ABKA Limited Partnership v. Board of Review of Village of Fontana-On-Geneva-Lake, No. 98-0851 (Wis. 12/23/1999)

• Decision Date: 23 December 1999
• Docket Number: No. 98-0851.,98-0851.
• Parties: ABKA Limited Partnership, Plaintiff-Appellant-Petitioner, v. Board of Review of the Village of Fontana-On-Geneva-Lake, Defendant-Respondent.
• Court: Wisconsin Supreme Court

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ABKA Limited Partnership, Plaintiff-Appellant-Petitioner, v. Board of Review of the Village of Fontana-On-Geneva-Lake, Defendant-Respondent.

No. 98-0851.

Supreme Court of Wisconsin.

Opinion Filed: December 23, 1999.

REVIEW of a decision of the Court of Appeals. Affirmed.

For the plaintiff-appellant-petitioner there were briefs by Alan Marcuvitz, Andrea Roschke and Weiss, Berzowski, Brady & Donahue, LLP, Milwaukee and oral argument by Alan Marcuvitz and Andrea H. Roschke.

For the defendant-respondent there was a brief by Robert Horowitz and Stafford, Rosenbaum, Rieser & Hansen, Madison and oral argument by Robert Horowitz.

ANN WALSH BRADLEY, J.

¶ 1 Plaintiff ABKA Limited Partnership (ABKA) seeks review of a published decision of the court of appeals that affirmed a circuit court order to uphold the 1996 and 1997 property tax assessments of the Abbey on Geneva Lake Resort.¹ ABKA contends that the assessments of the Board of Review of the Village of Fontana-on-Geneva-Lake (Board) improperly included income from the management of separately owned off-site condominiums and incorporated erroneous data and methodology. We determine that the management income is "inextricably intertwined" with the resort property and that the assessor employed proper data and methodology. Because we conclude that assessments of the Board were made according to law and were supported by a reasonable view of the evidence, we affirm the court of appeals.

¶ 2 ABKA owns and manages the Abbey on Geneva Lake Resort (Abbey). In 1996, the Abbey was assessed at $8.5 million.² In his valuation of the resort property, Assessor Fred Mathes included ABKA's income from the management of rental condominiums located adjacent to the resort. ABKA disputed neither the assessor's use of the income method to calculate the property assessment nor the capitalization rate he applied.³ Instead, ABKA challenged the inclusion of the management fees in the assessment of the resort property.

¶ 3 ABKA does not own the condominiums located near the property. They are separately owned and assessed. Pursuant to annual rental agreements between ABKA and the condominium owners, however, ABKA receives 50% of the gross revenues from the rental of each unit. The owners retain the remaining 50%.

¶ 4 In return for its percentage of rental revenues, ABKA provides a myriad of services for the renters. Renters make reservations through the Abbey, where they also check-in and check-out. Rental prices for the condominiums are advertised in the Abbey's brochures and are listed along with the rates for rooms in the Abbey. According to the terms of the rental agreements, ABKA retains sole discretion to set rental rates for the condominiums. In addition, the condominium renters have access to the full amenities of the resort, subject to the same additional charges as resort guests. The resort also provides advertising, individualized accounting, cleaning supplies and toiletries, and maid and switchboard services.

¶ 5 ABKA has managed the condominiums since 1978, and the management income from the rental of these condominiums accounts for over $300,000 of the resort's yearly revenue. Although not all of the condominium units participate in the rental pool, those units that do participate have provided a long-term, consistent pattern of rentals and a stabilized flow of income to the Abbey.

¶ 6 ABKA challenged the 1996 assessment before the Board on December 11, 1996. While testifying before the Board, both Assessor Fred Mathes and Frank Karth, ABKA's expert appraiser, addressed the propriety of including the management income in the assessment of the resort property. Mathes testified in support of the inclusion, while Karth testified that the fees represented intangible personal property that Mathes erroneously used to assess the resort property. ABKA also challenged the methodology that Mathes used in making the assessment, as well as his reliance on estimates rather than actual historical data. Finally, ABKA challenged the assessor's "rounding" of the assessed value from $8,328,025 to $8.5 million.

¶ 7 At the conclusion of the hearing, the Board decided to uphold the 1996 assessment. ABKA subsequently filed for certiorari review of the Board's determination. By that time, the 1997 assessment was also complete, and once again, the property was assessed at $8.5 million. The parties stipulated that the Board may make a determination as to the 1997 assessment based on the 1996 hearing record. Shortly thereafter, the Board upheld the 1997 assessment. In addition, the parties agreed to consolidate the certiorari actions for the 1996 and 1997 assessments.

¶ 8 Upon certiorari review, the circuit court affirmed the Board's decision finding both that the Board acted according to law and that its decision was based on a reasonable view of the evidence. The court of appeals subsequently affirmed the circuit court decision in part and reversed in part. The court held that the management income was "inextricably intertwined" with the resort property and thus was properly included in the assessment. Furthermore, the court determined that the assessor's methodology was proper, as was his reliance on estimates rather than actual historical data. However, the court disapproved of the assessor's decision to "round up" the final assessment and thus reversed and remanded with instructions to reduce the actual assessed value.⁴

I.

¶ 9 ABKA asks this court to review the Board's decision to uphold the assessment of its resort property. In a certiorari action under Wis. Stat. § 70.47(13) (1995-96),⁵ our review of the Board's decision is "strictly limited." State ex rel. Geipel v. City of Milwaukee, 68 Wis. 2d 726, 731, 229 N.W.2d 585 (1975). This court considers the following factors: (1) whether the Board acted within its jurisdiction; (2) whether the Board acted according to law; (3) whether the Board's action was arbitrary, oppressive, or unreasonable, representing its will rather than its judgment; and (4) whether the evidence was such that the Board might reasonably make the order of determination in question. Darcel, Inc. v. Manitowoc Bd. of Review, 137 Wis. 2d 623, 626, 405 N.W.2d 344 (1987). In this case, the parties dispute whether the Board acted according to law and whether its determination was supported by a reasonable view of the evidence.

¶ 10 This court reviews the record of the Board independently of the determinations rendered by the circuit court and court of appeals, while benefiting from their analyses. Steenberg v. Town of Oakfield, 167 Wis. 2d 566, 571, 482 N.W.2d 326 (1992). If the assessment is made in accordance with the statutory mandate, it must be upheld if it can be supported by any reasonable view of the evidence. Waste Management of Wis., Inc. v. Kenosha County Bd. of Review, 184 Wis. 2d 541, 555, 516 N.W.2d 695 (1994). In determining whether there is enough evidence to sustain the assessment, "[t]he presumptions are all in favor of the rightful action of the Board." Darcel, 137 Wis. 2d at 626 (quoting State ex rel. Boostrom v. Board of Review of the Town of Linn, 42 Wis. 2d 149, 155, 166 N.W.2d 184 (1969)).

II.

¶ 11 We begin our analysis by examining the statutory basis for the assessment. Wisconsin Stat. § 70.03 defines "real property," "real estate," and "land" for the purposes of tax assessment as "not only the land itself but all buildings and improvements thereon, and all fixtures and rights and privileges appertaining thereto . . . ." Whether an income interest may be captured in a property assessment hinges on whether the value appertains to the property. A value that appertains to property is one that is transferable with the property. State ex rel. N/S Assocs. v. Board of Review of the Village of Greendale, 164 Wis. 2d 31, 54, 473 N.W.2d 554 (Ct. App. 1991).

¶ 12 At the heart of ABKA's argument lies its claim that, as business value, the management income from the rental of off-site condominiums was improperly assessed under the laws of this state. However, Wisconsin law recognizes that certain business value may be captured in a property assessment. Waste Management, 184 Wis. 2d at 564-65.

¶ 13 A determination of whether business value is assessable involves an inquiry into the income-producing capacity of the land. Income that is attributable to the land, rather than personal to the owner, is inextricably intertwined with the land and is thus transferable to future purchasers of the land. N/S Assocs., 164 Wis. 2d at 54. This income may then be included in the land's assessment under Wis. Stat. § 70.03 because it appertains to the land.

¶ 14 In N/S Associates, the owner of a shopping mall challenged the assessment of the property, arguing that the assessor had improperly included business value in the fair market value of the mall. 164 Wis. 2d at 52. In addressing the mall owner's argument, the court of appeals formulated a test for determining whether business value is to be included in a property assessment, and we adhere to that test today.

¶ 15 The N/S Associates court stated that the "key to the analysis" of whether business value is assessable "is whether the value is appended to the property, and is thus transferrable with the property, or whether it is, in effect, independent of the property so that the value either stays with the seller or dissipates upon sale." Id. at 54. Applying the test, the court found that the mall's sole reason for existence, the leasing of space to tenants, represented value that was "inextricably intertwined" with the mall and would survive its sale to a subsequent owner. Id. at 55. As part of its "transferrable income-producing capacity," the mall's business value was properly included in the mall's assessment. Id.

¶ 16 In Waste Management, the owner-operator of a sanitary landfill challenged a tax assessment that included the income generated by the landfill. 184 Wis. 2d at 545. The...