Announcement of Wisconsin Supreme Court Decision

March 2, 2023

To: Statutory Assessors, Assessors, Real Property Listers, County Clerks & Treasurers, Municipal Clerks & Treasurers


The Wisconsin Department of Revenue (DOR) would like to inform you of a Wisconsin Supreme Court decision, Lowes' Home Centers, LLC  v. City of Delavan.

The decision affirmed the city of Delavan's assessments of the Lowe's property. The assessments were developed consistent with sec. 70.32, Wis. Stats., and the Wisconsin Property Assessment Manual (WPAM).

Background

  • City completed a 2013 revaluation and valued the subject Lowe's property at $8,922,300
    • The assessor's value was developed using the cost approach with market adjustments for depreciation and obsolescence
    • The city conducted maintenance assessments for 2016 and 2017 – there were no changes to the Lowe's 2013 property value for the 2016 and 2017 assessments
  • Lowe's challenged the 2016 and 2017 assessments as excessive under sec. 74.37, Wis. Stats., making two arguments:
    • Argument 1: Assessor is not entitled to presumption of correctness under sec. 70.49 (2), Wis. Stats., because the assessments deviated from the WPAM
    • Argument 2: Assessments were excessive under sec. 74.37, Wis. Stats., did not follow sec. 70.32, Wis. Stats., and the WPAM by excluding comparable properties with improvements that were not occupied

Decision Summary

  • Supreme Court affirmed lower courts and upheld the city's assessments
  • The assessments were properly afforded a presumption of correctness under sec. 70.49(2), Wis. Stats.
    • The presumption attaches when the assessor files the assessment with the required affidavit
    • If the failure to follow the WPAM results in an excessive assessment under sec. 74.37, Wis. Stats., then the presumption is overcome
  • Assessments were not excessive, valuation was consistent with sec. 70.32, Wis. Stats., and the WPAM
    • Lowe's appraised value was determined using sales of six properties:
      • Sale numbers one, three and six were properties in receivership when sold
      • Sale numbers two, four and five were vacant for multiple years prior to sale (two years, four years and four years respectively)
    • The Supreme Court rejected Lowe's appraisal:
      • The subject Lowe's property was an occupied, operating property
      • The sales were not comparable: vacant beyond the normal time frame for the area, i.e., dark and distressed properties under receivership
    • City's appraisal applied occupied properties at the time of sale with market-rate leases in place
      • Sales had no duress, none were bank-owned or in bankruptcy, and none were exposed to the market
      • Adjustments were reasonable, sufficient, and credible
    • The city approach was consistent with sec. 70.32, Wis. Stats., and the WPAM
      • Sales Comparison Approach, pages 9-23 to 9-24 (2023 WPAM) – this approach is based on the premise that similar properties will sell for similar prices on the open market. Comparable sales refer to properties that are similar to the subject property in age, condition, use, type of construction, location, design, physical features and economic characteristics. The more similar the sold property is to the subject, the more reliable the sale price is as an indicator of the value of the subject property.
      • Sales Comparison Approach, page 13-12 to 13-13 (2023 WPAM) – when valuing properties, the assessor should choose comparable sales exhibiting a similar highest and best use and similar placement in the commercial real estate marketplace. The assessor should avoid using sales of improved properties that are vacant or distressed as comparable sales unless the subject property is similarly vacant or distressed. Vacant or non-operating stores are often referred to as "dark" stores. A recent court case stated distressed properties are not seen as meaningfully comparable to operating properties.
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