The Wisconsin Supreme Court recently rejected an argument that the City of Milwaukee did not properly follow Wisconsin’s property tax assessment law when it used a mass appraisal method to value an income-producing property.

Metropolitan Associates challenged tax assessments on seven Milwaukee properties from 2008 to 2013. The parties agreed to present evidence on one property, an apartment complex, with a resolution governing assessments on the six others.

The city assessor used a “mass appraisal” method to assess the property. Metropolitan Associates (Metropolitan) argued that a mass appraisal method did not collect the best information available, which is required under state property tax assessment law, Wis. Stat. section 70.32. A circuit court upheld the assessments. An appeals court affirmed.

In Metropolitan Associates v. City of Milwaukee, 2018 4 (Jan. 10, 2018), a supreme court majority (5-2) affirmed, concluding the city “permissibly utilized mass appraisal for its initial assessment and appropriately defended its initial assessment with single property appraisals demonstrating that the assessment was not excessive.”

Justices Danial Kelly and Rebecca Bradley wrote a co-authored dissent. They said the law requires assessments to closely match the amount a buyer would pay for a subject property and a mass appraisal method is not reflective of full value through private sale.

Majority View

The five-justice majority noted that Wis. Stat. section 70.32(1) directs assessment procedures under the Wisconsin Property Assessment Manual, and the manual says commercial property can be valued by a single or mass appraisal technique.

The manual defines “mass appraisal” as the “systematic appraisal of groups of properties, as of a given date, using standardized procedures and statistical testing.” A single appraisal technique looks at unique characteristics through a tiered analysis.

The manual says assessors may perform a mass appraisal to produce initial values, but a single-property appraisal is necessary if the taxpayer challenges the mass appraisal.

Metropolitan argued that the city did not rely on the best information available in conducting a mass appraisal and should have relied on a single-property appraisal.

But the majority noted the law requires “the best information that the assessor can practicably obtain,” and the manual specifically allows an initial mass appraisal.

“Requiring a single property appraisal after a taxpayer challenges an assessment does not mean that the value of the property must be set in accordance with the single property appraisal,” wrote Justice Ann Walsh Bradley for the majority.

“The value reflected in the initial mass appraisal can thus constitute the value of the property for tax assessment purposes as long as it is not excessive.”

The law requires the best information the assessor can “practicably” obtain, A.W. Bradley noted, and it would be impractical to always require a single property appraisal.

“Completing annual assessments in a major metropolitan area would simply not be feasible without the use of mass appraisal,” Justice A.W. Bradley wrote.

“Because its use is provided for by the Manual and it allows the City to efficiently assess a large number of properties, mass appraisal comports with Wis. Stat. § 70.32(1).”

The majority also concluded that the city appropriately defended the initial assessment to show it was not excessive, and the circuit court properly concluded “that Metropolitan failed to rebut the presumption of correctness to which city assessments are entitled.”

The circuit court had ruled that the city’s approach to sales comparison valuations was more reliable than the approach taken by Metropolitan’s assessor.

“The circuit court’s observation that the City’s approach was worthy of greater weight than Metropolitan’s was not clearly erroneous,” Justice A.W. Bradley wrote.

Dissent

Justices R. Bradley and Kelly concluded that Wis. Stat. section 70.32details three types of analysis that assessors may use to determine value, and “the assessment in this case was not based on any of the three types of analysis listed in the statute.”

The dissenters said the mass appraisal method “is not authorized by statute” and is “structurally incapable of identifying the fair market value of a specific property.”

“[B]ecause the assessed value under consideration was the product of the mass appraisal technique, it is not entitled to the presumption of correctness,” they wrote.

They would have reversed and remanded with directions “to conduct a statutorily compliant assessment based on the sales comparison approach and properly adjusted for economic characteristics using the best information available.”