*1 Adams Outdoor Advertising, Ltd. Advertising Adams Outdoor of Madison,
d/b/a Plaintiff-Appellant,
v. Defendant-Respondent. of Madison, Supreme Court No. argument 2005AP508. Oral April July —Decided 104WI
(Also 803.) reported in 717 N.W.2d *6 For the there were briefs plaintiff-appellant by Thomas S. Hornig, Tibbetts, Mebane and Margery Bren- nan, S.C., & Janesville, Steil oral Basting, argu- ment by Hornig. Thomas S.
For the there brief defendant-respondent, was a O'Brien, oral argument by W. Larry assistant city attorney, with on whom the brief was Michael E May, city attorney. T. PROSSER, DAVID J. This case before on court certification the court of appeals, (Rule) (2003-04).1 §
pursuant The 809.61 to Wis. Stat. (the City) upheld City of Madison's circuit court personal property tax of Adams Outdoor (Adams) Advertising, for 2002 and Ltd. billboards appealed.2 and Adams essentially challenges presents four 2. Adams
the assessments: City erroneously used the third income
A. The tier though approach to Adams' even evi- assess billboards comparable dence of sales was available. City Assuming tier methods
B.
could use third
City improperly
billboards, the
relied
to assess Adams'
upon only
approach to
the income
assess Adams' bill
City Appleton,
v.
boards, in violation of Bischoff
(1978).
2d
1 All to the Statutes are to references Wisconsin 2003-04 version unless otherwise indicated. 2 generically "billboard" to refer to all We use term outdoor, signs by of owned Adams. types off-premises various activity sign An does not advertise the business or off-premises on where the billboard is located. that occurs the site
448 City A. The entitled to use was third tier methods of assessment assess billboards Adams' because there arms-length not a sale was recent of and produce reasonably compa- Adams did not evidence of sales. rable Although
B. net income from billboard rentals may analysis, abe factor to consider in a tier third it controlling determining be in cannot the sole factor acknowledged value. When Madison Assessor rejected approaches that he all considered but other long-standing and his factors, assessment contravened principles Management articulated Waste County Wisconsin, Review, Inc. v. Kenosha Board (1994); 2d Wis. N.W.2d Bischoff, Corp. 619; 2dWis. and State rel. v. ex I.B.M. Board (1939), Review, 303, 311-12, 285 231 Wis. N.W 784 practice prevailing assessing well as the billboards throughout Wisconsin the United States. by including
C. The erred the value of bill- permits in board assessment Adams' billboards. permits tangible personal property. Billboard are not For purposes, permits tax billboard constitute an § property, interest real as defined Wis. Stat. 70.03. Having City's D. concluded that the assessment is only improper approach because it relied on an income improperly and because it included the value of billboard permits, question we do not reach the of whether the City's use of the income violates the Unifor- mity Clause. Accordingly,
¶ 4. we reverse the circuit court remand the court, cause to the circuit which is directed *8 stay proceedings pending to further of reassessment by City Adams' the in a manner billboards consistent parties opinion, with this until the reach settle- ment.
449
I. BACKGROUND City's challenges per- the 5. as excessive Adams property for of its the tax assessments billboards sonal City years The Adams' and 2003. assessed bill- 2002 $6,022,400 $5,858,000 in 2002 and 2003.3 boards billboard struc- In 2002 and 2003 Adams owned 109 according appraisal prepared City, to an in the tures presented These "206 billboard Adams. structures according All faces," to the Madison assessor. billboard on leased land. structures were timely challenged 2002 and the 2003 Adams City the Board of Assessors and assessments before years, City of For Adams then the Board Review.4 both of claimed the fair market value its billboards was objection City's $401,984. Adams' fundamental to the they that included attributable assessments was tangible property, personal than elements other to including and the the location of the billboards bill- permits.5 board personal tax bill for 2002 was Adams'
$141,283.10. personal tax bill for 2003 Adams' was $135,786.10. The due to the net difference assessment was of three billboards between 2002 loss City's $5,815,900. original In 2002 the valuation was objected, City of Assessors When Adams Board increased $6,022,400. City The billboards to the assessment of Adams' increase. In upheld Board Review the Board Assessors' 2003 the Board Assessors reduced $5,858,000, $6,625,000 from an amount Adams' billboards of Review sustained. Board constructing A a billboard is prerequisite operating City strictly City. Because limits permit issued increasing demand for permits despite number of billboard significant inheres in a advertising space, a amount of value *9 meaningful ¶ 7. After Adams failed to obtain re- timely lief from the Board of Review, Adams com- against City County menced actions the in Dane Circuit 74.37(3)(d). § pursuant Court to Wis. Stat. The circuit court consolidated the 2002 and 2003 actions and held three-day July trial 27-29, 2004, from which this appeal ensued.
¶ 8. Since has 1994 used the income approach ap- to value billboards. Under the income proach, an assessor to seeks convert future benefits likely to be from derived into an estimate present Mgmt., market value. See Waste 184 Wis. 2d at Using approach, the income the assessor first personal prop- determines the net annual income from erty, figure by such as billboards. This is reached deducting gross from income "the leasehold interest typical operating expenses, land," all and income something personal prop- attributed to other than the erty. capitalization Then the assessor sets a rate and applies this rate to the net annual income to determine expected income stream over the economic life of Property Id.; the billboards. see also Assessment Assessors, Manual Wisconsin ch. 7 at 7-27 to 7-28 (hereinafter, Property ch.9 9-11 to 9-25 Assess- Manual). ment City appraised 9. Prior to billboards
using approach. approach the cost Under cost required reproduce total cost billboard is deter- depreciation from mined and this amount is subtracted. Vivid, Fiedler, 764, 783, Inc. v. 219 Wis. 2d 580 N.W.2d (1998); Property Manual, see also 1 ch. Assessment 7 at 7-22 to 7-25 and 9-11. Oehlrich, permit. Ron L. & Donald E Nations The Valuation Cf. (Oct. 1999). Structures, Appraisal Billboard J. approach from the cost The switched receiving ap- an in 1994 after
the income part praisal supplied of Adams' inverse Adams as early City. against the In the lawsuit condemnation *10 actively restricting City began the number of 1990s, the City pursuant to within the Wis. Stat. billboards § damages, commissioned To its Adams 84.30. establish (the Ruppert, appraisal Ruppert Inc. and an from Ap- Appraisal). The Condemnation Condemnation approach praisal Adams' and valued used the City approximately $5,000,000. at within the billboards Appraisal prompted the The Condemnation In billboards. to re-think how it assessed City initially using approach, the income the assessed up from $5,000,000, assessments Adams' billboards previous years.6 $2,000,000 of no more than the three City's billboards Since the assessments Adams' using steadily approach. increased the income have emphasized it trial, 12. At Adams how unusual approach to use the income to billboards. is only Testimony Madison, other than the revealed that jurisdictions approach nation that use the income the testimony Additionally, Prairie and Crosse. are Sun La only City, the the billboards are revealed that within personal using approach, the income assessed except buildings property. certain on leased undisputed, Although are above facts the fiercely through expert parties, witnesses, their methodology. proper Conse- contest assessment briefly necessary quently, summarize the to testi- it parties' mony experts. of the assessment, eventu After Adams contested $3,032,000. ally reduced City's ¶ 14. The Chief Assessor, Michael Kurth (Kurth), appraised testified that he Adams' billboards using approach the income because there were no arms-length recent sales of the billboards and no rea- sonably comparable explained sales information. Kurth deriving that in the amount of income attributable to he billboard structures determined Adams' total income and then subtracted the value of the leasehold interest, the income attributable to art Adams' advertising-development department, oper- and Adams' ating expenses. According Kurth, the result these equaled calculations the net income attributable to the permits. billboard structures the billboard To this figure, applied capitalization Kurth then rate of 14% to calculate the true cash value of the billboards. Additionally, testimony
¶ 15. Kurth's addressed approach. explained rejected First, the cost he that he the cost he because believed the true cash *11 greater value of Adams' billboards was than the of cost components. According its to Kurth, the cost to con- industry struct a billboard does not reflect how the fair calculates the of Second, market value billboards. (Rodolfo expert he criticized the calculations of Adams' Aguilar) approach omitting under the cost several significant including procurement costs, costs, site de- sign permit thereby significantly costs, costs, and un- dervaluing Adams' billboards. presented expert
¶ 16. Adams three witnesses: Aguilar (Aguilar), (Ulmer), Rodolfo Mark Ulmer and (Sutte). experts Donald Sutte Adams' testified that sales) approach (comparable either the market or the approach appraise cost be should used to for billboards personal property tax assessments. ex- None these perts, presented comparable however, evidence of sales. Only Aguilar provided testimony affirmative as to the Using approach, the cost of Adams' billboards.
value Aguilar in the Adams' 109 billboard structures valued $1,565,100. Aguilar, Ulmer, all critical and Suite were approach. City's All three con- of the income use City improperly the income- cluded that the included permits "intangibles," producing value of billboard — they personal argued property assessments, tax the—in thereby overvaluing All Adams' billboards. three testi- approach preferred fied the cost is the method to that purposes tax assess- value billboards testimony Ulmer Nonetheless, the of both ment. suggested just that the attributable Sutte physical of the billboards could be deter- structure mined. testimony,
¶ 18. on this the circuit court Based appraisal purpose concluded, first, an that the does (i.e., not method must be used drive which valuation approach approach), versus the income because cost objective assessing property for when both condem- purposes tax is to determine the nation and property's noted, however, fair The court market value. regardless used, of the method non-taxable items any tangible personal property from must be excluded tax assessment. Second, the circuit court concluded that
City's proper use of the income was because it out all income attributable to Adams' business factored upon which the the real estate leaseholds anchored. billboards are City's
¶ that the Third, 20. the court concluded permits of of the billboard and the location inclusion proper, even if in the assessment was the billboards permits per- intangible, are because the and location mits and location are inextricably intertwined with the physical structure of the billboards. Fourth, 21. the circuit court concluded that use
of the income did not in approach result double taxa- tion. 22. Finally, the circuit court concluded that use
of the income rather than the cost approach did not violate Uniformity Clause, because both methods are result, intended to achieve the same full fair market value of the property. 23. Adams and the court of appealed, appeals
certified the following questions: In
1. the absence subject of recent sale of the property and of reasonably comparable sales other properties, does the require taxing authority law depreciation" use the "cost less method instead of the "income" valuing advertising method when an outdoor sign personal purposes? tax
2. Should appraisal methods in used eminent recognized domain be personal cases property tax assessment cases? "[inexplicably] Should the ap- intertwined"
proach used in real estate tax assessment cases be recognized personal property tax assessment cases? permit Is a authorizing the of location an advertising sign "intangible" outdoor an within the 70.112(1) § meaning Wis. Stat. and therefore an exempt for purposes personal factor property tax assessment? Uniformity Clause, VIII,
5. Does the article section 1 of language the Wisconsin Constitution and Manufacturing State ex rel. Baker Co. v. Evans ville, (1952), require Wis. N.W.2d 795 *13 method- assessed under the same similar be of the value ology merely require that the fraction taxed be the same?
II. STANDARD OF REVIEW ¶ of a circuit court's decision This is a review 24. 74.37(3)(d). § under Wis. Stat. on an action commenced of an excessive tax assessment When we review claim § 74.37(3)(d), we the record made before under review of See Nankin v. court, not the board review. the circuit Village ¶ Shorewood, 92, 25, 86, 245 2001 WI Wis. 2d P'ship 141; Bloomer Ltd. v. 630 N.W.2d Hous. App ¶ Bloomer, 252, 11, 883, 2002 257 Wis. 2d 653 WI 309. N.W.2d may
¶ make its determina- 25. The circuit court any regard any tion without determination made at proceeding, Nankin, 86, 25, earlier 245 2dWis. any giving made at deference to determination without previous proceeding. court, like circuit Id. This weight City's give presumptive court, must to the 70.49(2). § However, Stat. the assess- assessment. Wis. only challenging party presumed if correct ment contrary present significant evidence. Bloomer does not Housing, 883, 2d 11. 257 Wis. Failure to make an assessment on the statu
tory Bd. is an error of law. State ex rel. Boostrom v. basis Review, 149, 155-56, 2d 166 N.W.2d Wis. (1969). making the statute Whether followed question statutory interpretation is a its assessment County we de novo. See State v. Waushara that review Adjustment, ¶56, 2004 WI 271 Wis. 2d Bd. of N.W.2d ¶ 27. The circuit court conducted a trial expert testimony. conflicting included Where there is testimony the fact finder is the ultimate arbiter of credibility. weight credibility given "The to be to the *14 opinions expert 'uniquely witnesses is within the province Housing, of the fact finder.'" Bloomer 257 Wis. Applying presents ¶ 883, 2d 12. the law to the facts question independently of law that we review of the circuit court.
III. OVERVIEW expert testimony 28. trial, At witness re- disagreement vealed substantial over the most accurate method to assess the true cash value of billboards absent arms-length subject property an sale of the or evidence of reasonably comparable sales. Adams contends the cost approach be used, must whereas the maintains the approach proper ‘approach is and that the cost does not reflect the true cash value of billboards. disagreement
¶ 29. The over how to value bill- scholarly ap- boards is reflected in literature and journals. praisal trade However, article, a recent and one specifically property of the few articles that addresses tax "any accepted assessment of billboards, notes that of the approaches may value, income, sales, cost, or be emerging used[,]" but that the trend is to use the cost approach. Bradley K. Cris O'Neall & Marsh, R. Trends in Property Tax Valuation Commercial Outdoor Ad- vertising Prop. Structures, J. Tax Assessment & Ad- (Vol. 2004) added). (emphasis 5, 7,11 min. Issue ¶ 30. Neither the Wisconsin Statutes nor the Property Assessment Manual mandates either the cost approach. Nevertheless, we or the income
begin of the assessment framework an overview with Property statutes, Assessment established Manual, and case law. upon Property levied all real taxes must be except property property personal state, in this
and §§ exempt and Stat. 70.01 from taxation. Wis. only all the land itself but Real is "not 70.02. improvements buildings thereon, and all fixtures and thereto[.]" privileges appertaining rights and Wis. and goods, § "all Personal includes Stat. 70.03. any effects, merchandise, chattels, nature wares, any description, having title, real marketable or property,' defined in s. in the term 'real not included per- § are taxed as Stat. 70.04. Billboards 70.03." Wis. property. Property Manual, ch. 15 at Assessment sonal 15-13. exemptions Exemp- Property abound.7 tax *15 primarily statutes, in three Wis. Stat.
tions are found exemption §§ at and One is issue 70.11, 70.111, 70.112. 70.112(1) "Money exempts: present in case. Section the intangible personal property, credit, all such as drafts, notes, bonds, drafts, other stocks checks, share and the other instruments." Adams written disagree permits fall the over whether billboard within exemption. intangible personal property per dispute that are There is no billboards subject property personal property, to the tax. sonal 7 legislature has proliferation exemptions, of the Given creating interpreted by sought exemptions limit are how § Section 70.109 taxability. of Stat. 70.109. presumption Wis. strictly con chapter shall be "Exemptions states: under this that the every presumption strued in instance with taxable, person of is on the proof and the burden question exemption." who claims
458 presented questions The concern how an assessor at of a should arrive the value billboard and what may billboard be in the elements of the included assess § "[a]ll provides ment. Stat. 70.34 ar Wisconsin personal practicable, shall, ticles of as far as be upon their valued the assessor actual view at true per value[,]" cash and that be assessments should Property formed accordance with the Assessment Manual 8 Property
¶ 34. The
Assessment Manual and case
methodology
law set forth a three-tier
assessment
ascertain
cash
State
true
value. See
ex rel. Markarian v.
City Cudahy,
683, 686,
45 Wis. 2d
market value. State ex rel. Mitchell Inc. v. Bd. of 277, (1976); 1 Property Assess 74 Wis. 2d N.W.2d 521 Manual, ment (noting valuing ch. at 21.4-1 "the basis Thus, personal property property,"). should be same as real true they cash value of the is that which would sell billboards *16 market, "upon arms-length negotiation open in the between sell, willing an owner but willing obliged buyer not and a but Aero, Mitchell obligated buy." not 74 2d Wis. at 459 may three, an assessor consider tier 35. Within bearing collectively on have a which "all the factors its fair in order to determine value of Property 1 Markarian, 686; 2d at 45 Wis. market value." Manual, 21.3-16. These factors 21, ch. Assessment replacement depreciation, value, income, "cost, include occupancy, sales conditions, location industrial property, carried, of insurance value, amount like book produced appraisals prospectus and in a value asserted by Aero, Inc. v. Bd. rel. Mitchell the owner." State ex (1976); 278, 246 521 see Review, 268, 2d N.W.2d 74 Wis. Property Manual, 21, at 21.3-16 to ch. Assessment approach, which seeks to The income 21.3-20, 21.4-11. gener capture income the will the amount of approach, and the cost which life, useful ate over its property, replace the both cost to to measure the seeks Property analytic Assessment framework. fit into this Manual, ch. at 21.3-16. BY DID THE CITY ERR NOT
IV SALES? COMPARABLE CONSIDERING City should not contend the 36. Adams does acquired tier. Adams the first assessment have used City majority in at a time in the of its billboards City regulatory in was environment when years price paid for the billboards 15 The Adams flux. their true cash value not indicative of earlier is argue, however, that the Adams does and 2003. comparable sales. evidence failed to consider reasonably comparable sales, If there were approach, the assessments used the but Keane, 590; 2d at rel. 99 Wis. be invalid. State ex would Upon review of the Markarian, 2d at 686. 45 Wis. *17 City by using record, we conclude the did not err tier methodology. three assessment response objection ¶ 38. In to Adams' to the 2002 Objection Report assessment, Assessor Kurth filed an report part: dated November 2002. The in stated There no subject is sale of the property nor are there reasonably sales of comparable properties.
The of La Crosse Assessor has informed me of a recent sale of a set of containing eight billboards eight faces. These faces sold for an allocated value of $301,200 $37,650 per face. response objection
¶ 39. In to Adams' to the 2003 Objection Report assessment, Assessor Kurth filed an September repeated dated 17, 2003. It word-for-word comparable the statements on sales from the 2002 Objection Report. July signed 20, 2004, On Assessor Kurth a
Supplemental Report that elaborated on the 2002 and objection reports. Supplemental Report This was " report [reasonably introduced at trial. The states that comparable report sales do not exist." The lists sales, six including purchased the billboards Adams in Madison in 1987. Two of the documented sales occurred in year both less than a before the first in Supplemental Report 2002.9 The lists the source of the six sales as the of La Crosse Assessor's Office. Supplemental Report ¶ 41. The states: "The out- advertising industry experts door and valuation indi- cate in various articles and books that the sales com- reported We note that sales information eight for the billboard faces sold 2001 differs between the 2002 and 2003 objection reports Supplemental and the Report. multiplier using gross approach
parison market value of to determine relevant advertising signs. of outdoor advertis- .. . Sales outdoor ing in the State Wisconsin." do exist structures why he did four reasons Kurth went on to list discussion of had cited sales he not consider the *18 reasonably compa- approach comparison to be the sales (1) becoming was the sales information rable sales: (2) lacked details about information dated; the sales (3) were sold; the sales structures nature of the billboard limiting comparatively billboards, small number of a (4) had con- information; and he of the the usefulness accuracy and calcu- information of the cerns about produced by compute the income used to lations billboards. contrary significant present
¶ did not 43. Adams weight presumptive of the to overcome evidence testimony. experts report stressed Its and assessor's they comparable failed available but sales data was that any comparable provide sales.10 to sales, Donald Sutte tes comparable asked about When researched, my from under but "I have not tified: believe —I are for both in Wisconsin that standing, there are sales produced never evidence land leases." Sutte permits and such sales. attorney testified:
Likewise, and Mark Ulmer consultant purchase sale of there of and [T]here an active market out tangible personal standing items of alone as billboard structures comparable appraisal theory property. typical ... when direct It's step, you get exist, go to an you the next don't that don't even sales approach. income based At oral of such sales. Ulmer, however, evidence produced never Adams did not attorney confirmed that Adams' argument sales, that its other than comparable evidence present existed. comparable sales experts testified 44. We note that at the 2003 Board of Review hearing, Adams' appraiser, Craig Hungerford, testified: "There no comparable [are] sales that we're aware of at this time; therefore, the cost is the most reliable approach." 45. Based on the Supplemental Report
Kurth's the circuit testimony, court found that Kurth's reasons the sales dismissing as not reasonably comparable were entitled to presumptive weight concluded the City used the correctly income approach, a third tier assessment methodology. 46. Adams' chief on this complaint is that point did not do enough seek out actively compa-
rable sales information.11 Yet Adams did nothing assistance. provide Adams' own Mark expert, Ulmer, has written:
[Bjillboards commonly land; are erected on leased con- sequently, sell, they when billboards by are transferred assignment sale, of lease or bill rather than warranty deed public recorded Many record. *19 appraisers, therefore, are not aware of billboard trans- 11We too have City reservations about the Assessor's efforts to discover comparable sales information willingness and his to dismiss the information he reasonably did have as not compa instance, question rable. For we City what efforts the Assessor made to obtain reasonably sales; evidence of comparable whether he obtained the other sales information from the La assessment; Crosse Assessor before or after the 2002 whether he to attempted size, age, illumination, obtain details about the daily signs or circulation of the from the La Crosse Assessor any source; why other year two sales within a Adams, however, assessment were viewed as out of date. did not questions ask these or similar present of Kurth and did not evidence sufficient to presumption overcome the of correctness that attached to Kurth's conclusion that the sales were not reasonably comparable. data for they ready have access to sales
fers nor do transactions, they apply are unable to billboard so comparable approach. sales (3d § 23.04[4], at 23-62 Eminent Domain
8ANichols on 2005); (noting supra Marsh, at 7 also & ed. see O'Neall relying upon comparable with the difficulties associated sales); Gelineau, Valuation Billboards Con- Jill S. (July demnation, 4 Prac. Real Est. Law. 19 No. 2003) (noting values are difficult that data on billboard obtain). to obligation An assessor has an follow analysis. comparable In terms of
three tier assessment billboards, however, neither the nor Adams sales of particularly information. One anxious to use this seems reasonably comparable sales are not avail- insists that them; effort to find one able but makes no serious information is available but then assures us that the provide it. Under the circum- makes no serious effort to uphold stances, the decision of the we are bound rely upon entitled to tier circuit court that the was three valuation methods. USE DID THE CITY IMPROPERLY
V
THE INCOME APPROACH?
ONLY
have
that an
48. On several occasions we
stated
solely upon
cannot be based
E.g.,
Mgmt.,
approach.
558;
184 Wis. 2d at
Waste
I.B.M.,
619;
¶ 49. Adams that the used approach income to value its billboards. The does disagree, although not it contends that it reached its considering assessment after the alternative methods of comparable approach rejecting sales and the cost them. against
¶ 50. The rule the exclusive use of the approach originated in Wahl v. &H.W. S.M. (1936). Tullgren, Inc., 222 306, 310, Wis. 267 N.W.278 Bldgs. City Milwaukee, See Dev. Co. v. 225 Wis. (1937) (interpreting holding 359, 274 N.W 298 Wahl as that income alone cannot control the determination of value). plaintiff, fair market In Wahl the who was securing appraisal apartment interested a low of an building, urged this court to reverse the fair market value determined the circuit court for the reason income-generating capability building that the of the support finding. Wahl, did not the circuit court's rejected plaintiffs The Wis. at 309-10. court con concluding tention, the fair market based upon the income was not consistent with the original purchase price reproduction or the cost of the building, greater. both which were much Id. at 310. *21 Implicit in is the Wahl court's concern that upon single determining in
reliance factor fair market may appraisals in skewed result due to aberrant market conditions. See id. The reason the income approach yielded building a low valuation of the Depres- that it was the middle of the Wahl was Great monthly apartments and sion rent was one-third to prior Depression. one-half the rent obtained to the Id. progeny The lesson from and Wahl its is that an all assessor must consider factors relevant to fair mar- ket value to ensure that an assessment is not skewed. Property
¶ 52. The Assessment Manual reflects upon the need to consider all factors that bear fair "Usually, market value. more than one—and often all approaches apply given property." three —of the to a Property only Manual, 7, ch. Assessment at 7-18. "The limiting appropriate factor: whether available and data develop any approaches." exists to and all Id. may only
¶ 53. There
be situations in which the
compels
single
information available
an
assessor to use
methodology
property.
Property
to assess
1See
Assess
any
Manual,
7,
event,
ment
ch.
at 7-28.12In
an assessor
ability
disregard,
discount,
must have the
even
really
property.
factors
do not
bear on the value of a
Review,
State
rel.
See
ex Kesselman v.Bd.
133 Wis. 2d
(Ct.
1986).
App.
122, 129-30,
¶ 54. there is sufficient data Where to estimate ap- market value under both the income and cost proaches, "[assessors should a final select estimate of through process the of 'reconciliation.'" Id. at requires 7-18. Reconciliation an to evaluate assessor approaches the data available under the alternative and decide whether to derive the value from one the approaches approaches. or a combination of Id. nullify case, In think this we that we would permitted City if
the so-called rule we Bischoff reject approaches assessor to all and factors other than approach. extraordinary an think it that the We rejected cost, assessor out of hand such factors as depreciation, replacement value, and insurance carried. City in concluded, effect, The assessor that the Wiscon- Supreme (approving approach), in cost sin Court Vivid Department of Revenue in three revenue the Wisconsin rulings (approving approach), in most cost the assessors (using approach), in communities Wisconsin cost approach, rulings approving in other states the cost simply Thus, were irrelevant. Assessor deemed approach, nearly unreliable the cost method that all jurisdictions use to assess billboards.13
¶ 56. We consider the assessor's failure to collectively especially factors, consider all the cost- less-depreciation, reasonably that affected the value of Property Adams' billboards failure to follow the rulings Assessment Manual and the of this court. No presumption may of correctness be accorded to an apply principles that does not in the Property upheld Assessment Manual. The circuit court presumption, notwithstanding Adams' full-blown appraisal expert testimony. and all of Adams' Under present City improperly the upon only case, facts relied the income to assess Adams' in billboards, violation of 81 Wis. 2d at Bischoff Property contravention of the directive applicable ap- Assessment Manual to reconcile the proaches to value.
13In order to *23 approach conclude the income proper was emphasizes dissent appraisal articles discredit the cost Dissent, approach as unreliable. 108-114. As we have rec ¶¶ ognized, 29, supra, there disagreement is substantial over every how to value For promoting billboards. article the income approach, contrary extolling there is a article the virtues of the approach. e.g., Wagner Baker, cost See James & David The Valuation Outdoor A Advertising Appraisal Structures: Mass of Approach, Digest, July/Aug. 1991, (concluding Assessment at 4 "justifiable approach cost is as the best available method for off-premise advertising structures"); valuation of outdoor Floyd, F. Advertising Signs Charles Outdoor & Eminent Do Proceedings, main Real Est. Appraiser Analyst, & Summer (concluding approach only "the cost is the valid valuing technique advertising signs"). for outdoor APPLY DID THE ERRONEOUSLY CITY VI. BY THE INCOME APPROACH INCLUDING PERMITS THE THE BILLBOARD VALUE OF IN ITS ASSESSMENT? of the This three question encompasses appeals: certified the court
questions methods used in eminent appraisal 2. Should the recognized personal property in tax domain cases be cases?14 assessment "inextricably
3. Should the intertwined" recognized in real tax cases be used estate personal tax assessment cases? property authorizing the location of an outdoor permit Is "intangible" meaning of advertising sign an within the 70.112(1) exempt § and therefore an factor for Wis. Stat. personal property tax assessment? purposes A Permit Real Property A. Billboard is billboard permits address the issue of 58. We are either permits contends that billboard first. Adams (1) § 70.03 in real under Wis. Stat. property an interest (2) and not taxable as intangible personal property 70.112(1). § Either under Wis. Stat. personal property the same: the value concludes, Adams the result is way, in the assess- cannot be included permits billboard In contends response, ment of billboards. immaterial, because the of the permits classification argument during oral agree Adams' statement We with is better -understood as question of this certified that the thrust be included an assessment asking what should in an eminent domain establishing fair market value purposes tax assessment. compared personal proceeding *24 permits inextricably value attributable to the is inter- twined with the billboard structures and therefore properly in included the assessments of the billboards. permit right 59. We conclude that a billboard is a privilege appertaining property real and thus falls property" within the definition of "real in Wis. Stat. § permit tangible personal 70.03. A billboard is not "personal property" within the definition of § permit Wis. Stat. If 70.04. a billboard were to be personal property, exempted considered it would be from intangible by taxation as an Wis. Stat. 70.112(1). §
¶ 60. Whether the
could include the value of
permits
personal property
the billboard
in its
tax assess
question
statutory interpretation.
ments is a
As al
ways, "statutory interpretation begins
language
with the
of the statute." State ex rel. Kalal v. Circuit Court for
County,
Dane
45,
2004 WI
Id. We conclude the unambiguously scheme established Wis. Stat. ch. 70 precludes permits being personal billboard from taxed as property. determining permit In whether a billboard personal property, question
can be taxed as the first permits personal property. whether are To answer this question § turn we to Wis. Stat. 70.04, which states: personal
Definition of property. The term "personal property", used chs. 70 to shall goods, include all wares, merchandise, chattels, effects, any nature or description, having any value, real or marketable not included in the term property", "real as defined in s. 70.03.
(1) bridges; toll also includes property Personal and bridges; logs, timber saw railroads private steamboats, afloat; ships and lumber, land or upon either boats, abroad; ferry vessels, or at home other whether .... running the same including the franchise § aspects that a billboard of 70.04 demonstrate Three right intangible represents permit, to use land an which specific definition not fall within the manner, does in a property. personal of § personal
¶ defines First, Stat. 70.04 62. Wis. property, general types property of a list of means of including "goods, merchandise, chattels, and wares, tangible characteristics and have effects," all of which corpo- value" because of their "real or marketable have By of a billboard contrast, the value existence. real permit paper qua paper, piece in but lies not designated upon right land, a billboard to construct Applying paper represents. the canon of which only § interpret ejusdem generis,15 to include 70.04 we tangible personal property, intan- exclusion of to the permits, gible property fran- licenses, most as such patents, copyrights, like. trademarks, and the chises, [21] 70.04(1) § corroborates Stat. Second, Wis. permits fall within do not that billboard
the conclusion (1) property. personal lists Subsection the definition only property. examples personal specific list, theOf of tangible ferry If franchise. boat is not one item —a permits, property" licenses, and "fran- "personal included that when a of construction generis is a 'canon "Ejusdem or persons specific a list of phrase or follows general word include interpreted to phrase or will be things, general word those listed.1" State things type the same as only persons n.4, N.W.2d 712 A.S., 243 Wis. 2d v. 2001 WI 1999)). (7th ed. Dictionary 535 Law (quoting Black's "ferry chises," the statute would listed a not have boat rendering provision surplus- franchise." To avoid this (which age, interpret "personal property" we the term taxation) subject property intangible prop- to exclude erty, exception ferry with the boat franchises. § Third, Wis. Stat. 70.04 excludes from the personal property anything definition of that falls within § real definition of Stat. In Wis. 70.03. § part, only 70.03 defines real "not the land rights privileges apper- itself but... all fixtures and *26 taining thereto[.]" permit a Because billboard a confers right privilege operate or to erect and a a billboard on designated piece permit land and a of because be cannot transferred to a different we location, conclude a bill- permit property.16 within board falls of real definition Intangible Rule, B. As a General a Permit Is Personal Property question
¶ 65. The fourth certified a asked: "Is authorizing permit the location of an outdoor advertis- 16The Property helps Assessment Manual to explain why a permit billboard real property: is property To value real the assessor must know what real property process valuing property, is. In real the assessor property." will encounter the terms "real estate" "real and Real items; physical any estate refers to the the land and structures and improvements property rights, located on the land. Real is the privileges, owning and benefits of the real estate. These two terms interchangeably. are often misused and misunderstood used For purposes property 70.03, real is defined Section Stats., property1, "The terms 'real follows: 'real estate1... shall only buildings improvements include land not itself but all and thereon, rights privileges appertaining and all fixtures and and Thus, property thereto." in Wisconsin assessment real law encom passes property. of both definitions real estate and real Manual, Property Assessment 7-1. ch. meaning 'intangible' sign Stat. ing Wis. within an 70.112(1) exempt purposes § factor an and therefore property personal assessment?" tax permit a should billboard We conclude 66. appertaining right privilege to real or as a assessed be § result, we need property As a Stat. 70.03. under Wis. "yes" question "no" respond a with the certified not to on intan- if a to comment Nonetheless, failure answer. gibles impression that the answer were to leave misleading impression of Wis. "no," create we would 70.112(1) argument open § on the door to Stat. intertwinement. inextricable 70.112(1) § exempts from Stat. Wisconsin intangible personal property
personal "all taxation property" intangible personal "[A]ll is an property." language plain exceptionally Its classification. broad "intangible exempt policy suggests choice a clear personal property" We personal taxation. from give the term the statute to on the face of no reason see reading. narrow support historical basis There is a solid 70.112(1). §§ interpretation Stat. 70.04 Wis. this broadly century ago personal was more A § today. *27 1036 read In Wis. Stat. 1900 than it is defined follows: as The term defined. Section
Personal shall be con- in this title as used properly" "personal include to mean and strued bridges,
Toll lumber, land or upon either and logs, timber Saw afloat; vessels,
Steamboats, whether ships and other abroad; home or
473 Buildings upon lands, leased if buildings such have not been included the assessment of the land on they erected; which are
Ferry-boats, including the franchise for running same; use, Ice cut and stored for sale or shipment; Ml debtors, debts due solvent whether on from account, note, contract, bond, mortgage or other secu- rity, or whether due; such debts are due or to become goods, wares,
And all
merchandise, chattels, mon-
eys
effects,
any
nature or description, having any
real or
value,
marketable
and included in the term real
added.)
as above
(Emphasis
defined.
¶ 69. This text covered some, if
all,
not
intan-
gibles.
Gaylord,
In State ex rel. Dwinnell v.
two observations personal property "[t]he tax has been First, Wisconsin tangible years and tax on from a over the transformed intangible, income-producing non-income- tangible wholly producing property into a tax on (Emphasis property." income-producing largely on added.) interpretation of our reinforces statement This § little doubt Second, "there seems 70.04. Wis. Stat. *29 designed replace- the income tax an was as eventual personal property ment for the entire tax." respect point, ¶ 74. With to the second Wis. Stat. § "Property exempted 70.112 is now entitled from taxa- special explained by tion of because tax." This title is "Study Rick Olin ain of the Treatment of Personal Property Property (Legislative Under the Tax" Fiscal 2002). Sept. "[S]ection Bureau, Olin writes: 70.112 ... exempts types personal prop- of certain real estate and erty property property from the tax because the is subject property to another or tax fee ... Such includes (income tax).... money intangibles and In provided of creation the state income tax a rationale for fully exempting intangible property prop- ... from the erty supra, Olin, tax." at 3. (6th 1990) Dictionary
¶ 75. Black's Law ed. "Intangible Property." chiefly defines "As used in the taxation, law of this term such means as has merely no value, intrinsic and marketable but representative value, evidence such as certificates promissory copyrights, stock, bonds, notes, and fran- "Intangibles" "[pjroperty chises." is defined a as that is 'right' patent, copyright, such as trademark, etc., or lacking physical good- one which is existence; such as (6th 1990). Dictionary will." Black's Law ed. (7th 1999) Dictionary ¶ 76. Black's Law ed. "Intangible Property:" has a different definition of "Property physical Additionally, lacks existence." Property" category "Intellectual is defined as "1. A intangible rights protecting commercially valuable products category of the human intellect. The com- prises primarily copyright, patent trademark, and rights ...." Id. at 813. Intangibles paramount place in con- have a They integrally society.
temporary to are related both regulated wholly entrepreneurial heavily facets economy. They include the intellectual modern our creativity, branding, essential that is § technology. ex- Stat. 70.112 information Wisconsin intangible personal property empts "all taxation from patents permits, personal ranging property," as from added.) Any (Emphasis money substitutes. well intangible personal property be should to tax decision legislature, not local assessors.17 *30 made the Inextricably Concept Not The Intertwined Does C. Property Apply Tax Personal in the Context of Assessments Regardless that billboard of our conclusion City per property,
permits
contends it is
the
are real
permits in the
the
of the
to include
missible
argues
personal property
the
The
tax assessments.
inextricably
permits
to
is
income attributable
billboard
physical
of the bill
the
structure
intertwined with
just
assessment,
boards,
it can be included
the
so that
management
ABKA
Partner
income in
Limited
as the
17
ex
disagrees
analysis.
cites
with this
It
State
The dissent
Review,
2
2d
85
County
v. Board
Wis.
rel. Dane
Title Co.
of
determined
not
(1957),
title records are
which
864
N.W.2d
the records
"intangible
property." The court described
personal
of
collection
completely
as "a
indexed
in an
office
abstract
relating to
public
all
records
and memoranda of
authentic notes
liens, etc.,
the
grants,
judgments,
preparation
for use in
These
at 60.
title-policy purposes."
Id.
of title or
abstracts
substan
obviously tangible
they presented
in that
records were
difficulty in
no
weight
space.
We have
questions
tial
permits.
from billboard
distinguishing tangible title records
477
ship
Review,
v.
328, 344,
Board
231 Wis. 2d
603 N.W.2d
(1999),
217
and the income
attributable
the landfill
Management,
license in
184
2d
Waste
Wis.
at
were
short,
included in real
assessments. In
argues permits
personal property
can be included in
tax
permit necessary
assessments because a
is
for a billboard
operational, meaning
permits
inextricably
to be
are
physical
intertwined with
structure of the billboards.
City's
upon
79. We conclude that
reliance
inextricably
concept misplaced.
intertwined
The
concept of inextricable intertwinement allows business
value to be included within the
of real
income-generating capability
where the
can be
ABKA,
transferred with the real estate.
231
2d at
Wis.
Mgmt,
336; Waste
563;
Wis. 2d at
State ex rel. N/S
Review,
Assocs. V.Board
478 ABKA, property 231 real from assessments. excluded Mgmt., 2d at 344; Waste 184 Wis. 2d at Wis. (requiring and to be to labor skill income attributable out). factored Management, ABKA, In and Asso- Waste 81. N/S question whether busi-
ciates, confronted the the courts underlying primarily to the was attributable ness value of the skill and acumen or to the business real estate property determined cases, In all three the courts owner. underlying real estate. to the the value was attributable Integral analysis in the conclusion the these cases was to appertained real under the income to the proper § element to 70.03, therefore, and Wis. Stat. was under Wis. Stat. in the real estate assessment include 70.32(1). § Assocs., ABKA, 344; 2d See Wis. N/S Wis. 2d at 55. depend upon in The conclusions these cases § 70.03, in Stat. real Wis. the definition of improvements buildings thereon, and "all which includes rights privileges appertaining all and and and fixtures added.) (Emphasis [.]" ABKA the man- Thus, in thereto adjacent agement real could derived from estate income physical because in be included proximity interdependency the real estate meant subject privilege appertaining to the the income was product skill of the owner's estate, rather than real Management, Likewise, acumen. Waste and business apper- right generate from the landfill than the real estate rather the nature of the tained to Finally, Associates and skill ofthe owner. labor N/S appertained right to the nature rental income to receive unique mall rather than location of the ownership. qualities mall's of the pur- of Adams' billboards The valuation presents poses personal property tax assessment of a *32 the court with a different set of circumstances from presented Management, ABKA, those Waste and N/S question Associates. Rather than a of whether the primarily is income personal attributable to the real estate or the property skill
business and acumen of the real primarily owner, the issue here is whether the income is property personal property. attributable to real permits ¶ 84. We conclude that because billboard § property, are real 70.03, as defined in Wis. Stat. the properly income to attributable them is included the property personal property assessment, real tax not the Any tax assessment.18 value attributable to the bill- permits inextricably board is not intertwined with the primary structure of the billboards. The value of the permits structures; is unrelated the rather, to primary permits appertains value of the to the location underlying of the real estate. permits
¶ 85. The nature of billboard
demon-
per-
strates the correctness of this conclusion. Billboard
designated
only. permit
mits
are valid for
location
A
terminates when a
is
billboard moved. Whether value
appertains
property depends upon
property's
to
capacity generate
ABKA,
inherent
income.
231 Wis.2d
18Our conclusion does not mean
can include
percent
of the income derived from Adams' billboards in the
real
tax
the land that is leased to Adams
upon
which
places
Adams
its billboards. The amount of
rental
income a property
generate
can
proper
factor
assessing
consider
when
approach.
under
the income
Darcel,
Review,
See
Inc. v.
Manitowoc Bd.
137 Wis. 2d
(1987).
n.7,
D. The
Valued
Property
Than the
Is More Limited
Assessment
Domain
for Eminent
Valued
recognized
meth-
valuation
are three
87. "There
approach,
cost
for
ods
billboards:
(citing
approach." Vivid,
2d
8A
at 783
219 Wis.
market
§
to
23.04[4], at 23-51
Eminent Domain
Nichols on
23-59).
equally applicable
These three methods are
establish fair market value in
cases,
eminent domain
personal
id.,
prop-
and to establish true cash value for
erty
Aero,
tax assessments. Mitchell
279;
be purposes may establish fair market value for condemnation be used establish true cash purposes personal property tax assessments, *34 property depending upon purpose. valued differs § See 8ANichols on Eminent 23.04[3], Domain at 23-50 (3d 2005). n.7 ed. In domain, eminent fair market value price aggregate of a billboard is "the asset—the permit sign bring lease, in the market- —would place!;.]" (Bablitch, Vivid, 219 J., Wis. 2d at 780 with two justices joining). Necessarily, this includes the value attributable to the location the billboard. Id. at (Bradley, justices joining) (noting J., 803-04 with three the value of the location is included in the value leasehold). appraisal personal prop- In contrast, an for
erty purposes only tax assessment includes the value of personal property, and therefore excludes the value of permit. the leasehold and billboard See Wis. Stat. §§ experts, 70.04 and 70.34. Because Adams' Donald City's Sutte and Ulmer, Mark assessor, chief Kurth, Michael all testified that income attributable to the billboard isolated, structures could be we conclude per against that a se rule the use of the income approach appraise to billboards for tax assess- a fact, In once it is shown that necessary.19 not ment is available, is not approach market approach consider],.]" to always a element proper "is added). Wis. at (emphasis methods of Therefore, we conclude same in eminent domain as are used be used may appraisal provided tax purposes, appraising personal from a tax personal property care taken to exclude is elements other any value attributable to tangible than personal property. OF THE INCOME THE CITY'S USE
VII. DOES VALUE BILLBOARDS APPROACH TO THE CLAUSE? VIOLATE UNIFORMITY the cause to remand necessary 91. Because it not to we need property, for the reassess Adams' Labor & Farm challenge. reach Adams' constitutional dictating billboards should per rule how Creation se legislative decision. valued smacks of an administrative be adopt rule that the per se We leave the decision whether bill be the exclusive method cost should legislature, as have Department of Revenue or the to the boards Equalization, e.g., State Board of other states. See California *35 the Assess Special Dept., Guidelines Property and Taxes for (Dec. 2002), at 2 Properties, No. ment Billboard 2002/078 http://www.boe.ca.gov/proptaxes/pdfAta02078.pdf at available 2006) (last approach); cost Nev. July (adopting the visited (2006) (adopting approach); the cost § Admin. Code 361.1305 Taxation, Treasury, Div. of Jersey, of the Dep't of New State Jersey 71.02 New Assessors Appraisal Manual Property Real for (Feb. 2005), http://www.state.nj.us/treasury/ available 2006) (last July 10, visited taxation/pdfApt/billboardpacket.pdf market, all income, approaches are avail and cost (noting billboards). able to
483 Party Bd., v. Elections 351, 354, Wis. 2d 344 N.W.2d (1984) ("This normally court does not decide con- questions stitutional if the case can be resolved on other grounds.").
VIII. CONCLUSION ¶ 92. In sum, we conclude as follows: City A. The was entitled to third use tier methods assessment assess Adams' billboards because there arms-length was not recent sale of the and produce reasonably compa- Adams did not evidence rable sales. Although
B.
may
net income from billboard rentals
analysis,
be a factor to consider in a third tier
it cannot
controlling
determining
be the sole
factor in
value. When
acknowledged
the Madison
Assessor
he
consid-
rejected
approaches
ered but
all other
factors,
and
his
long-standing
prin-
assessment contravened
ciples
Management,
articulated in Waste
¶ we reverse 93. directed court, circuit which is cause to the remand the pending stay proceedings reassessment further by ain manner consistent Adams' the billboards opinion, parties reach a settle- or until the with this ment. judgment
By court is the circuit the Court.—The proceed- remanded for further reversed and the cause is ings opinion. with this consistent (dissent- ABRAHAMSON, C.J. 94. SHIRLEY S. ing). agree deci- excellent I with the circuit court's reviewing conclude, I did the circuit court after sion. as presented trial, that the all evidence the using properly the Adams's billboards Madison assessed considering approaches approach, various income after sign purpose of an outdoor is The obvious to valuation. display public As circuit in a desirable location. generate "A not stated, billboard does court sitting of its warehouse; its value is function income-generating capac- permit location. That and its inextricably ity and its intertwined the billboard with is requires, captured if, law value must be Wisconsin market value." at its full be assessed Accordingly, personal property tax as- challenged are valid in the instant case sessments assessments, I therefore dissent.
H begin used I of assessment with method City. majority opinion, court, like the circuit The correctly regarding the various methods the law states personal property circuit Both the tax assessment. correctly majority opinion conclude court and *37 the City was entitled to use the "third tier" assessment methods to assess billboards.1 97. The majority opinion is also correct
¶ that a third tier conducting assessment, when the income "cannot be considered as the sole approach controlling of determining either factor real or personal "[A]n assessor must property."2 determine market value information from the best the assessor can practicably obtain, all considering elements which collectively have on bearing the value of the property."3 When the assessor uses more than one approach assessment, to he must reconcile the values determined the various However, approaches. when other are approaches prop- rejected erly and only one is used, obviously no reconciliation is needed.4
1Majority op., City Appleton, 612, 81 619, Wis. 2d 260 2 Bischoff v. (1978) N.W.2d 773 (quoting State Corp. ex rel. I.B.M. v. Bd. of Review, 303, 312, 231 (1939)); Wis. 285 784 N.W majority see 48; op., Property 1 Assessment Manual Wisconsin Asses for sors, ("The ch. at 7-28 appraiser should consider all three approaches estimating when the value of a property. However, all approaches may three not be developed in an appraisal because a may or, sufficient amount of data not be available due characteristics, to the specific property the approach may be (second considered less reliable in estimating market value." emphasis added)); Wis., third Mgmt. see also Waste Inc. v. Review, County Kenosha 541, 558, Bd. 184Wis. 2d 516 N.W.2d (1994) ("Income 695 may never be the sole basis for an assess property."). ment of 3 Mgmt., Waste 2dWis. at 558. ("If Manual, Property Assessment ch. at 7-28 more than one approach is developed appraisal, in the the individual value estimates must be reconciled into one final value estimate property.... The may final value estimate be the value estimate derived from approaches may one of the or be a careful pur- majority opinion observes, the As the pose requiring all elements that to consider assessors prevent tois "skewed the value of bear on appraisals The to market conditions."5 due aberrant recognizes, majority properly opinion however, may limiting be available is that data not factor any approaches.6 develop appropriate Accord- and all majority opinion, ing "an must have assessor to the disregard, ability do not discount, factors that even really property."7 I wholeheart- on the value of a bear right edly agree. present into this case falls And the situation. *38 majority opinion Unfortunately, not
¶ does the 99. espouses. apply Indeed, after of it the rules assessment disregard may stating that do factors that an assessor majority property, the on the value of the not bear requiring concluding opinion rule an shifts, the market that bear on the all elements assessor to consider permitted were if the assessor would be nullified value reject approaches an other than all and factors "to approach" other he "deemed unreliable" because approaches.8 can Either disre- 100. is it? the assessor Which they inappropriate,
gard approaches are other when he cannot. developed court is record in the circuit 101. The third tier assess- the considered several
clear that majority approaches.") of Thus applicable reconciliation instant in the case on reconciliation opinion's emphasis, ¶ irrelevant.
5 Majority 51. op., ¶ 6 Majority 52-54. op., ¶¶ added). Majority op., (emphasis 53¶
8 Majority op., ¶ ment methods. The record demonstrates that after considering variety approaches, assessor had a sufficient basis use income approach for the and to other disregard approaches as not reliable and as a skewed fair producing market value. The other approaches disregarded were after careful consideration; rejected hand, none was out of as the majority opinion states.9 The circuit court opinion details the record demonstrating City's careful analysis in the cost I rejecting approach. conclude that the assessor's rejection of approaches factors that were not reliable in the instant case comports with long-standing assessment principles articulated in the cases and the rule stated the majority opinion.10
9Majority op.,
10See,
("[A]n
e.g.,
Mgmt.,
Waste
488
there were no
determined that
City
102. The
evi-
Adams did not proffer
sales.11
arms-length
recent
arms-length negotiation
open
in the
upon
it will sell for
amount
sell,
willing
obliged
not
to
and a
market,
owner
but
between an
DOR,
Corp.
114
obliged
buy."); Xerox
v.
willing but not
to
buyer
(1983) (same);
527,
State ex rel.
522,
dence of sales.12 The opinion although City in effect concedes that at- tempted comparable City to use sales, neither the nor any Adams offered at trial.13 approaches ¶ 103. The two issue the instant approach" case approach." are the "cost and the "income approach replacement The cost is a measurement of the property. approach cost of the The income is a measure- of gener- ment the amount of income the will ate over its useful life.14
¶ ap- 104. The assessor considered the cost proach and way determined that it was anot reliable City's the fair supple- determine market value. In the report regarding mental the 2002 and 2003 assess- relying Property ments, on the Wisconsin Assessment citing expert authority, Manual de- methodology considering, scribes its valuation as but rejecting, approach the cost as follows:
Due to the complete, lack of data, accurate cost the cost approach is not considered a reliable approach to value not considered in this valuation. Most sources agree that approach cost does not reflect the fair market outdoor advertising signs. 12 See majority op., 39-47, n.10, ¶¶ ¶ n.ll.
13Majority op., 47. The comparable sales has been "fraught described difficulties, with numerous all of against which militate use this approach for property tax valuation of billboards." Cris Bradley Marsh, K. O'Neall & R. Property Trends Tax Valuation Commercial Outdoor Structures, Advertising J. Prop. Tax 5, Assessment & Admin. (vol. 2004). issue 14Majority op., *41 not a rehable indicator approach The cost is considered following to subject property the due the of value for reasons: mainte- age improvements the and constant
The to impossible it almost esti- upkeep nance and makes appropriate cost and reproduction replacement mate and depreciation obsolescence. impossible almost to estimate very
It is difficult or costs, and procurement soft site costs en- appropriate profits put are needed to the trepreneurial which required by use the productive into Wis- billboard Manual. Property consin Assessment cost to approach All reviewed considered the be sources to for outdoor adver- approach the least reliable value indicator, not tising the and an signs, lowest value market accurate reflection of value. sign influence its value.
The of the do not materials Rather, importance in outdoor paramount location is of may advertising. A of a billboard particular location and value. In have a over and above its nuts bolts industry, virtually sense, in it is this the billboard the impossible separate to location from structure. rights appropriate
The associated sign structure sign inextricably are intertwined with the structure using cannot the approach. be valued cost properly court clear Thus, record in the trial is 105. ¶ as the did not use the approach that in the value determining factor controlling sole majority that and it is clear property, personal that the asses- suggesting is misleading opinion of hand."15 "out rejected the cost approach sor ap- of the income Other allow use states ¶ approach recognize critics of the income The proach. op., majority See that the income is The approach valid. criticisms are that the income primarily is difficult to approach imple- ment.16 journal 107. The article relied ma- upon by
jority opinion conclude cost approach is emerging totally trend The unconvincing.17 article has to read be that both authors knowing "specialize owners in tax representing assessment mat- ters."18 They conclude that the cost is the best approach for tax assessment purposes.19 108. There are several more substantive rea- sons very not take this article seriously. The authors'
16See, e.g., Baker, Wagner James & David The Valuation of Advertising Outdoor A Appraisal Approach, Mass Structures:. 1991, Digest, July/Aug. Assessment ("Advantages using of (1) approach the cost in the off-premisesigns valuation of are: the (2) ability of to application; ease the determine the value of the irrespective location, income, structure of and expenses attribut (3) able to the opposed structure; business as to the and availability data."); Floyd, cost Charles F. Advertising Outdoor Signs and Eminent Domain Proceedings, Real Appraiser Estate Analyst, & ("Traditionally, Summer at 16 approach the cost appraisal technique is the that has been utilized to value outdoor advertising signs in eminent domain It proceedings. has been accepted by the courts technique, as valid and it been has accepted by most courts as ONLYvalid technique valuing advertising signs. outdoor The sole exception arises when evi sign dence indicates that the cannot be relocated within the entire market area. In this situation several courts have ruled used."). that some approach may variation the income be case, however, In the instant the assessor was able using determine the market value of the billboards the income approach signs and the cannot easily be relocated in Madison. 17 majority op., See 29. ¶ Marsh, supra & O'Neall note at 5. 19Id. at 11. any emerging the cost trend toward conclusion about approach by presented supported the evidence is not the article. surveyed a mere six states.20 The authors 109. Wisconsin, is was which not of the six states
One any approaches.21 adopting three of the described expressly ap- income allow an Two of the six states proach. may used; if be California, In value given to the is a cost new value is cost used property, depreciation subtracted, is and the value sales) (using comparable determined land is prima Ohio, is facie evidence added In cost brought by taxing contrary to the is unless evidence authority taxpayer. or Regardless, examples from the six unconvincing four of the six states are because
states Ohio, Carolina, California, Texas, North discussed, nothing examples provide than of recommended more authority by agency guidelines to mandate an with no They appraisal approaches. what do not discuss happening actually Thus we cannot in those states.23 from the article the billboard determine any states. rules in six states other any Furthermore, conclusions normative rejected in Wisconsin the authors must be reached proper approach view of the because the authors' *43 The authors law. conflicts with Wisconsin valuation reject approach" Wisconsin, In as unreliable.24 the "sales long rule that "sales it has been the however, 20 Id. at 8-11.
21 Id. at 11. See id. at 8-9, 10. 8-9, Id. 10-11.
24 Id. at 7. valuing the based
approach," on recent or sales, is the best comparable approach to valuation. available, when sales information Only is not as in the case, instant an may assessor third proceed tier approaches.25 Moreover, 112. reject other commentators
normative conclusions this article. A commentator relied upon by majority opinion,26 who is member of a private law firm and apparently con- represents demnees rather than condemnors and at least one billboard concludes company, that cost appropriate determining for billboards in rare only circumstances. This commentator has ob- served there are several with the problems cost approach: The cost approach major has at least three shortcom-
ings: -It does thinking: Buyers not reflect market and sell- advertising ers of outdoor do not replace- consider the sign, ment depreciation, cost of a minus as an accurate they purchase estimate of value when signs. -Depreciation may be impossible to estimate: Because sign companies continually are refurbishing struc- sign tures, standard of estimating methods physical depre- applied ciation cannot be signs. addition, outdoor In estimating cost age-life services do not develop tables signboards they for categories do other of real Moreover, estate. economic obsolescence attributable to negative extremely difficult, external influences is if impossible, to not estimate.
-Replacement may cost not replace- reflect value: The sign ment cost of a can quite readily. be estimated The sign actual cost to build a can be from determined 25Majority op., ¶¶ 26Majority op., *44 However, the of bids. cost
contractors' estimates or usage must be reflected sign for also acquiring the site continually acquire Companies in the estimate. cost advertising. complicate To mat- new sites for outdoor for as entre- further, associated costs items such ters must profit be estimated. preneurial the shortcomings, use cost Because of these serious only in the rarest of circumstances.27 approach the espouses also 113. The same commentator determining approach the income using virtue that the income billboards, contending value of and nature of the the full value encompasses billboard: advertising sign depends
The true of an outdoor Many of these characteristics make on a host of factors. appraisal of billboards similar to the valuation purchased generally. Signs real estate are commercial locations, signboard them- for their structures selves, on the land leases that run with sites are similar to signs stand. These interests which the purchase of an the real involved estate interests building, building, commercial cen- office or apartment location, ter, physical usually include the which structure(s), to use the land under the right and the advertising poten- agreement. Attributes such lease Location to interests. is tial are related locational assets, whether the all real estate prime importance residential, commercial, industrial. real estate is in outdoor adver- true of the interests equally This signboards. tising Gelineau, Condemna S. Valuation Billboards Jill (July Lawyer 30-31
tion, Estate 19 No. 4 Practical Real (also 2003) a billboard is tied observing the value of are that billboards location, physical structure and permit, and in eminent.do property, personal not arguably property, real cases). main *45 The similarities between and other billboards commer- interests, properly buildings, cial such as office restau- rants, like, suggest and the that properly billboards are property.28 as real viewed 114. The cited the expert opinions by City its on report the 2002 and 2003 assessments supplemental the the is support proposition that cost unre- approach for liable billboards. An article one by written of Adams's witnesses that the income expert explains approach the appropriately captures because, value of a billboard unlike other businesses, the income-producing capacity cannot be from the separated physical structure: is...
It incorrect to approach assert the income expense reflects the "business" value of a billboard. The data, management costs, which include all operating and effectively component eliminate the "business" from the figures. advertising income ... An outdoor structure is not a outlet, restaurant food separate fast where a activity and distinct business selling conducted such as beverages. sign food All activities of a owner relate directly being tenant-advertiser, to its rented to a purely real estate related function.29 27, Gelineau, supra note at 27. Aguilar, Appraisal RodolfoJ. The Advertis of Off-Premise Billboards, Right ing of Way, September/October at 12 (publication Right Ass'n, of the Int'l Way http://www. irwaonhne.org/).
For further discussion of the relative benefits of the income approach compared to the approach determining cost the billboard, of a see other City also authorities cited the supplemental Sutte, in the report, Donald T. The Appraisal of (1994) Advertising Signs (stating Outdoor same reasons why Gelineau to explain approach cost is inappropriate for billboards); Oehlrich, Ron L. Nation & Donald E The Valuation Structures, Journal, Billboard Appraisal The October Taking fact that into account the ¶ 115. rejected approaches than the other
considered approach approach income fact that the and the income assessing property tax proper ais only City's to use purposes, decision that the I conclude proper. approach was income consider whether I must now approach. applied The circuit court properly income applied City properly agree, that the concluded, and I "inextricably including inter- approach, *46 agree the concept. court that the circuit I with twined" any approach from its had eliminated per- assessing improper the billboards in elements property.30 sonal property has context, this court
¶ In real 117. the 'ap- may in fact be value "certain business held that pended' personal to the than rather the real estate property appended when to real is This value owner."31 inextricably land.32 the intertwined with it is Institute, http://www. Appraisal the of (publication at 412 of cost (discussing inadequacy appraisalinstitute.org/) billboard). determining of in value 30 methods "the same that majority concludes opinion The in used as are in eminent domain may be used appraisal of is care provided purposes, for tax property personal appraising any property tax personal exclude from taken to tangible personal than other to elements attributable Majority op., ¶ property." 31 2d at 564. 184 Wis. Mgmt., Waste 32 Village Review P'ship v. Bd. ABKA Ltd. See of of 2d 328, 336, 603 Fontana-On-Geneva-Lake, 231 Wis. 564; rel. State ex 2d at (1999); Mgmt., 184 Wis. 217 Waste N.W.2d
497 The asserts that "in majority opinion ¶ extricably concept intertwined" is not here applicable because the billboard is "a or right permit privilege to real appertaining and thus falls within the property § 'real definition of Wis. Stat. 70.03."33 The property1 that majority asserts inter opinion "inextricably twined" concept is not here applicable because billboard is an permit interest real and the property income attributable permits to the is properly included in the real tax not the property assessment, personal tax property Therefore, assessment. concludes the ma jority opinion, permit cannot be inextricably inter (the billboard). personal twined with property 119. The majority opinion remarkably ex- ¶ also plains that billboard is real both permit property intangible personal property.34 Greendale, Bd. Village v. Review 164 2dWis. N/S Assocs. (Ct. 1991). 31, 54-55, App. 473 N.W.2d554 33 ("[A] Majority op., majority op., 59. See also ¶ ¶ billboard permit falls within definition of real property."); ("[A] permit billboard should be right assessed as a privilege appertaining to real under Wis. Stat. 70.03."); § ("Regardless of our conclusion that billboard ('We permits are real property...."); conclude be permits cause billboard real property, are as defined in Wis. 70.03, § Stat. the income attributable to them properly assessment, included in the real tax not personal assessment"). *47 property tax 34 majority The opinion states that it does not to want "leave the impression that the answer to question is 'no'" the of " whether a permit 'intangible' meaning billboard is within the 70.112(1)," is, of § Wis. Stat. permit that whether a billboard is intangible personal Majority property. op., 65-66. ¶¶
I assume that majority because the does not want to leave the impression that the is "no" answer because it would be "misleading," it must that "yes." conclude is answer the inextri- addressing the cases Although I cases, agree real rule are property intertwined cably rationale to applies that the same circuit court with the analy- to the 'key "[T]he taxation.35 property personal are, majority permits that as opinion in the explanation The from rule, excluded intangible personal property general 65-77. majority op., See ¶¶ taxation is untenable. property text of Wis. Stat. comport not with the conclusion does This from 70.112(1), exempt that is defining personal property § taxation, the statute. interpreting or the cases property 70.112(1) property from taxation exempts § Stat. Wisconsin credit, intangible personal property, such as "[mjoney and all notes, bonds, drafts, drafts, stocks and other checks, other share County Title Co. v. In ex rel. Dane instruments." State written Madison, 51, 62, Review, 2d 85 N.W.2d 2 Wis. Board of of (1957), ejusdem generis applied principle court this " in sec. 'written instruments' as used and concluded that rights and 70.112(1), Stats., writings to that evidence refers money things involving credits." obligations of permit how a can be majority opinion explain does not The Indeed, permit that a "money explaining credit." classified as a under intangible personal property generally non-taxable Title, the 70.112(1), County Dane majority apply § does not meaning of the interpreting court case supreme foundational 70.112(1). § property" in "intangible personal phrase Associates, issue, Although real was N/S inextricably discussed the appeals 2d at the court of 164 Wis. court generally. This applying "property" rule as intertwined inextricably inter favorably regarding the cited Associates N/S 231 Wis. 2d at Partnership, in ABKA Limited twined rule are assessed on basis and real personal Both is, valuation, that and the same methods fair market value income, sales, cost, types property. are for both used rule to inextricably intertwined apply Another reason billboard, though in Wisconsin classified billboards is that S. property. real Jill to be like property, appears personal cases, billboards in eminent domain argues Gelineau property. property, personal real not valued as should be *48 appended prop- sis'... 'is whether the value is to the erty, property, and is thus transferable with the independent is, effect, whether it in of the so stays dissipates that the value either with the seller or "36 upon sale.' ¶ 121. It is clear from the law, case from the record in the perspective case, instant and from a commonsense (the value)
that cash value fair market inextricably of billboard is based on income, which is permit. intertwined with the billboard Vivid, In Inc. v. (1998) (an Fiedler, 219 764, 781, Wis. 2d N.W.2d argued eminent domain case in which no one that the adequate cost alone was to evaluate the fair billboard), explained market value of the this court that sign value of the largely is derived from the location sign. Therefore, of the right, "all title and in interest sign and to the and ... relating leasehold thereto" must only include not sign value of the structure and value, leasehold but also the value of the location. permit It is therefore not the but the valuation of the encompassed permit location in the that is included the assessment of a billboard. supports 122. The record in the instant case physical
conclusion that the value of the structure of Gelineau, supra note at 30-31 (observing that the value of a location, billboard is tied to permit, and physical structure and that arguably billboards are real property, personal not prop- domain). erty, in eminent P’ship, ABRA Ltd. 231 Wis. 2d (quoting at 337 N/S Assocs., ('Whether 54); 164 Wis. 2d at see also id. at 336 an may income interest captured be hinges on whether the value appertains to the property. A value appertains to property is one that is transferable with the property."). inextricably loca- with the intertwined billboard permit. governed billboard, which is
tion of the report City's supplemental First, as the 123. up not do make the billboard materials that stated, the (that is, value is tied Rather, the influence its value. inextricably with) location of the bill- intertwined permit. thus, the and, board ex- cross-examination, Adams's Second, on inextricably sign permit agreed
pert is that the witness sign purpose that the and of the with the intertwined permit income is derived: which is vehicle will, inextricably, you if entwined Q permit So the of the purpose intended with the existence you say? sign, wouldn't
A Yes. sign right?
Q buy permits, You can sell A Yes. appraiser, negotiator,
Q you If to be were analyzing the it who is you to call whatever want you you would permit, of that what price sale — physical of the at the dollar value not look would you? paper, would piece value of the no, at the marketable Oh, I look
A would permit. manager general testified Third, Adams's permit of a and the value of a the value billboard
that inextricably intertwined: are sign have a $1,500 permit
Q for a you pay If more you, your company, Madison, get that does $1,500 of value? worth than Absolutely A
Q Okay. Explain why. A having permit gold, Because is like and when we
have one can at point put up we a bulletin and $1,500. make a lot more than Q That's piece the critical of the sign? value of a A Yeah. I wouldn't be in if I any business didn't have
permits. Q Is the component most critical of a billboard the
value of the permit?
A Yes.
Q permit And without a is there value to a billboard? A No.
Q permit With a is there value?
A Yes. In other words, structures and permits are bought sold on the basis what income is expected be generated by the billboard with the permit. 126. Adams's general manager further testified
that the income-producing capacity billboards is tied to the permit, not the physical sign structure, and the permit transferable to a subsequent purchaser. Q Now,in the industry billboard is there a market for
just sign used structures?
A Not much of one.
Q Is there a market for billboard leaseholds? Absolutely. A
Q buy companies buy Do or do and sell bill- people on
boards leaseholds that don't have billboards them?
A Yes.
Q business, course, you meaning Are in the Adams of sign you full that you parts
do have a warehouse sign parts regular on a sell to others basis? No,
A sir. Finally, perspective sup- ¶ 127. a commonsense ports that the value of a billboard is the conclusion permit. inextricably intertwined with billboard permit, nothing a a billboard is more than Without implausible pile of metal and wood. It seems personal property that brings in tens or hundreds of year in income a fair market thousands of dollars has pile value limited to the cost of the of metal and wood. surely get billboards, If to sell its it would Adams were How, then, of the materials. can the more than the cost just the cost of the market value of the billboard be I conclude that it cannot. materials?37 conclude, court, the circuit I further as did that the did not err in its assessment of Adams's City's using approach and that the billboards the income Gelineau, (noting supra problems note at 30-31 See *51 including buyers fact that and approach, with cost to reflect replacement of billboards do not consider cost sellers billboard). of the value sign place market of a observes that "the value Gelineau "the the construction cost" and that may be 10 or 15 times location, physical structure permit, of a billboard lies in its Gelineau, 31. supra note operating —not the business." of the application income approach subtracted properly value unrelated to the billboards themselves. 129. After the twists following and turns of the
¶ I majority opinion, conclude that on remand the City can use the income method it has used and reach the same result it reached previously.
HHHHH—I I now consider Adams's state constitu- tional to the challenge assessment. 131. Adams contends that the City's use of the billboards, assess its but not other
commercial properties, violates the Uniformity Clause of the Wisconsin Constitution. Adams's contention is with- out merit. Const, 132. The Uniformity Clause, Wis. art.
VIII, 1,§ provides "[t]he rule of taxation shall be uniform ... ."38The uniformity clause that all requires Milwaukee, Gottlieb v. 408, 424, 33 Wis. 2d (1967), N.W.2d 633 guiding distills the principles of the Unifor mity Clause as follows: property, 1. For direct uniformity taxation of under the rule there
can be but one constitutional class. 2. All equality within that class must be taxed on a basis of so far practicable property as equally all taxed must bear its burden on an ad valorem basis. property 3. All absolutely not included in that class must be exempt property from taxation. Privilege property taxes are not direct taxes on and are not subject uniformity to the rule. 5. While there can be no classification of for different property taxation, legislature rules or classify rates of can wholly between that is to be taxed and that which is to be exempt, and the test of such classification is reasonableness. *52 property according be taxed to the market value of the property.39 requirement, however, 133. There is no that a approach determining method or
uniform market property. Uniformity for all The value be used Clause require every property does not that each and be valued requires Rather, in that, the same manner. it whatever property, of the the fraction of the valuation value to paid in be taxes must be the same: determining true,
The methods of
current value neces-
sarily
significant sales,
differ
the absence of
but
at,
once the true
arrived
each
when
value is
dollar's
property
exactly
worth of one sort of
is liable for
any
tax
same
as
dollar's worth
other sort
property,
property
and to
real
at a different
assess
fraction of the
than personalty
is error.40
explained
¶ 134. This court has
that "there can be
variations in the mechanics of
assessment or
imposition
long
resulting
tax
so
as the
taxation shall be
nearly
equality
practicable
as
on an ad
borne with as
property."41
valorem
with other taxable
basis
allegation
¶ 135. There is no
as-
Using
properties
sessed different
at different rates.
properties
alone for certain
and not
Uniformity
for others does not violate the
Clause. This
6. There can be variations in the mechanics
long
resulting
imposition
or tax
so
as the
taxation shall be borne
nearly
practicable equality
with
on an ad valorem basis with
as
property.
other taxable
added.)
(Emphasis
Evansville, Mfg.
State ex rel. Baker
Co. v.
Wis.
(1952).
41Gottlieb,
case is about more than the uniformity which determine fair market value. The implicated. is not clause *53 forth, 136. For the reasons set I would affirm judgment upholding City's of the circuit court
assessment of Adams's I billboards. therefore dissent.
¶ 137. I am authorized to state that Justice ANN joins opinion. WALSH BRADLEY this