining that "the majority of cases have rejected taxpayers' assertions of zero or nominal value" and collecting cases); Peter J. Patchin, Valuation of Contaminated Properties, 56 Appraisal J. 7, 13 (1988) (stating that a conclusion that contaminated property is "worthless" is "unreasonable when the property is still being utilized by its present owner for some useful purpose"). 12 17 No. ¶44 Second, Collison's Collison's burden to argument present evidence ignores before 2018AP669 that the it Board is to support his proposed valuation of zero, which he did not do. See Sausen, 352 Wis. 2d 576, ¶10. Like our case law, the IAAO standards make clear that in a case of contamination, the burden is on the taxpayer to demonstrate the extent of the damage. Int'l Ass'n of Assessing Officers, Standard on the Valuation of Properties Affected by Environmental Contamination § 5.1 ("The property owner must provide clear documentation of the nature and extent of environmental contamination. Accurate and detailed maps must be included as part of this documentation.") By imploring the court to adopt a value of zero for his property despite not Collison is presenting evidence asking court the to to support allow him such a theory, to sidestep his to address the burden, which we will not do. ¶45 As a final matter, we decline additional issue presented in Collison's petition for review and briefing, i.e., § 70.32(1m).13 whether Although the CMECS Collison conflict with Wis. Stat. asserts that the CMECS unlawfully require a phase II assessment, the assessor testified that he would have accepted "any written, verifiable evidence The dissent states that "[w]e asked the parties to address whether MECS were consistent with the statutes." Dissent, ¶77. Such a statement could be read to indicate that the court sua sponte asked the parties to brief the question. That is not correct——the issue was raised in Collison's petition for review. 13 18 No. 2018AP669 done by an expert[,]" and not only a phase II assessment of the property as evidence of contamination. ¶46 As both the circuit court and court of appeals determined, the Board did not reject Collison's challenge on the basis that he lacked a phase II assessment. The legal question Collison presents, while interesting, is not reachable on the facts of this case. We will therefore not depart from our general practice that this court will not offer an advisory opinion or make a pronouncement based on hypothetical facts. State v. Grandberry, 2018 WI 29, ¶31 n.20, 380 Wis. 2d 541, 910 N.W.2d 214. ¶47 In sum, we conclude that by utilizing the income approach to value the property according to its highest and best use as a parking lot, the assessor properly considered the impairment of the value of the property due to contamination in arriving at a valuation pursuant to Wis. Stat. § 70.32(1m). Further, we decline to address Collison's challenge to the CMECS because the assessor did not rely on the CMECS in the assessment of Collison's property. ¶48 Accordingly, we affirm the decision of the court of appeals. By the Court.—The decision affirmed. 19 of the court of appeals is No. ¶49 PATIENCE DRAKE ROGGENSACK, J. 2018AP669.pdr (dissenting). As the City of Milwaukee's appraiser, Jim Wiegand, said, "we recognize the site is contaminated." Once the presence of contamination is found on a property, Wis. Stat. § 70.32(1m) requires the taxation assessor1 to consider the "impairment of the value of the property" that is due to contamination. appraisal, upon § 70.32(1m). which the Instead, Milwaukee Environmental directed the assessor it appears uncontaminated" unless relied, that Contamination appraiser to the However, Wiegand's value taxpayer did not Wiegand Standards follow applied (MECS), the property meets MECS's the which "as burden if of proving the costs of clean-up. ¶50 affirms I respectfully dissent the Board of Review's because the majority opinion decision sustaining appraisal, which appraisal did not follow the law.2 because I conclude § 70.32(1m) and that MECS therefore, do it is not comply unlawful I also write with to Wiegand's Wis. apply Stat. MECS in property is taxation appraisals of contaminated properties. I. ¶51 The City agrees BACKGROUND that environmentally contaminated. leaking from underground Ronald Collison's The contamination was caused by storage tanks that once contained The City of Milwaukee is the assessor of taxes due on real estate within its boundaries. Wiegand is the appraiser for the City who determined the market value of the property. 1 2 Majority op., ¶3. 1 No. 2018AP669.pdr petroleum products and perchloroethylene, solvents used in a dry cleaning business that operated on the property in 1979 when Collison purchased it. As Board member, Volkman, pointed out, the City has long been aware of the contamination because the City built an alley on the edge of Collison's property and found evidence of these pollutants leaching into city property. He was surprised that the City did not do anything about cleaning up the contamination. ¶52 Wiegand's appraisal recognized the contamination and related that "owner has provided a copy of a Tank System Site Assessment Solutions. Report (TSSA) dated July 19, 2012 from Endpoint This report details the removal of four underground storage tanks (UST's) and a comprehensive analytical soil sample report."3 The appraisal continues to relate that the "Report [of Endpoint Solutions] did not make any recommendations regarding cost or remediation. . . . The report detailing clean-up costs. owner has not provided any Lacking detailed, a Phase II environmental study, it remains unclear as to the extent of contamination that exists on the site or any associated clean-up costs."4 3 Appraisal, Non-Electronic Record Item, p. 4. 4 Id. 2 No. II. A. ¶53 decision 2018AP669.pdr DISCUSSION Standard of Review We review the decision of the Board of Review, not the of the circuit court or the court of appeals. Steenberg v. Town of Oakfield, 167 Wis. 2d 566, 571, 482 N.W.2d 326 (1992). determine Our review is under certiorari standards where we whether the Board's actions were: (1) within its jurisdiction; (2) according to law; (3) arbitrary, oppressive, or unreasonable and represented its will and not its judgment; and (4) supported by evidence such that the reasonably make the decision now under review. Board might Sausen v. Town of Black Creek Bd. of Rev., 2014 WI 9, ¶¶5, 6, 352 Wis. 2d 576, 843 N.W.2d 39. ¶54 Our review falls under the second certiorari standard because Collison claims that the Board of Review did not act according to the requirements of Wis. Stat. § 70.32(1m), i.e., that it did not act according to law. Although the Board presumes that the valuation is correct pursuant to Wis. Stat. § 70.47(8)(i), there is no presumption that the Board according to law when it adopted Wiegand's valuation. acted Rather, "[w]hether the Board acted according to law is a question of law that we decide independently." State ex rel. Peter Ogden Fam. Tr. of 2008 v. Bd. of Rev., 2019 WI 23, ¶24, 385 Wis. 2d 676, 923 N.W.2d 837. In order to resolve whether the Board acted according to law, we interpret and apply § 70.32(1m). Again, these decide tasks present questions 3 of law that we No. 2018AP669.pdr independently of the decisions of the Board, the circuit court and the court of appeals. B. Id. ¶55 Relevant Statutes Real estate is valued for taxation purposes by the criteria set out in Wis. Stat. § 70.32. Provisions relevant to Wiegand's appraisal of Collison's property provide: (1) Real property shall be valued by the assessor in the manner specified in the Wisconsin property assessment manual provided under s. 73.03(2a) . . . at the full value which could ordinarily be obtained therefor at private sale. In determining the value, the assessor shall consider recent arm's-length sales of the property to be assessed . . . ; recent arm'slength sales of reasonably comparable property; and all factors that, according to professionally acceptable appraisal practices, affect the value of the property to be assessed. . . . . (1m) In addition to the factors set out in sub. (1), the assessor shall consider the impairment of the value of the property because of the presence of . . . environmental pollution, as defined in s. 299.01(4). § 70.32. ¶56 Collison claims that the City did not act in accord with Wis. Stat. § 70.32(1m) because he provided proof that his property was contaminated, but the City did not consider the impairment of the value of the property because of contamination as § 70.32(1m) requires. Rather, the City contended that Collison was required to provide "verifiable written evidence pertaining to the extent or cleanup costs" for the contamination in order to have his property value reduced. 4 Accordingly, the No. 2018AP669.pdr interpretation and application of § 70.32(1)(m) are central to the case before us. C. ¶57 Wiegand's Appraisal Wiegand used the income approach to value Collison's property. He did so by following the 2016 Wisconsin Property Assessment Manual (WPAM),5 as Wis. Stat. § 70.32(1) directs, and by employing MECS to the acknowledged contamination. to place issues in the context this case In order presents, a brief review of principles that underlie taxation appraisals will be helpful. ¶58 current Assessments for taxation purposes are valid for the year, with Wis. Stat. assessment date as January first. § 70.10 establishing the "The assessment is based on the status of the property as of the close of that day."6 ¶59 As WPAM explains, approaches to comparison approach, approach."7 is used.8 developing "There the the opinion cost are of approach, three value: and traditional the the sales income For taxation valuations, the "Markarian hierarchy" State ex rel. Kesselman v. Bd. of Rev. for Vill. of Sturtevant, 133 Wis. 2d 122, 128-34, 394 N.W.2d 745 (1986). The Markarian hierarchy requires: All references to the Wisconsin Property Assessment Manual are to the 2016 version. 5 6 Wisconsin Property Assessment Manual (WPAM) at 7-21. 7 Id. at 7-22. 8 Id. at 7-23. 5 No. 2018AP669.pdr [A]ssessors to first use a recent arm's length sale of the subject property. If there is no such sale, the next step is to use recent comparable sales of other properties. Only if there are no recent comparable sales of other properties should the assessor proceed to other indicators of value that include the income and cost approaches to value.[9] ¶60 Valuation by the income approach capitalization of income, as explained in WPAM. employs "This method assumes the gross rental under a ground lease is at current market levels. expenses Net (insurance, appropriate rate into rental after management) an estimate deduction is of of the capitalized land value."10 owner's at an Direct capitalization, as described in WPAM, was used by Wiegand to determine the value of Collison's property.11 ¶61 WPAM also addresses contaminated properties "where the extent of contamination is unknown and thus the effect on value is difficult to measure."12 In those circumstances, the guidelines in ch. 8 of WPAM "provide a framework the assessor can use to gather information to help estimate the effect of contamination on value."13 property "that makes it Contamination attaches a stigma to less desirable than comparable properties."14 Id. (citing State ex rel. Markarian v. City of Cudahy, 45 Wis. 2d 683, 686, 173 N.W.2d 627 (1970)). 9 10 Id. at 9-11. 11 Id. at 9-15; Appraisal, Non-Electronic Record Item, p. 4. 12 WPAM at 8-46. 13 Id. 14 Id. 6 No. ¶62 that 2018AP669.pdr There is nothing in Wiegand's income-based valuation refers to impairment of value, even though Wiegand's appraisal confirmed both his knowledge of contamination and his receipt of a Solutions. valuation detailed Rather, as statement: the "As contamination Wiegand appraisal of January report supported for 1st taxation 2016, The from using with his Endpoint $31,800 the following of Milwaukee City Assessor Office did not have any verifiable written information pertaining to the extent or clean-up costs associated with any perceived contamination at the subject property."15 D. ¶63 The application Wisconsin Stat. § 70.32(1m) purposes are to of apply statutory the meaning interpretation and of the the legislature chose to undisputed facts presented. words Jefferson v. Dane Cnty., 2020 WI 90, ¶21, 394 Wis. 2d 602, 951 N.W.2d 556. Wisconsin Stat. § 70.32(1m) provides: In addition to the factors set out in sub (1), the assessor shall consider the impairment of the value of the property because of the presence of . . . environmental pollution, as defined in s. 299.01(4)."[16] ¶64 I begin by interpreting the plain meaning of the words that the legislature chose. 15 State v. Mercado, 2021 WI 2, ¶43, Appraisal, Non-Electronic Record Item, p. 7. Wisconsin Stat. § 299.01(4) provides that "'Environmental pollution' means the contaminating or rendering unclean or impure the air, land or waters of the state, or making the same injurious to public health, harmful for commercial or recreational use, or deleterious to fish, bird, animal or plant life." 16 7 No. 395 Wis. 2d 296, 953 N.W.2d 337. its common, ordinary, and 2018AP669.pdr "'Statutory language is given accepted meaning, except that technical or specially-defined words or phrases are given their technical or special definitional meaning.'" Id. (quoting State ex rel. Kalal v. Circuit Court for Dane Cnty., 2004 WI 58, ¶45, 271 Wis. 2d 633, 681 N.W.2d 110). ¶65 The plain meaning of the words the legislature chose for Wis. Stat. § 70.32(1m) places two duties on the assessor when property is contaminated. First, the assessor is to apply the assessment factors in subsection (1), which require the use of WPAM and the Markarian hierarchy that I explained above. Second, "the assessor shall consider the impairment of the value of the property" due to contamination. Stated otherwise, subsection (1m) places an affirmative obligation on the assessor to act. It requires that the effect of contamination on the value of the property be addressed by the assessor. ¶66 Focusing on the term, "impairment," I note that common synonyms for Thesaurus, impairment Microsoft are: January damage, 27, 2021. injury, A and common loss. dictionary definition for impairment is that which is "diminished in some material respect." Webster's New Collegiate Dictionary, 574 (1974). ¶67 The Deliberate, consider. require assessor ponder is and to "consider" think-through are the all Thesaurus, Microsoft January 27, 2021. the assessor to take 8 some action impairment. synonyms for All synonyms because of the No. 2018AP669.pdr impairment caused by contamination of the property. He is not free to ignore the impairment. ¶68 However, Wiegand's appraisal never mentions "impairment" or any other synonym to show that he considered the effect of ignoring contamination impairment, compliance with § 70.32(1m). approach on he the the failed value to of the provide legislature's property. an directive By appraisal in Wis. in Stat. Stated otherwise, the value he found by the income was not diminished in any respect because of the presence of contamination.17 ¶69 Instead of following the statutory directive, Wiegand's appraisal placed additional requirements on Collison. For example, Wiegand says that the owner should have provided "verifiable written information pertaining to the extent or cleanup costs associated with any perceived contamination on the subject property." However, there is nothing in Wis. Stat. § 70.32(1m) that requires, or even suggests, that the owner do so. The legislature placed all the duties found in § 70.32(1m) on the assessor, not on the property owner. ¶70 Because the Board of Review sustained Wiegand's appraisal, which was not prepared consistent with Wis. Stat. § 70.32(1m), the Board's decision was not made according to law. I do not contest that the property owner must show that the property is contaminated before the burden of Wis. Stat. § 70.32(1m) applies to the assessor. However, here, Collison provided an environmental report from Endpoint Solutions showing contamination, and all parties agreed that the property was contaminated. 17 9 No. 2018AP669.pdr Therefore, I would reverse its decision and remand to the Board so that it can request an appraiser to consider the impairment of value caused by contamination as § 70.32(1m) requires.18 E. ¶71 The majority consider the Majority Opinion opinion impairment asserts due to that the contamination assessor did because the appraiser valued the property based on the income approach.19 support this assertion, the majority quotes the To appraiser's statement that there is a "need for parking in this area and contaminated lots."20 The contamination income sites be majority that approach can to encapsulated then drove the value and concludes assessor's the used that "it decision property."21 as This parking was to use the the conclusion ignores Exhibit 3, prepared by Wiegand, as his written valuation report, and it also ignores the Markarian hierarchy that must be used for taxation appraisals according to WPAM and Wis. Stat. § 70.32(1). ¶72 I begin with the appraiser's report. Prior to calculating the market value under the income approach that is before us in this review, Wiegand noted that he could not use other valuation methods for this property. He explained that I take no position on the dollar valuation of the impairment due to contamination. That is a matter left to the professional expertise of an appraiser. 18 19 Majority op., ¶3. 20 Majority op., ¶38. 21 Id. 10 No. 2018AP669.pdr "the Direct Sales Comparison Approach was considered but not applied due to difficulty finding sales of similar properties."22 He also considered the cost approach to value, but concluded it was not "the most reliable indication of value for the subject property given the age of the structure and difficulties in estimating depreciation."23 It was only after determining that other valuation approaches were not available that Wiegand moved to the income approach where he applied direct capitalization of income to determine value. ¶73 The appraiser's report contained a step-by-step calculation from which he derived the market value of $31,800. It shows in clear terms that he did not employ an income-based valuation due to his consideration of contamination. employed direct capitalization of income Rather, he because he was following the Markarian hierarchy required by WPAM, and it was the one valuation method available for this property. First, he determined projected annual revenue based on what Collison had been paid in the past. to a 30 capitalized percent the Next, he deducted an amount equivalent vacancy resulting rate number, as an expense. $4,082, by 12.841 Then, he percent, which was "a market derived capitalization rate of 10.00% plus an effective tax rate of 2.841%."24 Under the Markarian approach 22 Appraisal, Non-Electronic Record Item, p. 5. 23 Id. Report of Jim Wiegand, Senior Property Appraiser, Exhibit 3, p. 6. 24 11 No. 2018AP669.pdr to taxation valuation, the income method is appropriate when recent sales or comparable sales are not available.25 State ex rel. Markarian v. City of Cudahy, 45 Wis. 2d 683, 686-87, 173 N.W.2d 627 (1970). ¶74 I calculated have That is what happened here. no through problem direct with the value capitalization calculations were properly done. the of appraiser income. His My objection is that he did not reduce the $31,800 value by any amount based on "impairment of the value of the property because of the presence of [] environmental pollution" as Wis. Stat. § 70.32(1m) requires. ¶75 There simply are no facts from which to conclude that Wiegand used the capitalization of income approach to consider the effect of environmental contamination on the value Collison's property as the majority opinion has done. to come to its conclusion, the majority of In order opinion ignored Wiegand's step-by-step valuation that is set out in Exhibit 3. His testimony and the exhibit he prepared belie the majority opinion's conclusion. ¶76 used Furthermore, the property's income value the majority's approach due to to conclusion consider contamination that impairment is new Wiegand of law, the without citation to authority or reasoning to support it. The majority opinion has will create unending confusion in what been a consistent approach to taxation valuations where capitalization of income 25 has been well accepted as part of the Markarian WPAM at 7-23 (citing Markarian, 45 Wis. 2d at 685-86). 12 No. 2018AP669.pdr hierarchy when comparable sales are not available,26 but never before used to "consider the impairment of the value of the property because of . . . environmental pollution." Wis. Stat. § 70.32(1m). F. ¶77 We asked the MECS Validity parties to consistent with the statutes. address whether MECS were Because they give burdens to property owners that are inconsistent with the plain meaning of Wis. Stat. unlawful § 70.32(1) and their and use (1m), should be I conclude that they are discontinued in regard to valuations of contaminated property. ¶78 As foundation for the following discussion, I review what MECS require of the taxpayer and the appraiser in regard to valuing contaminated property. First, MECS place a "BURDEN OF PROOF ON TAXPAYER."27 MECS require the taxpayer to prove that contamination exists: "The appraiser should not assume that a specific property substantiating has contamination evidence."28 substantiated expert. . . . type through Second, an without appropriate "[c]ontamination independent must be environmental The minimum level of acceptable substantiation will be a comprehensive Phase II Audit, setting forth (among other 26 pertinent information) the type, level and source of WPAM at 7-23. Milwaukee Environmental Contamination Standards (MECS) at A-App. 057. 27 28 Id. 13 No. contamination and remediation."29 the Third, suggested "[w]ithout method this must be valued as if uncontaminated."30 valuations are tied to clean up costs: or 2018AP669.pdr methods information, for property Fourth, reductions in "Adjustments to the assessments will be based on clean up costs with consideration of discounting these costs for time."31 Fifth, "[p]roperty assessments which have been adjusted for contamination shall be designated as unfinished ("U" symbol) assessment."32 ¶79 Here, Collison provided a contamination report from Endpoint Solutions. storage tanks and It detailed the removal of four underground provided "a comprehensive analytical sample report"33 of environmental contamination. soil In addition, all parties agreed that Collison's property was contaminated. Therefore, despite MECS's Phase II requirement, the assessor's duties under Wis. Stat. § 70.32(1m) were clearly triggered in this case. ¶80 In his Appraisal Report, Wiegand explained that one of the purposes of his appraisal was that it be in accord with "procedures of the City of Milwaukee Assessor's Office," i.e., MECS.34 He also said that the City Assessor's Office did not 29 Id. 30 Id. 31 Id. at A-App. 058. 32 Id. 33 Appraisal, Non-Electronic Record Item, p. 4. 34 Id., p. 2. 14 No. 2018AP669.pdr have any verifiable written information pertaining to the cleanup costs associated with contamination of Collison's property. From this statement and his failure to address impairment of value due to contamination, it appeared that he applied MECS's requirement that without a Phase II report showing the costs of clean-up the property is to be assessed as if uncontaminated. ¶81 value of written This Wiegand's Collison's report, is appraisal property Exhibit confirmed by following footnote.35 ignored 3, the due all to explained MECS impairment of the contamination, as his in step-by-step directive set detail. forth in the And finally, under MECS, if Wiegand had considered an impairment due to contamination, he would have specially marked property his assessments designated as assessment "adjusted unfinished ("U" because for MECS provides contamination symbol) shall assessment." that be The assessment for Collison's property did not have a "U" symbol showing that it had been adjusted for contamination. III. ¶82 majority In conclusion, opinion affirms I CONCLUSION respectfully the Board dissent of because Review's the decision sustaining Wiegand's appraisal, which appraisal did not follow the law.36 I also write because I conclude that MECS do not As MECS provides, "The starting point for determining market value for properties affected by contamination is the unencumbered, or unimpaired value. This is the value that a property would have if no adjustment were made for any environmental problems. Unencumbered value is obtained using standard appraisal methods." MECS at A-App. 064. 35 36 Majority op., ¶3. 15 No. 2018AP669.pdr comply with Wis. Stat. § 70.32(1m) and therefore, it is unlawful to apply MECS in taxation appraisals of contaminated properties. ¶83 I am authorized to state that Chief Justice ANNETTE KINGSLAND ZIEGLER and Justice REBECCA GRASSL BRADLEY join this dissent. 16 No. 1 2018AP669.pdr
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