Wisconsin Supreme Court rules contaminated downtown property properly assessed

The Wisconsin Supreme Court has handed down a split decision finding that an assessor had acted properly when he valued a contaminated piece of property in downtown Milwaukee at $31,800.

The 4-3 majority ruled on Wednesday that the assessor was right to based the valuation on likely rental income from the property’s parking lot, despite the owner’s argument that the contaminated property wasn’t worth anything because he couldn’t sell it.

Contaminated Milwaukee property valued at $31,800

Ronald Collison has owned the property at issue since 1979. It’s two blocks from Fiserv Forum, and it includes a two-story, steel- and wood-framed commercial building and an asphalt parking lot with space for about 15 vehicles. The building had previously housed a dry-cleaning business, which closed in 2005, and is now vacant.

In 2012, the City of Milwaukee issued a permit for the removal of four underground storage tanks on the property. A subsequent soil analysis found contamination from petroleum and perchloroethylene solvents. The city assessed the property and deemed the fair-market value $31,800.

The city assessor, Jim Wiegand, used a so-called income approach to value the property, assessing it based on the parking lot’s rental income. He found the building had no value.

Collison appealed the assessment to the board, arguing that the entire property had no value because no one wanted to buy a contaminated lot. He said remediating it would cost “millions of dollars.”

Wiegand testified that the extent of the needed cleanup and the associated costs were unknown. He said the city was valuing the property based on its income potential. The board upheld the assessment, and Collison took his case to the circuit court. Milwaukee County Judge Glenn H. Yamahiro agreed with the board’s decision. Upon appeal, the appellate court did, too.

Majority: Assessor properly considered contamination

The state Supreme Court then reviewed whether Wiegand had properly assessed the property and, as required by state law, considered the contamination’s effects on its value.

On Wednesday, the majority concluded that the assessor, in using the income approach in order to value the property according to its highest and best use as a parking lot, had done what was needed to properly consider the impairment of the value of the property due to contamination.

“Contrary to Collison’s contention, the fact that the property is contaminated drove the entire assessment in this case,” Justice Ann Walsh Bradley wrote.

Justices Rebecca Dallet, Brian Hagedorn and Jill Karofsky agreed with Bradley’s opinion. They said the record reflects a recognition that the property could have been valued higher if it wasn’t contaminated because of its prime location.

Although the Wisconsin Property Assessment Manual, the state rulebook specifying how to value property, didn’t provide a specific procedure for dealing with this exact situation, the majority of the justices on the Supreme Court said the use of the income approach is consistent with International Association of Assessing Officers standards, which are also used by the WPAM.

“The assessment here is consistent with this principle,” Bradley wrote. “It recognizes that the highest and best use of the property as a parking lot has value to the owner even if the cost to cure environmental problems exceeds the value of the property.”

Dissent: Assessor never mentioned impairment

Chief Justice Annette Ziegler, Justice Pat Roggensack and Justice Rebecca Bradley disagreed with the majority’s conclusion. Roggensack said it appears Wiegand hadn’t considered the contamination’s effects on the property, an omission that would violate state law.

“Wiegand’s appraisal never mentions ‘impairment’ or any other synonym to show that he considered the effect of contamination on the value of the property,” Roggensack wrote.