Sigma Tau Gamma Fraternity House Corp. v. City of Menomonie, 79-440

Decision Date15 January 1980
Docket NumberNo. 79-440,79-440
Citation288 N.W.2d 85,93 Wis.2d 392
PartiesSIGMA TAU GAMMA FRATERNITY HOUSE CORPORATION, a Wisconsin corporation, Plaintiff-Appellant, v. CITY OF MENOMONIE, a Wisconsin Municipal Corporation, Defendant-Respondent.
CourtWisconsin Supreme Court

Hugh R. Braun, argued and Godfrey & Trump, Milwaukee, on brief, for plaintiff-appellant.

Phillip M. Steans, Asst. City Atty., Menomonie, for defendant-respondent.

Bronson C. La Follette, Atty. Gen. and Charles A. Bleck, Asst. Atty. Gen., for attorney general.

Burt P. Natkins, Madison, for The League of Wisconsin Municipalities.

BEILFUSS, Chief Justice.

This is an appeal by the plaintiff, Sigma Tau Gamma Fraternity House Corporation, from a judgment dismissing its complaint against the defendant, City of Menomonie, brought under ch. 32, Stats. The complaint challenged the right of the city to condemn its property. The plaintiff contends the condemnation is not authorized by the terms of sec. 66.46, Stats., the Tax Increment Law, and further asserts the Tax Increment Law is unconstitutional on its face and as applied because of lack of uniformity of taxation and the lack of a public purpose as required by the Wisconsin Constitution. It also alleges several substantive and procedural deficiencies which it claims invalidate the condemnation. This court granted a petition to bypass the Court of Appeals because of the state-wide importance of the issues raised.

On January 3, 1977, the City of Menomonie approved Tax Incremental District No. 1 to become effective May 1, 1977, pursuant to the provisions of sec. 66.46, Stats. The district consisted of Block 126, and Lots 1, 2 and 6 of Block 119 of the Original Plat of the City of Menomonie, including a portion of Fifth Avenue between Broadway and Second Streets scheduled to be vacated. Under the Tax Increment Law, sec. 66.46, Stats. (Laws of 1975, c. 105), cities are authorized to create within their boundaries tax increment districts to assist them in financing needed public improvement projects in areas 25 percent of which are found to be "a blighted area," in need of "rehabilitation or conservation work" within the meaning of sec. 66.435, or suitable for "industrial sites" within the meaning of sec. 66.52. When such a district is created, a tax incremental base is determined by the Department of Revenue. The tax incremental base of a district is equal to the full aggregate value of the taxable property within the district at the time it is formed. Sec. 66.46(5). In the years following the creation of the district, all positive tax increments over and above the tax incremental base, which are due to the increased valuation of the property within the district, are upon receipt by the city treasurer deposited into a special fund to be used to pay for the costs of the project undertaken by the city. This is done until such time as the city completely recovers its costs or until the expiration of twenty years from the date of the creation of the district. Sec. 66.46(6). The effect of tax incremental financing is to require those municipalities that share the city's tax base, and that benefit from an increase in that tax base, to share in the cost of improvements in the district undertaken by the city.

As a prerequisite to the creation of a tax increment district, the planning commission is to prepare and adopt a proposed project plan which must then be approved by the local legislative body within six months after the Department of Revenue certifies to the city clerk the tax incremental base of the proposed district. Sec. 66.46(4), Stats. In this case the project plan approved by the Menomonie Planning Commission and city council called for the city's acquisition and sale of the full amount of land within the district to Mr. Donald Williams who was to construct on it a 25,000 square foot supermarket together with accompanying parking facilities and landscaping.

Williams was at that time the owner of a supermarket several blocks away from the district, but was looking for a new location where he could expand. Although the city had made earlier attempts to encourage commercial development in the area, it was not until after Williams had submitted his proposal to the city that the precise boundaries for Tax Incremental District 1 were determined.

Following completion of the project, the tax yield of the property within the district was expected to increase from $3,481 in 1976 to $24,282 per year thereafter because of the improvements. Project costs and income were estimated as follows:

                           Costs                      Income
                ----------------------------  -----------------------
                Property
                  Acquisition       $278,000  Sale of Land   $154,000
                Appraisal Costs        2,000  Sale of Bonds   220,000
                                                             --------
                Relocation Costs      50,000
                Land Clearance        40,000
                Utility Relocation     4,000
                                    --------
                                    $374,000                 $374,000
                

The bonds were to be retired with the tax increment income generated by the improvement.

Plaintiff is the owner of Lots 6, 7 and 8 of Block 126 in the northwest corner of Tax Incremental District 1. The Sigma Tau Gamma Fraternity House is situated on Lots 7 and 8. The house itself is in satisfactory condition and presently serves as the residence of the student members of Sigma Tau Gamma Fraternity.

On January 2, 1978, the city adopted a resolution declaring the taking of plaintiff's property necessary "for the purpose of elimination of blighted and slum areas within the City of Menomonie and (to) encourage improvements within such areas pursuant to Section 66.46, Wisconsin Statutes, entitled 'Tax Incremental Law'." Plaintiff was served with a jurisdictional offer on March 22, 1978, but did not respond. The matter was assigned to the Dunn County Condemnation Commission which, following a hearing, filed its award on June 2, 1978.

Plaintiff commenced this action by complaint filed May 1, 1978, alleging that the property was not blighted and that it was being taken for a private, rather than public, purpose. Plaintiff also stated in its complaint that it objected to the taking of its property and "hereby challenges the authority of the city to take said property." Prior to trial, plaintiff obtained leave to amend its summons and complaint. The amended summons and complaint named the attorney general as a party to the action and added two more allegations challenging the constitutionality of sec. 66.46, Stats., on its face and as applied.

Although all parties admit service of the amended summons and complaint, it appears that it was never filed with the court and is therefore not contained in the trial court record. It was reproduced, however, in the appendix to the city's brief. As the attorney general did in fact admit service and responded to each of the issues raised by plaintiff in the trial court below, it appears the jurisdictional requirements of sec. 806.04(11), Stats., have been met.

Following a trial, the circuit court concluded that the city was lawfully entitled to condemn plaintiff's property, that it had lawfully proceeded under ch. 32, Stats., and that the Tax Increment Law was constitutionally valid.

Although several additional issues are raised, we decide only the plaintiff's claims that condemnation by eminent domain is not authorized by the Tax Increment Law, that the Tax Increment Law is invalid because the attorney general failed to seek a declaratory judgment as to its validity, and that the Tax Increment Law violates the Wisconsin constitutional requirements of uniformity and public purpose doctrine on its face.

We conclude that Tax Increment Law (sec. 66.46, Stats.) does not authorize the city to acquire property by condemnation, that the failure or refusal of the attorney general to seek a declaratory judgment does not affect the validity of the statute, and the Tax Increment Law is constitutionally valid.

The plaintiff contends that the Tax Increment Law does not itself authorize a city to condemn property, but only provides a method of financing redevelopment projects or public improvements which a city is authorized to undertake under other statutes. Such projects are specifically authorized under the Urban Development Law, sec. 66.405, Stats.; the Blighted Area Law, sec. 66.43; the Blight Elimination and Slum Clearance Act, sec. 66.431; and the Urban Renewal Act, sec. 66.435. The plaintiff argues that the city failed to proceed under a law which specifically allows condemnation to eliminate blight, and therefore it is without power to condemn its land.

A careful reading of the Tax Increment Law itself and the legislative declaration which accompanied it support plaintiff's position that the law was intended only as a financing vehicle for projects, not as a new and independent authorization for further urban redevelopment projects. The legislative declaration reads as follows:

"(1) The legislature finds that the existing system of allocating aggregate property tax revenues among tax levying municipalities has resulted in significant inequities and disincentives. The cost of public works or improvements within a city or village has been borne entirely by the city, or village, while the expansion of tax base which is stimulated, directly or indirectly, by such improvements, benefits not only the city or village but also all municipalities which share such tax base. This situation is inequitable. Moreover, when the cost to a city or village of a public improvement project exceeds the future benefit to the city, or village resulting therefrom, the city or village may decide not to undertake such project. This situation has resulted in the postponement or cancellation of socially desirable projects.

"(2) The legislature further finds that accomplishment of the vital and beneficial public purposes of sections 66.405 to...

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