Wisconsin Supreme Court Favors Dodgeville on Retroactivity Question in Property Tax Litigation

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This week, the Wisconsin Supreme Court ruled in favor of the City of Dodgeville, represented by Stafford Rosenbaum, in a major procedural dispute related to property tax litigation between the City and Lands’ End. Lands’ End, Inc. v. City of Dodgeville, 2016 WI 64. The Court’s decision affirms the plain text of the statute governing offers of judgment and dispenses with several objections that Lands’ End raised to applying the statute as amended by the legislature. This decision saves the City of Dodgeville hundreds of thousands of dollars in accrued interest.

Lands’ End maintains its headquarters spread across six parcels of land in Dodgeville. In litigation challenging the calculation of its 2005 and 2006 property tax bills, Lands’ End convinced the circuit court that the tax bills relied upon an overly high assessment of the value of Lands’ End’s headquarters properties. Based on the new valuation adopted by the circuit court, Lands’ End received a refund for overpayment of taxes for those years. Lands’ End then challenged its 2008 tax bill, alleging that, in calculating that bill, the City relied upon the same assessment the circuit court had deemed inaccurate.

In the new suit over the 2008 taxes, Lands’ End made an offer of judgment for $724,000. The City rejected that offer. Lands’ End then filed a motion for summary judgment, which the circuit court denied. The court of appeals held that summary judgment should have been granted, and it remanded the case with instructions to enter judgment in favor of Land’ End for $724,292.68 plus applicable interest and costs.

On remand, the parties disputed the applicable interest rate. Lands’ End claimed it was entitled to 12 percent interest, as provided in the offer-of-judgment statute at the time that it made the $724,000 offer to the City. The City countered that Lands’ End was entitled to 4.25 percent interest, as calculated under the amended version of the offer-of-judgment statute that was in effect when the circuit court entered judgment. The circuit court agreed with the City. Lands’ End appealed, and the Wisconsin Supreme Court granted the City’s petition to bypass the court of appeals.

The case depended on which version of the offer-of-judgment statute controlled—the version in effect when Lands’ End made its offer in 2009, or the amended version in effect when the circuit court entered judgment in 2014. Under Wis. Stat. § 807.01(4), a party who makes a written offer of settlement that is not accepted and then obtains a judgment in an amount equal to or greater than the offer is entitled to interest from the date of the initial offer. From 1980 until 2011, the statute provided that interest was to be calculated at an annual rate of 12 percent. In 2011 Wisconsin Act 69, the legislature amended the interest provision, setting the applicable interest rate at “1 percent plus the prime rate in effect” on a specified date, depending on when judgment is entered in a given year. Thus, when Lands’ End made its offer of $724,000, the applicable interest rate was 12 percent. In the fall of 2014, when the circuit court entered judgment, the applicable interest rate calculated under the new statutory formula was 4.25 percent. The difference in accrued interest from July 1, 2009 amounts to hundreds of thousands of dollars.

The plain text of Wis. Stat. § 807.01(4), both before and after the 2011 amendment to the interest rate, contained “the same three basic requirements in order for a party who makes an offer of settlement to be entitled to interest on a judgment recovered: (1) an (unaccepted) offer of settlement; (2) recovery of a judgment; and (3) a judgment for greater than or equal to the amount of the offer.” 2016 WI 64, ¶28. From this observation, the Court reasoned that there cannot be an imposition of interest “unless an actual judgment is entered in a case.” Id. (internal quotation marks omitted). Because the actual judgment is the final prerequisite to accruing interest under Wis. Stat. § 807.01(4), the statute applies as of (and as in effect on) the date of judgment. See id., ¶38.

Lands’ End’s primary argument was that, because Lands’ End made its offer of judgment when Wis. Stat. § 807.01(4) still provided for 12 percent interest, using the lower interest rate amounted to improper retroactive application of the amended statute. The Court considered several factors in determining that there was no retroactive application in this case. Among those factors was that any entitlement to interest was contingent on the entry of judgment, such that the enactment of a statute altering the legal effect of the judgment did not alter any rights that had already vested in Lands’ End. See id., ¶50. Moreover, the purpose of the interest provision—to place parties in roughly the same position they would have been had the amount of the judgment been paid immediately”—favored the application of the amended statute rather than the prior version. Id., ¶59. Nor was the Court moved by the argument that, had the circuit court granted summary judgment to Lands’ End when it first asked, the applicable interest rate would have been 12 percent.

Lands’ End also argued that it had a vested right to the higher interest rate, that application of the lower interest rate violated its constitutional rights to due process and equal protection of the laws, and that Wis. Stat. § 990.04 forbade the application of the lower interest rate. The Court dismissed each of these arguments in turn. The Court’s reasoning in each instance revisited one or more aspects of the Court’s response to the retroactivity argument. See id., ¶¶67-111. Ultimately, the Court affirmed the circuit court’s application of the lower interest rate calculated under the amended version of Wis. Stat. § 807.01(4) and overruled a court of appeals decision reaching the opposite conclusion on the same question. See id., ¶¶114-15 (expressly overruling Johnson v. Cintas Corp. No. 2, 2015 WI App 14, 360 Wis. 2d 350, 860 N.W.2d 515).

Justice Ziegler wrote a separate concurrence—itself longer than the Court’s decision—“to reemphasize the relevant framework when the court analyzes a claim that legislation is retroactive and cannot be applied in a particular case.” Id., ¶117 (Ziegler, J., concurring). Justice Prosser and Chief Justice Roggensack dissented, arguing that applying the lower interest rate under the amended version of Wis. Stat. § 807.01(4) to Lands’ End’s offer of settlement made when the statute provided for 12 percent interest undermines the purposes of using interest accruals both to encourage settlement and to punish parties who do not accept reasonable offers of judgment. See id., ¶¶203-05, 219-24 (Prosser, J., dissenting). 

Proposed Wisconsin Budget Provision Potentially Impacts Municipalities

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As part of his 2015-17 biennial budget proposal Governor Scott Walker has recommended consolidating municipal (town, village and city) property tax assessment into a county wide assessment where, with limited exceptions for 1st and 2nd class cities, counties would administer the system.  The proposal would consolidate the state’s 1,851 taxing districts into a single assessment office in each of the state’s 72 counties.  In addition, the equalized value system of assessments would be eliminated in favor of annual full market value assessments.  Counties could charge municipalities up to 95% of the cost of performing assessments in 2015.  

To read the full post by Stafford's Government Relations Advisor, please click here.

Property Assessment Consolidation Proposal Raises Questions From Local Governments

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As part of his 2015-17 biennial budget proposal Governor Scott Walker has recommended consolidating municipal (town, village and city) property tax assessment into a county wide assessment where, with limited exceptions for 1st and 2nd class cities, counties would administer the system.  The proposal would consolidate the state’s 1,851 taxing districts into a single assessment office in each of the state’s 72 counties.  In addition, the equalized value system of assessments would be eliminated in favor of annual full market value assessments.  Counties could charge municipalities up to 95% of the cost of performing assessments in 2015. 

Although this proposal may represent a dramatic shift away from the current property tax assessment system, it is not a new concept, nor is it a partisan one.  In 2009, under former democratic Governor Jim Doyle, state revenue Secretary Roger Ervin floated a similar plan.  Ervin cited inequity between state and local equalized values; lack of uniformity across jurisdictions; and inefficient administration as rationale for making the shift.  Local government groups, especially the Wisconsin Towns Association, objected and cited as a primary concern their inability to control the costs of providing the service if it was moved to the county.  Ultimately, the proposal was not adopted.

Just as in 2009, local government groups are once again raising questions about the proposal.  Following is a brief summary of some of the concerns raised by each of the three major local government groups, including the Wisconsin Counties Association, the League of Municipalities and the Wisconsin Towns Association as well as individual counties and municipalities.

Wisconsin Counties Association:

  • The proposal represents a new mandate.
  • The 2017 implementation date is not feasible. 
  • The funding mechanism is inadequate. 
  • Click here for the WCA release. 

League of Municipalities:

  • The 2017 implementation date is too ambitious. 
  • The cost of the county assessment should not be part of the municipal levy.
  • The cost of assessing all parcels at full market value is more expensive than the current system. 
  • Payments to counties from municipalities for the costs of assessments will be inequitable. 
  • The opt out provision should be more flexible. 
  • The provision could interfere with the long-term contracts between some municipalities and private assessors. 
  • Click here for the LWM release.

Wisconsin Towns Association:

  • The proposal erodes local control. 
  • Full market value assessments are more expensive than equalized value assessments for taxpayers and municipalities. 
  • The proposal reduces competition in the marketplace. 
  • Click here for the WTA release. 

According to Rick Chandler, the state’s current revenue secretary, the proposal would generate cost savings at the state and local level and result in improved quality of property assessments.  Now, it is up to the Legislature to decide whether the alleged benefits outweigh the concerns raised by local governments.