Waste Management of Wisconsin, Inc. v. Kenosha County Bd. of Review, 92-2951
| Decision Date | 09 June 1994 |
| Docket Number | No. 92-2951,92-2951 |
| Citation | 184 Wis.2d 541,516 N.W.2d 695 |
| Parties | WASTE MANAGEMENT OF WISCONSIN, INC., Plaintiff-Appellant-Petitioner, v. KENOSHA COUNTY BOARD OF REVIEW and Richard E. Ellison, Defendants-Respondents. |
| Court | Wisconsin Supreme Court |
For defendant-respondent, Richard E. Ellison, there was a brief by Bernard R. Vash, First Asst. Corp. Counsel and Kenosha County Corp. Counsel, Kenosha and oral argument by Bernard R. Vash.
For defendant-respondent, Kenosha County Bd. of Review, there was a brief by Donald E. Mayew and Plillips, Richards, Mayew & Corrigall, S.C., Kenosha and oral argument by Donald E. Mayew.
Amicus curiae brief was filed by David E. Stewart and Stewart Law Offices, S.C., Milwaukee for the Wisconsin Chapter of the National Solid Wastes Management Ass'n.
This is a review of a published decision of the court of appeals, Waste Management of Wisconsin, Inc. v. Kenosha County Board of Review and Richard Ellison, 177 Wis.2d 257, 501 N.W.2d 883 (Ct.App.1993), affirming a judgment of the circuit court for Kenosha county, Michael S. Fisher, circuit judge. The circuit court affirmed an ad valorem tax assessment by the Kenosha county board of review of three parcels of land owned by Waste Management of Wisconsin, Inc.
The issue presented is whether the Kenosha county board of review acted in accordance with Wisconsin law in determining the assessed value of the real estate, specifically the sanitary landfill site. Waste Management contends that the board improperly based its assessment on owner-operator income, that is, the net income generated by Waste Management's operation of a sanitary landfill on two of the three parcels. The court of appeals, reasoning that the net income generated by Waste Management as owner-operator could be attributed to the underlying real estate, upheld the board's reliance on this appraisal methodology. We affirm the decision of the court of appeals.
According to the record, both the Kenosha county Assessor and Waste Management presented the board of review with testimony by expert witnesses who variously appraised the property using the cost, market, and net income approaches to property valuation. These witnesses disagreed about which approach most accurately reflected the value of the sanitary landfill site; they failed to reach a consensus on the value of the real estate under any one methodology. Ultimately, after considering all of these approaches, the board of review reached its own conclusion, determining the property's value despite the conflicting evidence before it. Because we conclude that a reasonable view of the evidence supports the board of review's decision, we uphold the board's determination and affirm the decision of the court of appeals.
The parcels of land in question are located in the Town of Paris, Kenosha county, and were purchased by Waste Management in 1980 for the sum of $1.9 million. The three parcels are situated adjacent to one another and together total approximately 388 acres in size. On two of the parcels, accounting for roughly 242 of the 388 total acres, Waste Management now operates an 80-acre sanitary landfill known as Pheasant Run. Waste Management presently holds a license from the Wisconsin Department of Natural Resources to operate the Pheasant Run site. The third parcel, covering the remaining 146 acres, contains a small gatehouse, a scale for weighing incoming waste, an asphalt driveway providing access to the Pheasant Run site, and a 54-acre landfill now closed to dumping.
In 1990, the Kenosha county Assessor valued the three parcels at close to $27 million for purposes of ad valorem taxation. Prior to 1990, the assessed value of the entire property had been approximately $3.75 million.
The Assessor attributed approximately $26 million of the property's total value to the two parcels on which Waste Management operates the Pheasant Run landfill. That figure resulted from a combination of two valuation approaches. First, with respect to the 80-acre sanitary landfill site, the Assessor provided a written appraisal utilizing an "income approach," in which land value is based on the present worth of the expected stream of net owner-operator income from the landfill over the remainder of its life. 1 The Assessor rejected the cost approach (based on estimates) as inapplicable to this landfill site and rejected the market approach (adjusting the sale prices of reasonably comparable property) as too inconclusive to establish a value for the real estate. Instead, relying on an article by Robert L. Foreman in the 1978 edition of the Encyclopedia of Real Estate Appraising, the Assessor concluded that owner-operator income alone dictated the price of landfill property. The Assessor's calculations yielded an assessed value of approximately $25 million for the 80-acre landfill site.
Second, with respect to the vacant 162 acres surrounding the landfill site, the Assessor utilized the cost approach. He determined the value per acre by examining statewide sales of comparable lands. His analysis yielded a figure of roughly $970,000 for these 162 acres. Adding this sum to the $25 million value of the 80-acre landfill site, the Assessor reached a total value of approximately $26 million for the 242 acres covered by these two parcels.
Next, using the data drawn from the cost analysis of the vacant portion of the first two parcels, the Assessor estimated a per acre purchase cost for the usable acres of the third parcel owned by Waste Management. The 54-acre closed landfill site was exempted from the assessment and assigned no value. Including the depreciated value of existing improvements to the land, the Assessor valued the entire 146-acre parcel at roughly $850,000. Together, the value of the three parcels of land was thus assessed at almost $27 million.
Waste Management challenged the Assessor's calculations before the Kenosha county board of review. Waste Management argued that the income approach could not be used and, alternatively, that the particular method relied upon by the Assessor included the value of not only the real estate but the landfill license as well.
At hearings before the board in June 1990, Waste Management's independent appraisal expert, Michael J. Kelly, testified that the value of the entire property was roughly $2.3 million. He based this conclusion on his use of the cost approach. Kelly rejected the owner-operator income approach utilized by the Assessor with respect to the two parcels containing the landfill, arguing that the Assessor improperly included in his final assessment not only the value of the real estate, but also the value of the ongoing business concern. According to Kelly, Waste Management's business ability and resources had allowed it to obtain the landfill license, and a significant portion of the value of the operation was attributable to the business rather than to the real estate. Kelly rejected the market approach, reasoning that it would value both the tangible real estate and the intangible business enterprise.
The general manager of Pheasant Run testified that 50-60% of the revenue generated by the site was attributable to business from hauling companies owned by Waste Management's parent company. Without this business, he concluded, the landfill would fill up half as fast and the income would be reduced accordingly.
After considering the evidence presented by both Waste Management and the Assessor, the board of review affirmed the Assessor's valuation of the three parcels.
Waste Management appealed from the determination of the board of review by an action for certiorari under sec. 70.47(13), Stats. 1991-92, and in July 1991, the circuit court for Kenosha county, Michael S. Fisher, circuit judge, set aside the board of review's decision. The circuit court concluded that the Assessor had acted contrary to Wisconsin law, reasoning that the Assessor had proceeded "on the false assumption that the landfill license is real estate" and that "income was the [Assessor's] only concern and was the sole basis upon which the assessment was based." The circuit court ordered the matter remanded to the board of review for reconsideration and redetermination, stating that "it may well be that the assessor upon consideration of factors could justify the assessment."
Complying with the circuit court's remand, the board of review reconvened in November 1991 to consider additional information presented by both sides. All the witnesses agreed that the highest and best use of this property is as a landfill.
Newly revealed information made it clear that the Assessor's original estimates of Waste Management's income were substantially lower (roughly 35%) than the actual income generated by Waste Management in its operation of the landfill. The Assessor nevertheless continued to rely on the more conservative income estimates in projecting a value for the property.
At the hearing, the Assessor updated his prior written appraisal and submitted additional analyses of the property's value, utilizing both a market approach (by which he valued the land at $25 million) and the cost approach (by which he valued the land at $23.4 million). 2 Reconciling the estimates yielded by these various approaches with that originally reached under the income analysis, the Assessor concluded that the two parcels containing Pheasant Run were worth $25 million (approximately $1 million less than his original estimate).
The Assessor testified that the license to operate a landfill site has no intrinsic value because the license cannot be sold or transferred and cannot be separated from the land except by forfeiture. Therefore, according to the Assessor, the license to operate Pheasant Run was "intricately intertwined" with the land and was not to be considered separately in the income analysis. 3 The board of review's brief...
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