In Milwaukee Block 10 Properties v. City of Milwaukee, the Wisconsin Court of Appeals reaffirmed two key principles in its reversal of a circuit court decision which ordered the City of Milwaukee to revise its property tax assessment for the Aloft Hotel. First, Wisconsin affords substantial deference to property tax assessments prepared by municipalities. Property assessments enjoy a presumption of correctness which can rebutted only if the challenging party can present significant contrary evidence or is able to demonstrate that the municipality failed to apply the principles of the Property Assessment Case Manual. Second, when a stream of income is “inextricably intertwined” with the property, it may be included in the property’s tax assessment.
The Court of Appeals decision involves a five-year saga between Block 10 Properties, LLC and Milwaukee River Hotel, LLC (collectively “Block 10”) and the City of Milwaukee. Beginning in 2015, the City assessed Aloft at $18,491,300 which Block 10 believed was over $8,000,000 more than the appropriate amount. The City declined Block 10’s appeal for reassessment and its request for a refund totaling over $250,000. Then, in 2016, the City assessed Aloft at $18,491,300 which Block 10 again appealed to the City.
On review, the City increased the assessment to $20,305,000. The City attributed the over $1,500,000 increase to income generated by a parking ramp that Aloft leases. The parking income was previously not included in the initial assessment. In response, Block 10 brought an excessive assessment claim, under Wis. Stat. § 74.37(3)(d), against the City for the 2015 and 2016 Aloft assessments.
At trial, the Milwaukee County circuit court upheld the 2015 tax assessment, but ordered the City to reevaluate the 2016 assessment. The court found that the parking ramp income is not “inextricably intertwined” with Aloft, because the income would not transfer with a sale of the business. The 2015 assessment did not include the parking income and otherwise did not need to be reduced; however, the 2016 assessment did include the parking income and would need to be reevaluated. After reassessing the property for $19,586,700 and refunding Block 10 the excessive taxes, the City appealed.
Sitting per curiam, the Court of Appeals rejected the trial court’s finding that the parking income was not “inextricably intertwined” with the business because Aloft did not own the parking ramp. Relying on the Wisconsin Supreme Court’s decision in ABKA, the Court of Appeals found that property ownership is not the driving factor for including business income in an assessment. Rather, whether to include the parking income in the assessment is dependent on whether a new, competent owner of the hotel property would be able to derive income from parking in a way similar to Aloft’s current arrangement with the parking ramp. Because Block 10 failed to present significant contrary evidence (e.g. that guests requiring parking services would cease to stay at the Aloft upon a transfer of ownership), the matter was reversed and remanded for entry of judgment in favor of the City.
In conclusion, it is worth noting that underlying in this decision (and others) is the fact that if neither the municipality nor the challenger have credible evidence, the assessment will still stand.
Law Clerk Isaac Brodkey assisted with researching and writing this post.
Wis. Stat. § 70.49(2); Allright Props., Inc. v. City of Milwaukee, 2009 WI App 46, ¶ 12, 317 Wis. 2d 228, 767 N.W.2d 567; accord Walgreen Co. v. City of Madison, 2008 WI 80, ¶ 17, 311 Wis. 158, 752 N.W.2d 687.
 Milwaukee Block 10 Props, 2020 Wisc. App. LEXIS at ¶ 4.
 Id. at ¶ 5
 Milwaukee Block 10 Props., 2020 Wisc. App. at ¶ 7.
 Id. at ¶ 9.
 Id. at ¶ 10.
 Id. at ¶ 17 (citing ABKA Ltd. P’ship v. Board of Review of Fontana-On-Geneva Lake, 231 Wis. 2d 328, 336, 603 N.W.2d 217 (1999).
 Id. at ¶¶18–19.