Wisconsin Property Taxpayers, Inc., Plaintiff-Respondent, v. Town of Buchanan, Defendant-Appellant.
2022AP1233
SUPREME COURT OF WISCONSIN
June 29, 2023
2023 WI 58
L.C. No. 2021CV712;
OPINION FILED: June 29, 2023
SUBMITTED ON BRIEFS:
ORAL ARGUMENT: March 13, 2023
SOURCE OF APPEAL:
COURT: Circuit
COUNTY: Outagamie
JUDGE: Mark J. McGinnis
JUSTICES:
REBECCA GRASSL BRADLEY, J., delivered the majority opinion for a unanimous Court. REBECCA GRASSL BRADLEY, J., filed a concurring opinion in which ROGGENSACK, J. joined.
NOT PARTICIPATING:
ATTORNEYS:
For the defendant-appellant, there were briefs (in the court of appeals) filed by Richard J. Carlson and Town Counsel Law & Litigation, LLC, Kaukauna. There was an oral argument by Richard J. Carlson.
For the plaintiff-respondent, there was a brief (in the court of appeals) filed by Richard M. Esenberg, Luke N. Berg, Lucas T. Vebber and Wisconsin Institute for Law & Liberty, Inc., Milwaukee. There was an oral argument by Lucas T. Vebber.
NOTICE
This opinion is subject to further editing and modification. The final version will appear in the bound volume of the official reports.
STATE OF WISCONSIN : IN SUPREME COURT
Wisconsin Property Taxpayers, Inc., Plaintiff-Respondent, v. Town of Buchanan, Defendant-Appellant.
FILED JUN 29, 2023
Samuel A. Christensen Clerk of Supreme Court
REBECCA GRASSL BRADLEY, J., delivered the majority opinion for a unanimous Court. REBECCA GRASSL BRADLEY, J., filed a concurring opinion in which ROGGENSACK, J. joined.
APPEAL from a judgment and an order of the Circuit Court for Outagamie County, Mark J. McGinnis, Judge. Affirmed.
¶1 REBECCA GRASSL BRADLEY, J. The Town of Buchanan appeals the circuit court‘s grant of summary judgment in favor of Wisconsin Property Taxpayers, Inc. (WPT). The circuit court declared the Town‘s Transportation Utility Fee (TUF) to be a property tax subject to the Town‘s levy limit.1
¶2 WPT contends the TUF is unlawful on three grounds. First, Wisconsin Statutes do not authorize municipalities to impose a TUF on property owners based on estimated use of the municipality‘s roads. Second, the Town did not reduce its property tax levy to account for the TUF and accordingly has exceeded its levy limit.
I. BACKGROUND
¶3 The rising costs of maintaining public roads within the Town have become a long-term concern for the Town‘s board. The board anticipated needing to reconstruct as much as 44% of the Town‘s roads over the next ten years. Consequently, the board decided it needed to raise money beyond its current levy limit. The board submitted a referendum to Town residents, giving them a choice of raising the property tax levy, imposing a special assessment on all property, or imposing a TUF. After voters chose a TUF, the board adopted Town ordinance § 482 in December 2019 to fund future road construction projects through a transportation utility fee. In relevant part, the ordinance states:
A. The Town of Buchanan is hereby establishing a Transportation Utility District. The operation of the Transportation Utility District shall be under the day-to-day management of the Town Administrator and under the supervision of the Town Board. He/she, or a designated representative, shall provide an annual estimate to the Town Chairperson by October 1 of each year.
B. The Town, acting through the Transportation Utility District, may, without limitation due to enumeration, acquire, construct, lease, own, operate, maintain, extend, expand, replace, repair, manage and finance such transportation facilities and related facilities, operations and activities, as are deemed by the Town to be proper and reasonably necessary to provide safe and efficient transportation facilities within the Town. The following activities to be funded by the transportation utility fee are the cost of utility district highways, stormwater management, sidewalks, street lighting, traffic control and the cost of any other convenience or public improvement provided in the District and not paid in full by special assessment.
Town of Buchanan Ordinances § 482-3 (2021). To raise funds for the utility district, the Town implemented the TUF:
A. Every developed property within the Town of Buchanan shall pay a transportation utility fee.
B. The Town Board shall by resolution determine the annual amount to be funded by a transportation utility fee, formulas for the calculation of the fee and specific use category classifications. Changes in formulas and classifications may be made by further resolution of the Town Board. All fees established pursuant to this section shall be fair and reasonable. A schedule of current fees shall be maintained and on file in the office of the Town Clerk.
§ 482-4.
¶4 After enacting the ordinance, the Town administrator set the TUF target funding amount at $875,000 annually. The board then announced a formula and fee based on estimated use of the Town‘s roads by each developed property within the municipality. Under the Town‘s funding scheme, all residential properties must pay the same fee, while commercial properties must pay a variable fee based on the size and type of business and the number
¶5 Before adopting ordinance § 482, the Town paid for road construction on a “pay as you go” basis from its general property tax levy. The Town‘s total property tax levy for 2020 was $2,374,348. In 2021, after enacting the ordinance, the Town‘s property tax levy was $2,490,680, reflecting the maximum increase allowed under
¶6 In September 2021, WPT brought this action against the Town, seeking declaratory and injunctive relief. The parties stipulated to the facts, and both parties moved for summary judgment. WPT alleged the TUF is a property tax subject to municipal levy limits under
¶7 The circuit court granted summary judgment in favor of WPT, declaring the TUF to be a property tax subject to the Town‘s levy limit. It also permanently enjoined the Town from levying, enforcing, or collecting the TUF in any amount above its levy limit. This appeal followed.
II. STANDARD OF REVIEW
¶8 In this case, we “independently review a grant of summary judgment using the same methodology of the circuit court[.]” Kemper Indep. Ins. Co. v. Islami, 2021 WI 53, ¶13, 397 Wis. 2d 394, 959 N.W.2d 912 (quoting Talley v. Mustafa, 2018 WI 47, ¶12, 381 Wis. 2d 393, 911 N.W.2d 55). “Summary judgment is appropriate when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law.” Id. (quoting Talley, 381 Wis. 2d 393, ¶12).
¶9 This case also requires us to interpret and apply several Wisconsin statutes. “The interpretation and application of statutes present questions of law that we review independently, benefitting from the analyses of the circuit court[.]” Eau Claire Cnty. Dep‘t of Human Servs. v. S.E., 2021 WI 56, ¶13, 397 Wis. 2d 462, 960 N.W.2d 391 (citing State v. Stephenson, 2020 WI 92, ¶18, 394 Wis. 2d 703, 951 N.W.2d 819).
III. DISCUSSION
¶10 Despite being labeled a “fee,” the parties do not dispute the TUF is in fact a tax on Town residents. “The purpose, and not the name it is given, determines whether a government charge constitutes a tax.” Bentivenga v. City of Delavan, 2014 WI App 118, ¶6, 358 Wis. 2d 610, 856 N.W.2d 546 (citing City of Milwaukee v. Milwaukee & Suburban Transp. Corp., 6 Wis. 2d 299, 305–06, 94 N.W.2d 584 (1959)). A “fee” imposed for the purpose of generating revenue for the municipality is a tax, and without legislative permission it is unlawful. Id., ¶11 (citing Milwaukee & Suburban Transp. Corp., 6 Wis. 2d at 306). The parties are correct; the TUF is a tax because the Town imposed it on a class of residents for the purpose of generating revenue. The parties do, however, dispute its lawfulness. Specifically, the parties disagree on (1) whether
A. Authorization of Taxation
¶11 As Chief Justice John Marshall famously wrote, “the power to tax involves the power to destroy[.]” McCulloch v. Maryland, 17 U.S. 316, 431 (1819). Cognizant of the consequential power the State wields when it imposes taxes on the people, “Wisconsin recognizes the general rule of construction that a tax cannot be imposed without clear and express language for that purpose, and where ambiguity and doubt exist, it must be resolved in favor of the person upon whom it is sought to impose the tax.” City of Plymouth v. Elsner, 28 Wis. 2d 102, 106, 135 N.W.2d 799 (1965) (citing Wadhams Oil Co. v. State, 210 Wis. 448, 459, 245 N.W. 646 (1933)). Like cities, towns “have no inherent power to tax. [Towns] may only enact the types of taxes authorized by the legislature.” Blue Top Motel, Inc. v. City of Stevens Point, 107 Wis. 2d 392, 395, 320 N.W.2d 172 (1982) (citing Jordan v. Menomonee Falls, 28 Wis. 2d 608, 621, 137 N.W.2d 442 (1965)).
¶12 We first examine whether
¶13
(1) Towns . . . may establish utility districts.
(b) In towns, the town board may direct that the cost of any convenience or public improvement provided in the district and not paid for by special assessment be paid from the district fund under sub. (2).
(2) The fund of each utility district shall be provided by taxation of the property in the district, upon an annual estimate by the . . . town chairperson[.]
(Emphasis added). In enacting the TUF, the Town implemented a taxation scheme based on property owners’ estimated usage of roads within the municipality. Town ordinance § 482-4(B) states the Town board “shall by resolution determine . . .
¶14
¶15 The Town contends “taxation of the property” under
¶16 First, “the legislature knows how to write a statute accomplishing the work [the Town] would have
¶17 Second, the Town effectively asks this court to conclude the legislature “hid[] [an] elephant in [a] mousehole[.]” Id., ¶63 (majority op.) (quoting Whitman v. American Trucking Ass‘n, 531 U.S. 457, 468 (2001)) (modifications in the original). The negligible difference in language——“taxation of the property” as opposed to “property tax“——cannot bear the weight of the work the Town would assign it. More plausibly, “taxation of the property in the district” carries no meaningful difference from “property taxes” beyond differentiating between property taxes imposed within a discrete taxation district and the “general property tax” imposed on all non-exempt property owners in the municipality as a whole. Because the public improvement funded by a utility district may benefit only select properties within the municipality, the legislature limited apportionment of such property taxes to the
¶18 Because a TUF is a property tax, its funding through the establishment of a utility district must follow the procedures outlined in Chapter 70 of the Wisconsin Statutes. “The assessment of general property for taxation in all the towns, cities and villages of this state shall be made according to this chapter unless otherwise specifically provided.”
¶19 Chapter 70 also exempts certain properties from property taxation altogether.
¶20 The Town reads
¶21 Nothing in
B. Levy Limits
¶22 The law limits the amount by which municipalities may increase property taxes. “[
(2) Levy Limit.
(a) Except as provided . . . no political subdivision may increase its levy in any year by a percentage that exceeds the political subdivision‘s valuation factor. . . . [T]he base amount in any year, to which the limit under this section applies, shall be the actual levy for the immediately preceding year.
(4) Referendum exception.
(a) A political subdivision may exceed the levy increase limit under sub. (2) if its governing body adopts a resolution to that effect and if the resolution is approved in a referendum. . . . The resolution shall specify the proposed amount of increase in the levy, the purpose for which the increase will be used, and whether the proposed amount of increase is for the next fiscal year only or if it will apply on an ongoing basis.
¶23 The statute expressly limits year-over-year increases in municipal property tax levies to the amount of the valuation factor, the “percentage change in the political subdivision‘s . . . value due to new construction[,]” effectively freezing property taxes on existing property within the municipality.
¶24 An exception for spending on public improvements or utility districts is not listed in
¶25 The Town did put a referendum before its residents, but the voters rejected an increase in the levy limit under
¶26 The Town argues the taxation funding the utility district supports a separate “governmental unit” to which it has transferred responsibility to provide a public improvement; therefore, the taxation of the district should not be considered part of the Town‘s property tax levy. The Town points to
¶27 This strained interpretation of the levy limit statute disregards the fact that levy limits apply to “political subdivisions,” which means a “city, village, town, or county.”
¶28 The Town also argues that if funds raised for a utility district count against the municipality‘s levy limit, the utility district statute fails to serve any purpose. Under the Town‘s interpretation, a municipality would undertake the administrative effort to establish a utility district apart from the municipality only if district taxation is similarly separate from municipal taxation. Otherwise, the Town argues, any public improvement the utility district could fund may also be funded by the municipality‘s general property tax levy directly.
¶29 The Town‘s argument fails to consider a utility district comprising only a portion of a municipality. In this case, the Town established the utility district to cover the entire municipality, but a utility district could encompass some subset of the municipality, with an increased property tax imposed only on property within the district. The statutory text supports this interpretation by referencing “taxation of the property in the district.”
¶30 Taxation through utility districts parallels the statewide taxation schemes for stadium districts.
¶31 Contrary to the Town‘s argument, applying the levy limits to utility districts does not render the utility district statute surplusage. The procedures established under
IV. CONCLUSION
¶32 Wisconsin law prescribes certain procedures a municipality must follow for funding public improvements. In this case, the Town did not follow them. The imposition of property taxes over and above the Town‘s levy limits requires the consent of the voters within the municipality. Nothing in the statutes permits the Town to bypass levy limits for the purpose of imposing a TUF on property owners in the municipality.
By the Court.——The judgment and order of the Circuit Court are affirmed.
¶33 REBECCA GRASSL BRADLEY, J. (concurring). The court resolves this dispute solely on statutory grounds but Wisconsin Property Taxpayers, Inc. (WPT) also argues the Transportation Utility Fee (TUF) violates the Uniformity Clause of the Wisconsin Constitution, which guarantees “[t]he rule of taxation shall be uniform[.]”
¶34 On the one hand, the public benefits from a definitive interpretation of a constitutional provision, provided the analysis is rooted in the original meaning of the text, as informed by history. See New York State Rifle & Pistol Ass‘n, Inc. v. Bruen, 597 U.S. 1, 142 S. Ct. 2111, 2127 (2022). Indeed, to a significant degree, the people of Wisconsin adopted a two-tiered system of appellate review to enable this court to focus on addressing important questions of law. Citizens Study Comm. on Jud. Org., Report to Governor Patrick J. Lucey 78 (1973). Undoubtedly, this court has been “designated by the constitution . . . as a law declaring court.” See Cook v. Cook, 208 Wis. 2d 166, 189, 560 N.W.2d 246 (1997) (quoting State ex rel. La Crosse Trib. v. Cir. Ct. for La Crosse Cnty., 115 Wis. 2d 220, 229–30, 340 N.W.2d 460 (1983)). A rigid constitutional avoidance doctrine would effectively override the people‘s sovereign will and leave their liberties subject to arbitrary and capricious government action.
¶35 On the other hand, an incorrect interpretation of constitutional text is not easily undone. See Brown v. Allen, 344 U.S. 443, 540 (1953) (Jackson, J., concurring in the result) (“We are not final because we are infallible, but we are infallible only because we are final.“). For this reason, a narrow decision is often preferred.
¶36 On balance, the court should have exercised its discretion in this case to address WPT‘s uniformity claim. The public‘s interest in a definitive answer to this constitutional question, coupled with the interest of municipal governments in understanding the parameters governing the creation of utility districts, outweigh the justifications for constitutional avoidance. Whether TUFs survive constitutional scrutiny is of great public importance, and it is likely to arise again as municipalities throughout the state consider implementing them. Addressing the merits in this case to resolve uncertainty going forward would have been the best course. See Gabler, 376 Wis. 2d 147, ¶¶52–53 (choosing to address a constitutional question because the question was of “great public importance“); James v. Heinrich, 2021 WI 58, n.18, 397 Wis. 2d 350, 960 N.W.2d 350 (lead op.) (same). Under well-established precedent, the TUF violates the Uniformity Clause.
¶37 At its root, the clause serves “to protect the citizen against unequal, and consequently unjust taxation.” Gottlieb v. City of Milwaukee, 33 Wis. 2d 408, 426, 147 N.W.2d 633 (1967) (quoting Weeks v. City of Milwaukee, 10 Wis. 186, 201 (1860)). The seminal case on the Uniformity Clause, Gottlieb, identified several principles of uniformity:
1. For direct taxation of property, under the uniformity rule there can be but one constitutional class. 2. All within that class must be taxed on a basis of equality so far as practicable and all property taxed must bear its burden equally on an ad valorem basis. 3. All property not included in that class must be absolutely exempt from property taxation. 4. Privilege taxes are not direct taxes on property and are not subject to the uniformity rule. 5. While there can be no classification of property for different rules or rates of property taxation, the legislature can classify as between property that is to be taxed and that which is to be wholly exempt, and the test of such classification is reasonableness. 6. There can be variations in the mechanics of property assessment or tax imposition so long as the resulting taxation shall be borne with as nearly as practicable equality on an ad valorem basis with other taxable property.
Id. at 423–24.
¶38 As indicated in Gottlieb, the Uniformity Clause applies to property taxes——recurring direct taxes on real estate——as opposed to transactional taxes such as those imposed on income or sales. Columbia County v. Wis. Ret. Fund, 17 Wis. 2d 310, 325, 116 N.W.2d 142 (1962); Telemark Dev., Inc. v. Dep‘t of Revenue, 218 Wis. 2d 809, 825–26, 581 N.W.2d 585 (Ct. App. 1998) (citing State ex rel. Atwood v. Johnson, 170 Wis. 218, 242, 175 N.W. 589 (1919)). “[W]hen property is the object of taxation, it should all alike, in proportion to its value, contribute towards paying the expense of such benefits and protection. These are plain and obvious propositions of equity and justice, sustained as we believe by the very letter and spirit of the constitution.” Gottlieb, 33 Wis. 2d at 419
¶39 A core principle of uniformity requires all properties subject to taxation to be taxed the same, in proportion to their value. “Where a property tax is levied, there can be no classification which interferes with substantial uniformity of rate based on value.” Elsner, 28 Wis. 2d at 107. “For the direct method of taxing property, taxation on property so called, as to the rule of uniformity, there can be but one constitutional class. All not included therein must be absolutely exempt from such taxation. All within such class must be taxed based on a basis of equality so far as practicable.” Id. at 108 (quoting Chi. & N.W. Ry. v. State, 128 Wis. 553, 603–04, 108 N.W. 557 (1906)); see also Gottlieb, 33 Wis. 2d at 418–19; U.S. Oil Co. v. City of Milwaukee, 2011 WI App 4, ¶23, 331 Wis. 2d 407, 794 N.W.2d 904 (citing State ex rel. Hensel v. Town of Wilson, 55 Wis. 2d 101, 106, 197 N.W.2d 794 (1972)) (“[T]he method or mode of taxing real property must be applied uniformly to all classes of property within the tax district.“).
¶40 The rule of uniformity has been held inapplicable to special assessments, which are based on a determination of specific tangible benefits conveyed to the property subject to the assessment. Elsner, 28 Wis. 2d at 108. The assessment must be “fair, equitable, and in proportion to the benefits accruing to the property.” CED Props., LLC v. City of Oshkosh, 2018 WI 24, ¶21, 380 Wis. 2d 399, 909 N.W.2d 136. The benefit attached to special assessments may be narrow or broad in scope and, in some circumstances, may be applied to all property in the municipality. Duncan Dev. Corp v. Crestview Sanitary Dist., 22 Wis. 2d 258, 264–65, 125 N.W.2d 617 (1964) (concluding a sanitary district that benefits the entire town may be financed by special assessment because the degree of benefit varies between different properties).
¶41 Applying these longstanding rules to the ordinance before us, the TUF does not survive constitutional scrutiny. As previously discussed, municipalities fund utility districts through taxation of property. As a property tax, this taxation is subject to the rule of uniformity, and the funding must be raised through ad valorem taxes on property in the district. Within the district, there can be but one class of taxable property, and all property within the class must be taxed at the same rate.
¶42 As implemented, the TUF fails on several fronts. First, by applying a fixed fee to all residential property in the district, despite their varying fair market values, the TUF imposes an impermissible variable rate of taxation on different homes. Second, by applying a different methodology to commercial properties based on estimated road use rather than the value of those properties, the TUF creates multiple classes of property.
¶43 The Town argues the TUF should be exempt from the rule of uniformity because the calculation of tax takes into account the benefit each property receives from access to the Town‘s roads. In the Town‘s view, the TUF is sufficiently similar to a special assessment, allowing taxation of properties corresponding to the degree of benefit conveyed by the road construction. This reasoning cannot be reconciled with the law.
¶44 As a preliminary matter, the utility district statute draws a distinction between
¶45 Even if the TUF were comparable to a special assessment, it does not satisfy the legal characteristics of one. “Public improvements usually fall into one of two categories: general or local. A general improvement is one that confers a general benefit, that is, a ‘substantially equal benefit and advantage’ to the property of the whole community[.]” Genrich v. City of Rice Lake, 2003 WI App 255, ¶8, 268 Wis. 2d 233, 673 N.W.2d 361 (citing Duncan, 22 Wis. 2d at 264). “In contrast, a local improvement, although incidentally beneficial to the public at large, is primarily made for the accommodation and convenience of inhabitants in a particular locality and confers ‘special benefits’ to their properties.” Id.
¶46 A special benefit must have “the effect of furnishing an uncommon advantage to a property differing in kind, rather than in degree, from the benefits enjoyed by the general public.” CED Props., 380 Wis. 2d 399, ¶37. To claim specific benefits are conveyed to a property by a public improvement, the details and scope of the public improvement must be known, and the specific benefits conveyed to particular properties identified. In the absence of these details, it is not possible to determine whether the tax is “fair, equitable, and in proportion” to the benefits conveyed to a given property as uniformity requires. The Town established the TUF to raise general funds for improving roads throughout the municipality on an ongoing basis. While individual properties will benefit from improvements to the streets on which they are located, the cost of any improvement is not isolated to the properties located on a particular street. As a result, the tax is not proportional to the benefits received, which are enjoyed by the general public.
¶47 Additionally, properties do not benefit equally from each investment under the Town‘s road construction plan. In Duncan, a new water tower was constructed that increased water pressure and capacity across the entire district simultaneously. Duncan, 22 Wis. 2d at 264. In contrast, Town roads will be reconstructed piece by piece over many years. Each piece of road will substantially benefit certain properties but bring little to no benefit to others in the district. The road improvements the Town would fund with the TUF do not share the same characteristics as improvements funded through a special assessment.
¶48 Finally, a special assessment is calculated based on the benefit conveyed to the property by the public improvement itself. For example, when a sidewalk is added to a specific street, the special assessment to fund it reflects the resulting benefit to properties on that street. In the case of the TUF, the tax is based not on the individualized benefits of the particular improvement, but on estimated use of the municipality‘s roads. The TUF does not depend upon whether the roads a property actually uses are improved or not. A special assessment may not be imposed for access to existing public infrastructure.
¶49 Unlike a special assessment imposed one time to fund a particular improvement, The Town would impose the TUF on a recurring basis to maintain the Town‘s
¶50 I am authorized to state that Justice PATIENCE DRAKE ROGGENSACK joins this concurrence.