856 N.W.2d 546
Wis. Ct. App.2014Background
- City of Delavan collects a 'fee in lieu of room tax' from owners who do not rent to the public at the Lodges at Lake Lawn Resort Condominium.
- Development agreement (May 2005) required declarations to permit rental units and created a mechanism to impose the fee.
- Condominium declaration (Jan 2006) allowed the City to collect the fee via the Association and to collect unpaid amounts from owners or the Association.
- Owners who paid the fee sued the City and the Association, seeking a declaration that the fee is illegal and a refund.
- Circuit court granted summary judgment for the City, treating the fee as a contractual term; Owners appealed.
- Court ultimately held the fee is a tax and invalid absent statutory authorization, reversing the circuit court and remanding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the fee in lieu of room tax a tax or a contract-based charge | Owners: fee functions as a tax; no statutory authorization | City: fee is a contractual penalty/back-up mechanism | Fee is a tax; invalid without authorization |
| Does the development agreement authorize imposing the fee as a tax or penalty | No statutory basis; fee not authorized | Agreement permits a back-up mechanism to receive lost taxes | No authorization; fee invalid as a tax |
| Does standing defeat reach of tax argument due to non-participation in the development agreement | Owners lacked party status to the agreement, but challenge proceeds on tax status | Standing problem renders case moot | Tax determination resolves standing issue; standing not a barrier to ruling |
Key Cases Cited
- State ex rel. Building Owners & Managers Ass'n v. Adamany, 64 Wis.2d 280 (Wis. 1974) (definition and scope of taxes; revenue purposes)
- City of Milwaukee v. Milwaukee & Suburban Transp. Corp., 6 Wis.2d 299 (Wis. 1959) (purpose of taxes vs. fees; tax characterization by function)
- City of River Falls v. St. Bridget's Catholic Church of River Falls, 182 Wis.2d 436 (Ct. App. 1994) (distinguishing taxes from fees; revenue use)
- Green Spring Farms v. Kersten, 136 Wis.2d 304 (Wis. 1987) (standard for reviewing summary judgment on tax issue)