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Appeals court denies lakefront property owners reduction on assessment

Appeals court denies lakefront property owners reduction on assessment

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A 1995 Wisconsin Supreme Court decision was not enough to sway the Court of Appeals to hold the town of Delavan to a similar standard, according to a recent decision.

In 3301 Bay Road LLC et al. v. Town of Delavan, 2012 AP 2594 (consol. with 2013 AP 148), a group of property owners argued the trial court erred in not following State ex. rel Levine v. Board of Review, 191 Wis.2d 363 (1995), in which the justices said the proper remedy to address a uniformity claim brought by two sets of landowners was to uniformly assess the properties.

But the argument did not convince the Court of Appeals, which affirmed, in part, the lower court’s decision.

Case history

In 2009, the town of Delavan conducted a substantial property revaluation. Several Delavan lakeside landowners suspected there was a problem with their resulting assessments, but their efforts to address the disparity directly with Delavan tax officials were unsuccessful.

The landowners took their challenges before the local Board of Review in 2009, 2010 and, later, 2011 pursuant to Wis. Stat. 74.37. Each time, the landowners only were granted small assessment reductions.

Later, the landowners filed separate lower court actions challenging their 2009, 2010 and 2011 tax assessments. They complained that their taxes were excessive and violated the Uniformity Clause in Article VIII of the Wisconsin Constitution.

Discovery and pre-trial motion practice were aggressively conducted by both sides. Motions for sanctions and charges of frivolous litigation were tossed back and forth, and motions in limine were proposed virtually until the eve of trial.

Less than a week before trial in 2012, Delavan agreed to a stipulation admitting that it had improperly assessed both the group of lakeside properties and the Assembly Park subdivision, leading to assessments that were not uniform. It admitted that its 2009-10 property tax assessments for Assembly Park subdivision properties were 45 percent below fair market value, while it had over-assessed multimillion dollar parcels on Lake Delavan.

When the cases finally went to trial in June 2012, the only remaining issues were the fair market assessed values of the properties from 2009-10, and the proper remedy for a Wisconsin Constitution Article VIII uniformity violation.

After a four-day trial, the trial court adopted the 2009 and 2010 proposed assessments of the lakefront owners’ appraiser, and ordered Delavan to refund to each landowner the amount of overpayment based upon their properties’ changed valuation to address the overvaluation issue.

Walworth County Judge James Carlson awarded the lakeside owners an additional 3 percent refund to compensate for the Wisconsin Constitution uniformity violation.

By these calculations, total refund payments to lakeside landowners just for over-assessments would be $207,035 for 2009, $250,160 for 2010 and $205,475 for 2011 (which was later added); a total of nearly $665,000.

Carlson was unwilling to give the Lakeside owners their own 45 percent assessment reduction. To give the owners such a large assessment reduction, he said, would result in a “windfall reduction in their taxes way beyond [that which] they suffered” through any increased tax burden.

On appeal

In their appeal, the lakeside landowners claimed that the trial court lacked the discretion to choose Delavan’s “made whole” theory of damages, and failed to provide proper damages for the admitted lack of uniformity violation as required by Article VIII of the Wisconsin Constitution.

The appellate court disagreed, and confirmed that the trial court did have the discretion to create a remedy for excessive assessments and violation of the Wisconsin Constitution uniformity clause.

According to the Court of Appeals, as long as the trial court took the proper steps to create the remedy, incorporated the relevant facts and applied the property standard of care, its discretion should not be disturbed.

Therefore, the court found the lakefront property owners were overreaching when they asked for a comparable 45 percent reduction in their own assessments, similar to the benefit received by the Assembly Park properties.

A 45 percent reduction in assessed values for the property owners would have dropped their assessments anywhere from an average of $375,000 to $900,000, according to disputed figures provided by both parties.

The town of Delavan had argued that applying a uniform assessment formula as a remedy would not be fair here because the two sets of parcels were not “comparable,” in part given the higher density and reduced average value of Assembly Park properties.

The appellate court agreed with Delavan in its Jan. 15 opinion.

A court may “opt to satisfy constitutional mandate of uniformity” by reducing assessments below market value when that provides the “only practical means” of providing relief, said the appellate court, quoting Levine. That was not the case here, where the lakefront landowners were reimbursed for their overpayment and received other fair compensation.

The lakefront taxpayers also cited Noah’s Ark Family Park v. Board of Review, 201 Wis.2nd 301 (1997). But the appellate court deferred to the trial court decision, saying that Carlson had considered both Levine and Noah’s Ark in finding against the lakefront owners.

In Noah’s Ark, in order to find a proper remedy, the appellate court had approved a plan to “disregard” a previous sale, when a single commercial owner’s assessment was wrongly increased due to the sale. The remedy there was a far cry from compelling Delavan to impose a tit for tat 45-percent reduction in assessments, the appellate court ruled.

The court did, however, find that the trial court had incorrectly interpreted its ability to award expert witness fees under Wis. Stat. 814.02(2), and remanded the issue for the trial court to reconsider the amount of expert witness fees to be awarded.

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