Title: Milwaukee Regional Medical Center v. City of Wauwatosa

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2007 WI 101 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2005AP1160 
 
 
COMPLETE TITLE: 
 
 
Milwaukee Regional Medical Center, Inc., 
          Plaintiff-Respondent-Cross-Appellant-
Petitioner, 
     v. 
City of Wauwatosa, 
          Defendant-Appellant-Cross-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2006 WI App 139 
Reported at: 295 Wis. 2d 211, 720 N.W.2d 161 
(Ct. App. 2006—Published) 
 
 
OPINION FILED: 
July 17, 2007   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
January 11, 2007   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
Jeffrey A. Kremers 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
        
 
CONCUR/DISSENT: 
BUTLER, Jr., J. concurs in part, dissents in 
part (opinion filed). 
ABRAHAMSON, C.J., joins concurrence/dissent. 
 
DISSENTED: 
        
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For 
the 
plaintiff-respondent-cross-appellant-petitioner 
there were briefs by Margaret M. Derus and Reinhart Boerner Van 
Deuren s.c., Milwaukee, and oral argument by Margaret M. Derus. 
 
For the defendant-appellant-cross-respondent there was a 
brief and oral argument by Beth Thorson Aldana, assistant city 
attorney.  
 
 
2007 WI 101
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2005AP1160   
(L.C. No. 
2004CV5802) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Milwaukee Regional Medical Center, Inc., 
 
          Plaintiff-Respondent-Cross-Appellant- 
          Petitioner, 
 
     v. 
 
City of Wauwatosa, 
 
          Defendant-Appellant-Cross-Respondent. 
 
 
 
FILED 
 
JUL 17, 2007 
 
David R. Schanker 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed and 
remanded.   
 
¶1 
DAVID T. PROSSER, J.   This is a review of a published 
decision of the court of appeals, reversing a judgment of the 
Milwaukee County Circuit Court, Jeffrey A. Kremers, Judge.  
Milwaukee Reg’l Med. Ctr., Inc. v. City of Wauwatosa, 2006 WI 
App 139, 295 Wis. 2d 211, 720 N.W.2d 161.  The court of appeals 
reversed a judgment that the Milwaukee Regional Medical Center, 
Inc. (MRMC) was entitled to a property tax exemption under 
No.  2005AP1160 
 
2 
 
Wis. Stat. § 70.11(2)1 for land that MRMC leases from Milwaukee 
County (the County) as well as the day care facility that MRMC 
built on the land.   
¶2 
The case commenced in 2004 when MRMC requested 
reimbursement for property taxes paid under protest to the City 
of Wauwatosa (the City) for the leased land and the day care 
facility.  In 2003 the City assessed property taxes for 2001, 
2002, and 2003 against MRMC for this property, which had been 
tax-exempt prior to that time.  MRMC paid the property taxes for 
all three years under protest and filed a claim with the City to 
recover the taxes.  The City disallowed the claim, whereupon 
MRMC filed suit in circuit court, claiming the property was tax-
exempt under either Wis. Stat. § 70.11(2) or (4).2  Both parties 
moved for summary judgment.  The circuit court granted MRMC’s 
motion, 
holding 
that 
the 
property 
was 
tax-exempt 
under 
§ 70.11(2) because the property was owned by the County.  The 
court also made a non-dispositive determination that the 
property was not tax-exempt under § 70.11(4).   
¶3 
The City appealed, and MRMC cross-appealed.  The court 
of appeals reversed, holding that the property was not exempt 
from 
taxation 
under 
either 
Wis. Stat. § 70.11(2) 
or 
(4).  
                                                 
1 All references to the Wisconsin Statutes are to the 2005-
06 version unless otherwise indicated.   
2 Wisconsin Stat. § 70.11(2) 
exempts 
property 
owned 
by 
municipalities from property tax.  Wisconsin Stat. § 70.11(4) 
exempts property that is used by an educational association for 
educational purposes from property tax. 
No.  2005AP1160 
 
3 
 
Milwaukee Reg’l Med. Ctr., 295 Wis. 2d 211, ¶¶ 32, 36.  We 
granted MRMC's petition for review. 
¶4 
The ultimate issue is whether the leased land and day 
care facility (collectively, the property) are exempt from 
property taxation.  MRMC asks us to decide that the County is 
the "beneficial owner" of the property so that the property is 
exempt from taxation under Wis. Stat. § 70.11(2).  The City asks 
us to decide that MRMC is the "beneficial owner" of the property 
and is, therefore, subject to taxation.  We are also asked to 
determine whether MRMC qualifies for tax exemption under 
§ 70.11(4) as an educational association. 
¶5 
We conclude that MRMC, not the County, is the 
beneficial owner of the property at the present time so that the 
property is not tax-exempt under Wis. Stat. § 70.11(2), and that 
the property does not qualify for a tax exemption under 
Wis. Stat. § 70.11(4) 
because 
MRMC 
is 
not 
an 
educational 
association because its primary purpose is not educational.  
Consequently, we affirm the decision of the court of appeals. 
FACTUAL BACKGROUND 
¶6 
The parties stipulated to the facts.  Hence, the 
following facts are taken largely from the stipulation and the 
supplementary 
documents 
which 
support 
the 
stipulation, 
especially the lease. 
¶7 
MRMC is a voluntary consortium of governmental and 
private 
nonprofit 
institutions, 
including 
the 
following: 
Children’s 
Hospital 
of Wisconsin, Froedtert Hospital, the 
Medical College of Wisconsin, Curative Care Network, Milwaukee 
No.  2005AP1160 
 
4 
 
County Behavioral Health Division, and the Blood Center of 
Southeastern Wisconsin.  It is organized under Wis. Stat. ch. 
181 as a nonprofit, nonstock Wisconsin corporation.  As a 
charitable organization under Internal Revenue Code § 501(c)(3), 
MRMC is exempt from federal income taxation.  See 26 U.S.C. 
§ 501(a), (c)(3). 
¶8 
According to MRMC’s bylaws, MRMC has two purposes:  
(1) to aid and support the development and 
provision of health services in the Milwaukee region 
by assisting its members to develop and operate, high-
quality, 
efficient 
and 
effective 
programs 
of 
education, 
research 
and 
patient 
care; 
(2) 
to 
facilitate the efficient development and functioning 
of the Medical Center Campus.   
¶9 
MRMC leases land from the County pursuant to a lease 
agreement dated June 12, 1990.  The land is approximately 1.75 
acres and is located at 8624 Watertown Plank Road in Wauwatosa.  
The County holds title to the land.  The land was leased to MRMC 
for the specific purpose of permitting MRMC to build a day care 
facility. 
¶10 The lease agreement runs for 50 years, beginning June 
12, 1990, and ending June 11, 2040.  For the first 30 years of 
the lease, MRMC is to pay the County $1.00 per year in rent for 
the land.  For the remaining 20 years, MRMC is to pay the County 
rent at an agreed upon market rate.  If the parties cannot agree 
upon a market rate, the rent shall be set at 10 percent of the 
fair market value of the land, not including increased value due 
to improvements made by MRMC.  If the parties cannot agree on a 
No.  2005AP1160 
 
5 
 
fair market value, the lease provides a process for determining 
a value. 
¶11 The property must be used to operate a day care 
program that is available to employees and students of MRMC’s 
members and affiliates, as well as the general public.  The 
lease provides that MRMC had to construct a day care facility 
that 
could 
serve 
at 
least 
140 
children, 
and 
this 
was 
accomplished in 1991.3  MRMC may not sublet, assign, or lease 
space in the completed facility without the County’s prior 
approval. 
¶12 The cost to construct the day care facility was to be 
at least $400,000.  The County was required to approve all 
construction plans and material changes to the plans after 
initial approval.  If the day care facility had not been 
"substantially complete[d]" within three years, the lease would 
have been null and void.  During construction of the day care 
facility, MRMC was required to "minimize any interruption of 
full and complete public usage" of the roadways and to "restore 
all roadways to the same or similar condition as existed prior 
to the commencement of construction."  
¶13 The 
lease 
provides 
that 
MRMC 
could 
finance 
construction of the day care facility through various means, 
including mortgaging its leasehold interest in the land.  The 
                                                 
3 If MRMC had not been able to obtain approval for the day 
care 
facility, 
including the necessary licenses, permits, 
certificates, or other consents, MRMC could have declared the 
lease void within 365 days of signing the lease. 
No.  2005AP1160 
 
6 
 
lease further provides that the County would consider any 
modification of the lease necessary for MRMC to receive 
financing.  Such modification included subordination of the 
County’s 
fee 
interest in the land.  MRMC financed the 
construction of the day care facility through tax-exempt bonds.  
MRMC pays the debt service on these bonds. 
¶14 After 
seeking 
the 
County’s 
approval 
for 
its 
construction plans, MRMC built a day care facility in accordance 
with the terms of the lease.  The completed day care facility 
"is a two-story facility custom-designed for child care and 
includes 16 classrooms, 2 offices, kitchen, indoor play area, 
mechanical room, and adult and children’s bathrooms. There are 
four fenced patios, two fenced playground areas, a garage and 
two parking lots with 59 surface parking stalls."  The fencing 
was required by the lease agreement.  In addition, the lease 
permitted MRMC to affix signs on the exterior of the day care 
facility and on the land in accordance with size and design 
requirements and with prior written consent of the County's 
Director of Health and Human Services.  The lease also required 
MRMC to obtain permission before constructing a parking lot. 
¶15 Title to the day care facility is with MRMC until the 
expiration or termination of the lease.  Upon expiration or 
termination, MRMC may remove any fixtures, equipment, or 
displays it installed or any other personal property.  Title to 
all remaining personal property, fixtures, equipment, displays, 
along with the title to the day care facility will vest with the 
County.  However, should MRMC make, with prior written consent 
No.  2005AP1160 
 
7 
 
of the County, any "substantial capital expenditures" in the ten 
years prior to the termination of the lease, the County must 
reimburse MRMC for the expenditures. 
¶16 The lease also contains post-construction requirements 
for MRMC.  MRMC is required to pay the County for water and 
sewage services and to purchase electricity from the County; 
however, the electricity provision was made optional through an 
amendment.  MRMC must provide premises security for the interior 
of the day care facility and must pay the County pro rata for 
exterior security of common areas.  Furthermore, MRMC is 
required to obtain hazard insurance for up to 80 percent of the 
insurable value of the day care facility naming the County as a 
co-insured.  MRMC is also required to obtain public liability 
insurance naming the County as an additional insured.  MRMC must 
maintain and repair the property.  The County entered into an 
agreement with the City that made the County responsible for 
part of the construction costs of a fire station in the vicinity 
as well as the cost of 15 additional fire fighting positions; 
the lease requires MRMC to pay its pro rata share of these 
costs. 
¶17 The County retained certain rights over the property.  
The County must approve all additional projects costing over 
$50,000 and all alterations, additions, or improvements to the 
day care facility.  The County retains the right, after 
providing MRMC prior written notice, to "enter into and upon the 
Premises at reasonable times for the purpose of examining and 
inspecting whether [MRMC] has or is performing [the] covenants 
No.  2005AP1160 
 
8 
 
set forth in this Lease."  Additionally, the County retains the 
right to inspect its utility lines at any time without notice.  
¶18 If the property is condemned in whole or in part 
during the term of the lease, such that in MRMC’s "sole opinion" 
the property is unsuitable for the continuation of the day care 
facility, the lease shall terminate.  The County is entitled to 
any condemnation award attributed to the value of the land, 
county-owned utility lines, or utility tunnel; MRMC is entitled 
to the balance.  If MRMC deems the property still suitable for 
the operation of the day care facility, MRMC is required to use 
the condemnation award, exclusive of the portion of the award 
attributable to the partial taking of the County's underground 
utility facilities, to restore the property to its state before 
the taking, and the lease shall continue.4  Any remaining 
condemnation award is to be split between the County and MRMC, 
with the County receiving funds attributable to the land and the 
MRMC receiving the balance.   
¶19 If the day care facility is damaged by fire or other 
casualty, MRMC has the right to terminate the lease within six 
months of the event if, at its "sole discretion," the day care 
facility is no longer usable.  If MRMC terminates the lease, 
MRMC must, at the County's written request, "demolish and remove 
the [day care facility] from the [land] and restore the real 
estate comprising of the [land] to the extent possible to the 
                                                 
4 MRMC is not required to follow the original plan, provided 
that the quality of the day care facility remains the same. 
No.  2005AP1160 
 
9 
 
condition at the commencement of construction of the [day care 
f]acility."  In addition, if MRMC terminates the lease, the 
County no longer has a claim to insurance proceeds from the 
casualty, "except to the extent of damage or destruction of [the 
County's] underground utility facilities."  However, if MRMC 
does not terminate the lease, the insurance proceeds must be 
used to restore the day care facility, including the County’s 
underground utilities. 
¶20 In accordance with the lease, MRMC uses the day care 
facility as a child day care program that serves the employees 
and students of MRMC’s members and affiliates and the general 
public.  This child day care program is called Campus Child 
Care.  Beginning in 1998 MRMC contracted with Childtime 
Children’s Centers, Inc. (Childtime) for the management and 
operation of Campus Child Care.  Childtime is a wholly-owned 
subsidiary of Childtime Learning Centers, Inc., a for-profit 
Michigan corporation.  Childtime is not a related organization 
of MRMC and does not lease or hold any interest in the property.  
From 2001 through 2003, MRMC paid Childtime a flat fee ranging 
between $48,000 and $60,000. 
¶21 Campus Child Care is open to the general public, and 
no preference is offered to MRMC employees or students.  
However, from 2001 through 2003 over half of all children 
enrolled had parents who were affiliated with MRMC or Childtime.  
All parents are charged the same fee for child care services, 
based upon a fixed fee schedule, regardless of their affiliation 
with MRMC. 
No.  2005AP1160 
 
10 
 
¶22 Campus Child Care offers a curriculum that is tailored 
to children of varying ages.  Different programs are offered for 
children ranging from infants through school age.  All programs 
have educational components.  Campus Child Care is accredited by 
the National Association for the Education of Young Children, 
which evaluates programs based upon educational interaction 
between teachers and children and reviews Campus Child Care’s 
curriculum.  Many of the Childtime instructors were taught or 
certified in childhood education. 
PROCEDURAL BACKGROUND 
¶23 In 2003 MRMC timely filed a State of Wisconsin 
Property 
Tax 
Exemption 
Request 
with 
the 
Wauwatosa 
City 
Assessor’s office pursuant to Wis. Stat. § 70.11.  From 1990 
through 2002, the City treated the property as exempt from 
property tax.  However, on or about July 14, 2003, the City 
Assessor denied MRMC’s property tax exemption request, and on 
October 30, 2003, the City invoiced MRMC for property taxes from 
2001 and 2002.  The taxes assessed were $31,920.56 for 2001 and 
$38,384.84 for 2002, based upon assessed property values of 
$1,013,800 and $1,634,300, respectively.  In December 2003 the 
City invoiced MRMC for a 2003 property tax of $40,271.26, based 
upon an assessed value of $1,634,300. 
¶24 MRMC timely paid the property taxes for all three 
years, totaling $110,576.66.  It did so under protest, and it 
timely filed a claim with the City to recover the property taxes 
for all three years on grounds that the property was tax-exempt.  
On April 7, 2004, the City disallowed MRMC’s claim for refund, 
No.  2005AP1160 
 
11 
 
and MRMC timely filed this action in circuit court, pursuant to 
Wis. Stat. § 74.35(3)(d).5  MRMC claimed that the property is 
exempt from property tax under one of two provisions: (1) under 
Wis. Stat. § 70.11(2) because the land is owned by the County; 
or 
(2) 
under 
§ 70.11(4) 
because 
MRMC 
is 
an 
educational 
association. 
¶25 MRMC and the City both moved for summary judgment.  
The circuit court granted MRMC’s motion, holding that the 
property 
was 
exempt 
from 
property 
tax 
under 
Wis. Stat. § 70.11(2) and directing the City to refund MRMC’s 
property taxes for three years on the property.  The circuit 
court also concluded that the property was not tax-exempt under 
§ 70.11(4), though this conclusion was not dispositive.  The 
City appealed the holding that the property was tax-exempt under 
§ 70.11(2), and MRMC cross-appealed the conclusion that the 
property was not tax-exempt under § 70.11(4). 
¶26 The court of appeals reversed.  The court of appeals 
synthesized the case law to form a two-part test to determine 
the beneficial ownership of property leased from a tax-exempt 
entity like a county.  The court's test was that "the tax-exempt 
entity is the beneficial owner of the property if it: (1) gets 
not-inconsequential benefits from the property, and (2) has 
                                                 
5 Wisconsin Stat. § 74.35(3)(d) provides, "If the taxation 
district disallows the claim, the claimant may commence an 
action in circuit court to recover the amount of the claim not 
allowed.  The action shall be commenced within 90 days after the 
claimant receives notice by certified or registered mail that 
the claim is disallowed."  Wis. Stat. § 74.35(3)(d). 
No.  2005AP1160 
 
12 
 
substantial control focused on preserving or enhancing those 
benefits."  Milwaukee Reg’l Med. Ctr., 295 Wis. 2d 211, ¶29.  
"Where both aspects are present . . . the property is exempt 
from taxation."  Id.   
¶27 The court of appeals concluded that the County was not 
the beneficial owner of the property because (1) the County did 
not receive a sufficient, immediate benefit from the property; 
and (2) the County did not have sufficient day-to-day oversight 
of the property to exercise control over the property.  Id., 
¶¶29, 32.  Therefore, MRMC was the beneficial owner and the 
property was not tax-exempt under Wis. Stat. § 70.11(2).  Id.  
Judge Ted Wedemeyer dissented from this determination. 
¶28 The court of appeals affirmed the circuit court’s 
conclusion that MRMC was not exempt from property tax under 
Wis. Stat. § 70.11(4).  The court held that MRMC was not an 
educational association because it is not "substantially and 
primarily devoted to educational purposes."  Id., ¶34.  Thus, 
the tax exemption under § 70.11(4) did not apply, and the 
property was not exempt from property taxes for 2001, 2002, and 
2003.  Id., ¶36. 
¶29 MRMC filed a petition for review asking this court to 
review whether the property was exempt from taxation under 
either Wis. Stat. § 70.11(2) or (4).  We granted review.  
STANDARD OF REVIEW 
¶30 This case requires the court to interpret and apply 
Wis. Stat. § 70.11(2) and (4).  Construction of a tax exemption 
statute under a particular set of facts presents a question of 
No.  2005AP1160 
 
13 
 
law that is reviewed without deference to the trial court.  St. 
Elizabeth Hosp., Inc. v. City of Appleton, 141 Wis. 2d 787, 790-
91, 416 N.W.2d 620 (Ct. App. 1987). 
¶31 The party claiming exemption from taxation bears the 
burden of showing that property is exempt.  Id. at 791.  All 
exemptions 
are 
strictly 
construed 
with 
a 
presumption 
of 
taxation.  Wis. Stat. § 70.109.6  However, while an exemption 
should be strictly construed, the construction must still be 
reasonable.  Trustees of Ind. Univ. v. Town of Rhine, 170 
Wis. 2d 293, 299, 488 N.W.2d 128 (Ct. App. 1992). 
DISCUSSION 
A. 
Municipal Property Exemption under Wis. Stat. § 70.11(2) 
1. 
Legal Background 
¶32 Wisconsin Stat. § 70.11(2) exempts "[p]roperty owned 
by any county" from general property taxes.7  Furthermore, 
                                                 
6 Wisconsin Stat. § 70.109 states: "Exemptions under this 
chapter shall be strictly construed in every instance with a 
presumption that the property in question is taxable, and the 
burden of proof is on the person who claims the exemption."  
Wis. Stat. § 70.109. 
7 Wisconsin Stat. § 70.11 provides the following: 
 
The 
property 
described 
in 
this 
section 
is 
exempted from general property taxes if the property 
is exempt under sub. (1), (2), (18), (21), (27) or 
(30); if it was exempt for the previous year and its 
use, occupancy or ownership did not change in a way 
that makes it taxable; if the property was taxable for 
the previous year, the use, occupancy or ownership of 
the property changed in a way that makes it exempt and 
its owner, on or before March 1, files with the 
assessor of the taxation district where the property 
is located a form that the department of revenue 
prescribes or if the property did not exist in the 
No.  2005AP1160 
 
14 
 
"[l]easing the property exempt under this subsection, regardless 
of the lessee and the use of the leasehold income, does not 
render that property taxable."  Id.   
¶33 The parties do not dispute that the County retains 
legal title to the land.  However, retaining legal title to the 
land does not guarantee that the County or an equivalent 
municipality will remain the "owner" of property for tax 
exemption purposes, City of Franklin v. Crystal Ridge, Inc., 180 
Wis. 2d 561, 568, 509 N.W.2d 730 (1994), because "taxation or 
exemption depends not upon the legal title but on the status of 
                                                                                                                                                             
previous year and its owner, on or before March 1, 
files with the assessor of the taxation district where 
the property is located a form that  the department of 
revenue prescribes.  Leasing a part of the property 
described in this section does not render it taxable 
if the lessor uses all of the leasehold income for 
maintenance of the leased property or construction 
debt retirement of the leased property, or both, and, 
except for residential housing, if the lessee would be 
exempt from taxation under this chapter if it owned 
the property. Any lessor who claims that leased 
property is exempt from taxation under this chapter 
shall, upon request by the tax assessor, provide 
records relating to the lessor’s use of the income 
from the leased property.  Property exempted from 
general property taxes is: 
. . . .  
(2) Municipal property and property of certain 
districts, 
exception. 
 
Property 
owned 
by 
any 
county . . . .  Leasing the property exempt under this 
subsection, regardless of the lessee and the use of 
the leasehold income, does not render that property 
taxable.   
Wis. Stat. § 70.11(2) (emphasis added).   
No.  2005AP1160 
 
15 
 
the owner of the beneficial interest in the property."  State ex 
rel. Wis. Univ. Bldg. Corp. v. Bareis, 257 Wis. 497, 505, 44 
N.W.2d 259 
(1950). 
 
Thus, 
the 
word 
"owned" 
in 
Wis. Stat. § 70.11(2) means "beneficial ownership, not mere 
technical title."  Mitchell Aero, Inc. v. City of Milwaukee, 42 
Wis. 2d 656, 660, 168 N.W.2d 183 (1969); see also Am. Motors 
Corp. v. City of Kenosha, 274 Wis. 315, 80 N.W.2d 363 (1957). 
¶34 The Mitchell Aero court reasoned as follows: 
[T]he ownership of property by a municipality to 
qualify for exemption under sec. 70.11(2), Stats., 
means real or true ownership and not paper title only.  
Ownership is often referred to in legal philosophy as 
a bundle of sticks or rights and one or more of the 
sticks may be separated from the bundle and the bundle 
will still be considered ownership.  What combination 
of rights less than the whole bundle will constitute 
ownership is a question which must be determined in 
each case in the context of the purpose of the 
determination.  In this case for exemption one needs 
more than the title stick to constitute ownership. 
Mitchell Aero, 42 Wis. 2d at 662.  Applying this principle, it 
is evident that a municipality may transfer enough "sticks" from 
its bundle that it is no longer the beneficial owner of 
property.  On the other hand, it may retain enough "sticks" to 
retain beneficial ownership, even though it has leased its 
property.  See, e.g., Gebhardt v. City of West Allis, 89 
Wis. 2d 103, 106, 278 N.W.2d 465 (1979).   
 
¶35 To determine whether MRMC or the County is the 
beneficial owner, we look at the totality of the facts and 
circumstances surrounding the case.  Id. at 109.  We analyze the 
rights and benefits of each party that are usually associated 
No.  2005AP1160 
 
16 
 
with ownership, id., and weigh the County’s indicia of ownership 
against 
MRMC’s 
indicia 
of 
ownership, 
Crystal 
Ridge, 
180 
Wis. 2d at 568; Mitchell Aero, 42 Wis. 2d at 665.8  We keep in 
mind that not all "sticks" have the same weight.   
¶36 We 
do 
not 
understand 
either 
party 
to 
seek 
a 
modification of existing principles on beneficial ownership.  
Thus, our task is to apply existing principles to a particular 
set of facts.  Because this court has previously made rulings in 
three major cases determining beneficial ownership, we turn to 
those cases for legal precedent. 
a. 
Mitchell Aero, Inc. v. City of Milwaukee 
¶37 In Mitchell Aero, we held that Mitchell Aero was the 
beneficial owner of property it leased from Milwaukee County and 
was thus not tax-exempt.  Mitchell Aero, 42 Wis. 2d at 665.  
Mitchell Aero operated a "noncommercial aviation business" out 
                                                 
8 The court of appeals applied a two-part test to determine 
if 
the 
municipality 
was 
the 
beneficial 
owner 
under 
Wis. Stat. § 70.11(2).  Milwaukee Reg’l Med. Ctr., Inc. v. City 
of Wauwatosa, 2006 WI App 139, ¶29, 295 Wis. 2d 211, 720 
N.W.2d 161.  The test stated that "the tax-exempt entity is the 
beneficial 
owner of the property if it: (1) gets not-
inconsequential 
benefits 
from 
the 
property, 
and 
(2) 
has 
substantial control focused on preserving or enhancing those 
benefits."  Id.   
While such a test may be a useful analysis of prior case 
law, it has the potential of narrowing the inquiry to exclude or 
minimize certain factors that may be relevant but do not fall 
squarely within the benefits and control factors.  We interpret 
previous cases as requiring a totality of the circumstances test 
in which the court evaluates all the facts and circumstances 
surrounding the case.  We will continue to apply a totality of 
the circumstances test. 
No.  2005AP1160 
 
17 
 
of General Mitchell Field.9  It leased part of the airport 
grounds from Milwaukee County.  Id. at 658.  The lease extended 
for 20 years with an option to renew for five years.  Id. at 
663.   
¶38 Mitchell Aero paid rent to Milwaukee County for the 
land and attached buildings it had leased.  Id.  However, at 
that time it did not pay rent for two hangars that Mitchell Aero 
built with permission on leased land,10 even though, upon 
completion of construction, legal title to the two hangars 
vested in Milwaukee County.  Id.  Furthermore, any alterations 
to the hangars required prior approval by Milwaukee County and 
would not be made at Milwaukee County's expense.  Id.   
¶39 Mitchell Aero was responsible for maintaining the 
hangars, though Milwaukee County remained responsible for the 
maintenance of all other structures on the land.  Id.  Mitchell 
Aero had to acquire fire and extended insurance coverage for one 
of the hangars to the extent of 80 percent of the insurable 
value, and it was required to use all insurance proceeds to 
"immediate[ly] repair any damage to the hangar."  Id. at 664.  
The lease provided that if Milwaukee County condemned the land, 
abandoned the land as an air terminal, or breached the lease, 
Milwaukee County was required to pay Mitchell Aero an amount 
                                                 
9 General 
Mitchell 
Field 
is 
now 
General 
Mitchell 
International Airport.   
10 In the event that Mitchell Aero exercised its 5-year 
option, Mitchell Aero was required to pay rent based on square 
footage for one of the two hangars.  Mitchell Aero, Inc. v. City 
of Milwaukee, 42 Wis. 2d 656, 663, 168 N.W.2d 183 (1969).   
No.  2005AP1160 
 
18 
 
equal to Mitchell Aero’s "unamortized investment" in the 
hangars.  Id.  If the land was condemned by either the state or 
federal government, Mitchell Aero’s only recourse was against 
the condemning government.  Id. 
¶40 This court concluded that, under the terms of the 
lease, some of the rights usually associated with ownership were 
in Mitchell Aero and others were in Milwaukee County.  Id. at 
665.  However, Milwaukee County’s control over the hangars was 
"not indicative of true ownership but concern[ed] the operation 
of the airport."  Id.  In other words, the county's control over 
the hangars concerned its broad oversight of the airport's 
operation and did not impede Mitchell Aero's ability to use the 
hangars in its business, to the exclusion of the county, for the 
lease 
term. 
 
This 
court 
concluded 
that 
Mitchell 
Aero's 
arrangement with Milwaukee County did "not pass sufficient 
incidents of ownership with the paper title to constitute the 
county the true owner of the hangars within the meaning of 
'owned' in sec. 70.11(2), Stats."  Id.  We therefore held 
Mitchell Aero to be the beneficial owner of the hangars and 
subject to taxation.  Id.   
b. 
Gebhardt v. City of West Allis 
¶41 In Gebhardt, the State of Wisconsin leased property to 
Richard Gebhardt and William Sommer (collectively, Gebhardt) for 
10 years with an option to renew for 10 years.  Gebhardt, 89 
Wis. 2d at 104.  The property included an ice skating arena at 
the Wisconsin State Fair Park that Gebhardt was required to 
build pursuant to the lease.  Id. at 104.  The City of West 
No.  2005AP1160 
 
19 
 
Allis asserted that Gebhardt was the owner of the ice skating 
arena, while Gebhardt asserted the state was the owner for 
Wis. Stat. § 70.11(1)11 property tax exemption purposes.  Id. at 
105.  This court sided with Gebhardt.  Id. at 114-15.   
¶42 In our analysis, we observed that Gebhardt possessed 
the following indicia of ownership as articulated in the lease:  
(1) the building was constructed at [Gebhardt’s] sole 
expense; (2) [Gebhardt] enjoyed the use and benefits 
of the ice arena for ten months out of every year; (3) 
the lease require[d Gebhardt] to maintain and keep the 
premises in proper repair; (4) [Gebhardt was] required 
to carry full fire and extended coverage on the 
building and its contents and (5) under the terms of 
the lease [Gebhardt bore] the risk of loss should the 
ice arena be destroyed during the lease period. 
Id. at 109.   
 
¶43 In concluding that Gebhardt was not the beneficial 
owner, we noted that the benefits Gebhardt received from the 
property were distinctly different from the benefits Mitchell 
Aero received.  Id.  Significantly, unlike Mitchell Aero, 
Gebhardt was required to pay rent "based upon the number of 
years since the commencement of the lease and a percentage of 
the gross receipts from the operation of the [ice arena]."  Id. 
at 110.  Also significant was the fact that, unlike Mitchell 
Aero's 80 percent insurable interest in the property, Gebhardt 
had an insurable interest in the property that diminished as the 
                                                 
11 Wisconsin Stat. § 70.11(1) 
provides 
a 
property 
tax 
exemption for state-owned property that is similar to the 
§ 70.11(2) tax exemption for property owned by a municipality.   
No.  2005AP1160 
 
20 
 
state came closer to acquiring a full and complete possessory 
interest in the property when the lease expired.  Id. at 113. 
 
¶44 In addition, the state exercised significant control 
over the ice arena that interfered with Gebhardt’s business 
operation.  The state’s control included: (1) selection of the 
location for the ice arena and prior approval of the plans; (2) 
ownership of structural improvements if the lease was terminated 
because the ice arena was not completed by a specific day; (3) 
limitations on Gebhardt’s use of the ice arena to "ice skating 
related sports and recreation;" (4) exclusive right to use the 
arena for two months every year without charge; (5) requirement 
that improvements be made to the completed structure at 
Gebhardt's expense for the benefit of the state; (6) sole 
operation of the only concession stand and prohibition of the 
operation of a competitive concession stand; (7) keys to all 
doors and the ability to enter the ice arena at any time; (8) 
requirement that Gebhardt post hours and fees, and cater to 
special groups in the neighborhood; (9) prohibition on ice arena 
customers entering State Fair Park during certain special 
events; (10) prohibition on selling, conveying, letting, or 
subletting any portion of the ice arena without prior consent; 
and (11) requirement that Gebhardt repair any damage to the 
building caused by removal of personal property after the 
termination of the lease.  Id. at 110-112. 
 
¶45 In light of the above factors, we held that the 
"ownership of the ice arena rested in the state and that the 
indicia 
of 
ownership 
attributed 
to 
[Gebhardt 
were] 
not 
No.  2005AP1160 
 
21 
 
persuasive to the court to constitute true and beneficial 
ownership pursuant to ch. 70."  Id. at 114-15.   
 
c. 
City of Franklin v. Crystal Ridge, Inc. 
 
¶46 Finally, in Crystal Ridge, we held that Milwaukee 
County was the owner of a ski chalet and a rental building that 
it leased to Midwest Development Corporation12 as part of a plan 
to 
construct 
and 
operate 
"a 
down 
hill 
facility 
with 
restaurant/chalet and parking lot and other sports activities 
for all seasons."  Crystal Ridge, 180 Wis. 2d at 564.  The lease 
was for 10 years with three 5-year renewal options.  Id.  
Midwest built a ski hill along with buildings and other 
improvements to the land, as required by the lease, and it paid 
Milwaukee County rent of the greater of three percent of gross 
profits or $10,000 per year.  Id. at 564-65.  Midwest used 
landfill material dumped at the site to construct the ski hill.  
Id. at 565.  The lease required that Milwaukee County and 
Midwest share the revenue from the dumping fees to improve the 
facility.  Id.  Between the dumping fees and rent, Milwaukee 
County earned $744,569 for a 5-year period, whereas Midwest 
operated the ski hill at a loss of $83,694 for the same 5-year 
period.  Id. 
                                                 
12 Crystal Ridge Ski Hill is the name of the downhill 
facility.  City of Franklin v. Crystal Ridge, Inc., 180 
Wis. 2d 561, 565, 509 N.W.2d 730 (1994).  Midwest Development 
Corp. built the ski hill and remained the lessee.  Id. at 656-
66.  However, Crystal Ridge, Inc. physically occupied and 
managed the ski hill.  Id. at 563, 566.  
No.  2005AP1160 
 
22 
 
 
¶47 We noted the following indicia of Midwest’s ownership 
in the buildings:  
(1) Midwest constructed the buildings at its own 
expense; (2) Midwest and Crystal Ridge enjoy the use 
and profits from the ski facility for three and one-
half months each year; (3) Midwest carries fire and 
liability insurance on the buildings; (4) Midwest is 
responsible 
for 
repairs 
and 
maintenance 
on 
the 
buildings; and (5) Midwest agreed to pay all licenses, 
fees and taxes on the property. 
Id. at 568-69.   
 
¶48 In holding that Midwest was not the beneficial owner, 
we recognized that Midwest’s indicia of ownership deviated from 
Mitchell Aero’s indicia of ownership in three important ways.  
Midwest paid Milwaukee County rent, whereas Mitchell Aero did 
not.  Id. at 569.  Milwaukee County exercised significant 
control over the daily operation of the Crystal Ridge buildings, 
including "activities, fees, restaurant menu and hours of 
operation of the buildings," whereas Milwaukee County did not 
exercise control over the daily operation of Mitchell Aero's 
hangars.  Id.  Finally, Milwaukee County was required to pay 
Midwest for the buildings only if it terminated the lease and 
did not use the premises as a ski hill.  By contrast, there were 
several circumstances in which Milwaukee County would be 
required to pay Mitchell Aero for the hangars, such as if the 
county condemned the leased land, the county abandoned the land 
as an air terminal, or the county breached a provision in the 
lease.  Id. 
No.  2005AP1160 
 
23 
 
 
¶49 We then noted that Milwaukee County had many indicia 
of ownership in the buildings.  These included:  
(1) [Milwaukee County] must approve the plans and 
location of the buildings; (2) [Midwest] can only use 
the land for one purpose . . . skiing . . . unless 
[Milwaukee County] gives permission to conduct other 
activities on the land; (3) [Milwaukee County] enjoys 
exclusive use of the land for other purposes for a 
significant length of time each year; (4) [Milwaukee 
County] may enter and leave the buildings at any 
reasonable time; (5) [Midwest] may not sublet the 
buildings or any portion of the buildings without 
[Milwaukee County’s] prior approval; (6) [Midwest] 
must 
maintain 
insurance on the buildings naming 
[Milwaukee County] as an additional insured; and (7) 
upon expiration of the lease, [Milwaukee County] 
acquires a full possessory interest in the buildings. 
Id. at 570. 
 
¶50 We described two additional factors that indicated 
Milwaukee County was the beneficial owner of the buildings.  
Financial institutions did not recognize Midwest as the owner, 
and Milwaukee County received the majority of the profits from 
the ski hill.  Id. at 571. 
 
¶51 After balancing the county’s indicia of ownership 
against Midwest’s indicia of ownership, we held that the county 
was the beneficial owner of the ski chalet and the rental 
building.  Id.  
2. 
Application to MRMC 
¶52 We now apply the analyses of Mitchell Aero, Gebhardt, 
and Crystal Ridge to the present case.  MRMC argues that 
Milwaukee County, in addition to retaining title to the land, 
retains sufficient control over the property to be considered 
the owner.  MRMC argues that this control manifests itself 
No.  2005AP1160 
 
24 
 
through approval requirements, lease restrictions, and entry 
privileges.  Furthermore, the County receives present financial 
benefits under the terms of the lease and will receive 
significant rent for the last 20 years of the lease.  Moreover, 
the County will receive title to the day care facility at the 
end of the lease.  MRMC also contends that the County receives 
non-financial benefits by having the day care facility in the 
community. 
¶53 On the other hand, the City argues that MRMC has not 
presented sufficient evidence to overcome the presumption of 
taxation.  The City claims that the County receives only 
inconsequential 
or 
future 
benefits 
from 
the 
property.  
Furthermore, the County does not retain control over the 
property because it has no say in the operation of the property. 
¶54 We agree with the City that MRMC is the beneficial 
owner of the property at the present time, and thus the property 
is not tax-exempt under Wis. Stat. § 70.11(2).  The totality of 
the circumstances weighs toward MRMC as the beneficial owner.   
¶55 We recognize that the County has numerous indicia of 
ownership.13  These indicia include the following: (1) the County 
has title to the land; (2) if construction of the day care 
facility had not been substantially completed on time, the lease 
would have been null and void; (3) the County must give its 
approval for MRMC to use the day care facility for any purpose 
                                                 
13 In recognizing these indicia of ownership, we benefit 
from the circuit court's analysis.   
No.  2005AP1160 
 
25 
 
other than to operate a day care program; (4) the County 
controls whether MRMC may lease, sublet, or assign the day care 
facility or space within the facility; (5) the County must 
approve all building construction plans and material changes 
after 
such 
approval; 
(6) 
the 
County 
must 
approve 
all 
alterations, additions, improvements, and projects over $50,000; 
(7) the County has the right to enter the premises; (8) the 
County must consent before MRMC may construct a parking lot; (9) 
the County is paid by MRMC for exterior security of the 
property, sewage service, and water; (10) the County must give 
permission to MRMC before MRMC makes substantial expenditures 
during the last 10 years of the lease; (11) the County is paid 
by MRMC for MRMC's prorated share of fire station expenses; (12) 
the County receives title to the day care facility at no cost 
upon termination of the lease; (13) the County is a co-insured 
on the hazard insurance and an additional insured on the public 
liability insurance; and (14) if there is a condemnation that 
leaves the property unusable as a day care facility, the County 
receives the portion of the condemnation award attributable to 
the land, utilities, and utility tunnels. 
¶56 On the other side of the scale, MRMC’s indicia of 
ownership include: (1) MRMC has a 50-year lease; (2) MRMC has 
exclusive occupancy of the property during the life of the 
lease; (3) MRMC pays only $1.00 per year in rent to the County 
for 30 years; (4) MRMC does not pay the County any revenues from 
its day care activities on the property; (5) MRMC has control 
over the operation of the day care facility——the County does not 
No.  2005AP1160 
 
26 
 
set the prices or hours of operation; (6) MRMC must be provided 
with written notice before the County may enter the property, 
except when the County enters the property to inspect its 
utility lines; (7) MRMC can mortgage its leasehold interest in 
the land; (8) MRMC constructed the day care facility at its own 
expense; (9) MRMC pays the debt on the bonds issued to build the 
day care facility; (10) MRMC retains title to the day care 
facility until the expiration or termination of the lease; (11) 
MRMC has hazard and public liability insurance on the property; 
(12) MRMC maintains the day care facility and performs repairs; 
(13) MRMC provides security for the interior of the day care 
facility; (14) MRMC will be reimbursed by the County for any 
"substantial capital expenditures" it undertakes if those 
expenditures are made during the ten years prior to the 
termination of the lease; (15) upon condemnation of the 
property, MRMC shall "at its sole discretion" determine if the 
property is suitable to continue operation of the day care 
facility, and if the property is condemned so that it is not 
usable as a day care facility, MRMC receives that part of the 
condemnation award attributable to the day care facility. 
¶57 Several of the MRMC factors deserve discussion and 
emphasis.  First, a 50-year lease is a relatively long lease.  
It permits MRMC to engage in long-term planning for the child 
care needs of employees and students in its member institutions.  
In December 2003 the day care facility had 76 more children than 
the 140 mentioned in the 1990 lease, suggesting that MRMC has 
been able to expand use of the facility.   
No.  2005AP1160 
 
27 
 
¶58 Second, although a lessee's occupancy of leased 
property is expected and not dispositive, MRMC is nonetheless 
entitled to exercise exclusive occupancy of this property for a 
half century.  Its exclusive occupancy of the property contrasts 
with the nonexclusive occupancy of the properties in Gebhardt 
and Crystal Ridge. 
¶59 Third, legal title to the day care facility is 
presently vested in MRMC.  This makes the most valuable part of 
the property distinguishable from the property at issue in 
Mitchell Aero where title to the hangars was vested in Milwaukee 
County.  See Mitchell Aero, 42 Wis. 2d at 663. 
¶60 Fourth, at present, MRMC does not really pay rent for 
the land, as $1.00 per year is a token payment.  As MRMC notes, 
this factor will change markedly in the future.  As a 
consequence, MRMC receives the primary financial benefit from 
the property at the present time.  The only other financial 
benefits the County receives from MRMC are payments for water, 
sewage service, a prorated share of security for the exterior of 
the day care facility, and a prorated share of fire station 
expenses.  As in Mitchell Aero, where the County received no 
rent for the two hangars, the County in this case does not 
receive a portion of Campus Day Care’s profits.  See Mitchell 
Aero, 42 Wis. 2d at 663.   
¶61 In both Gebhardt and Crystal Ridge, on the other hand, 
the government agency received a significant present financial 
benefit.  In Gebhardt, the state received significant rent under 
the terms of the lease.  Gebhardt, 89 Wis. 2d at 110-11.  In 
No.  2005AP1160 
 
28 
 
Crystal Ridge, Midwest paid Milwaukee County rent of the greater 
of three percent of gross profits or $10,000.  Crystal Ridge, 
180 Wis. 2d at 564-65.  Milwaukee County also shared the 
revenues for the dumping fees for landfill material.  Thus, the 
court noted that between the dumping fees and rent, Milwaukee 
County earned $744,569 for the 5-year period.  Id. at 565.  
Here, while the County received $1.00 in rent for each year from 
2001 through 2003, Campus Day Care generated revenue of 
$1,051,014 in 2001, $1,218,942 in 2002, and $1,374,689 in 2003 
for MRMC.   
¶62 Fifth, Milwaukee County is not involved in the daily 
operation of Campus Day Care.  In other words, the County not 
only does not occupy the property, but also does not really 
control the property.  Most of the County's present "controls" 
come into play only if MRMC wishes to change the facility's 
mission, change the facility's occupants, or change the facility 
itself. 
 
Periodic 
inspections 
and 
control 
of 
building 
construction and building signage are typical of government 
oversight, irrespective of ownership.  The County may not access 
the day care facility without prior written notice.  Hence, this 
case stands in sharp contrast to Gebhardt and Crystal Ridge in 
terms of government control of operations. 
¶63 In Gebhardt the State owned and operated the only 
concession stand at the ice skating arena, required the ice 
arena to cater to special neighborhood groups, had keys to the 
arena, could enter the arena at any time, and had sole control 
over the arena for two months of the year.  Gebhardt, 89 
No.  2005AP1160 
 
29 
 
Wis. 2d at 111-12.  In Crystal Ridge the county specified the 
accounting method Midwest had to use; the cash management 
equipment Midwest had to use; and the cost of all lift tickets, 
food, ski rentals, or other items sold or rented on the 
premises.  Crystal Ridge, 180 Wis. 2d at 566.   
¶64 Considering the totality of the circumstances, we 
conclude that MRMC is at present the beneficial owner of the 
property.  The County presently holds title to the land, for 
which it is paid rent of only $1.00 per year, but MRMC presently 
holds legal title to the day care facility.  Thus, the present 
financial benefit weighs heavily for MRMC.  The County's present 
control of the property also is not significant.  Therefore, the 
property does not qualify for a Wis. Stat. § 70.11(2) tax 
exemption. 
¶65 Two 
additional 
comments 
on 
this 
score 
appear 
necessary.  One, under the lease, MRMC is required to pay the 
County a portion of the County's costs for the construction of a 
city fire station and additional firefighting positions.  For 
the years at issue, 2001-2003, these payments amounted to 
$6,645.30.  In essence, these payments serve as payments 
partially in lieu of taxes.  Inasmuch as we conclude that MRMC 
is not exempt from property taxes, MRMC will be paying full 
property taxes to Milwaukee County as well as to the City.  
Continuation of the fire station payments on top of property 
taxes to the County may constitute an issue that MRMC and the 
County should address. 
No.  2005AP1160 
 
30 
 
¶66 Two, of necessity, we consider the totality of the 
circumstances 
for 
tax 
years 
2001, 
2002, 
and 
2003.  
Wisconsin Stat. § 70.10 requires the assessor to assess all real 
and personal property "as of the close of January 1 of each 
year."  If the terms of the lease or other circumstances (such 
as use of the property) change significantly, beneficial 
ownership may change as well.  In this case, the effect of the 
lease is markedly different after 30 years.  After 30 years, 
MRMC will pay a fair market value rent to the County on the 
land.  This change in lease terms may alter the property's tax 
status.  This case is quite different from Gebhardt where the 
parties agreed that the court's determination would govern the 
tax assessment on the ice arena "for the year 1974 and all 
future years in which the property is subject to the lease 
agreement."  Gebhardt, 89 Wis. 2d at 105 (emphasis added).  The 
holding in this case does not prevent a reassessment of MRMC's 
tax status if there is a significant change in the totality of 
the circumstances.14 
B. 
Educational 
Association 
Exemption 
under 
Wis. Stat. § 70.11(4) 
¶67 MRMC presents a second ground for property tax 
exemption.  If MRMC is deemed the beneficial owner of the 
                                                 
14 Our purpose in making this observation is not to 
introduce uncertainty into property taxation.  Our purpose is 
merely to recognize that property is not static.  Over time, the 
beneficial ownership of property may change if enough "sticks" 
or rights move from one party to another.   
No.  2005AP1160 
 
31 
 
property, then, it argues, it qualifies as an educational 
association under Wis. Stat. § 70.11(4). 
 
¶68 Wisconsin Stat. § 70.11(4) authorizes a property tax 
exemption 
for 
"[p]roperty 
owned 
and 
used 
exclusively 
by 
educational institutions offering regular courses 6 months in 
the year" and for property owned by "educational or benevolent 
associations."15   
¶69 In Janesville Community Day Care Center, Inc. v. 
Spoden, 126 Wis. 2d 231, 235, 376 N.W.2d 78 (Ct. App. 1985), the 
court of appeals ruled on a tax exemption dispute involving a 
day care facility in a renovated former school in Janesville.  
In approving the facility's tax exemption, the court employed a 
five-part statutory test articulated in National Foundation of 
Health, Welfare & Pension Plans, Inc. v. City of Brookfield, 65 
Wis. 2d 263, 264-65, 222 N.W.2d 608 (1974).  The court said that 
to 
qualify 
for 
a 
property 
tax 
exemption 
under 
Wis. Stat. § 70.11(4), a property owner must pass the following 
five-part test: (1) the property owner must be an educational 
association; (2) the property at issue must be owned and used 
exclusively for the purposes of the association; (3) the 
property must be less than ten acres; (4) the property must be 
necessary for location and convenience of the buildings; and (5) 
                                                 
15 Because MRMC asserts that it is exempt only as an 
educational association, not as an educational institution, we 
apply 
only 
those 
tests 
appropriate 
to 
the 
"educational 
association" status.   
No.  2005AP1160 
 
32 
 
the property must not be used for profit.  Janesville Cmty. Day 
Care, 126 Wis. 2d at 235. 
¶70 To 
qualify 
as 
an 
educational 
association 
under 
Wis. Stat. § 70.11(4), MRMC must pass a two-part test.  First, 
the organization must be a nonprofit organization substantially 
and primarily devoted to educational purposes.  Nat'l Found., 65 
Wis. 2d at 264-65.  If the educational function is merely 
incidental to nonexempt functions or the educational function 
serves the directors' or the members' personal interests, the 
exemption will not be granted.  Id. at 265-66.  Second, the 
organization must 
be devoted to "traditional" educational 
activities.  Id. at 266; see Eng'rs & Scientists of Milwaukee, 
Inc. v. City of Milwaukee, 38 Wis. 2d 550, 558, 157 N.W.2d 572 
(1968).   
¶71 The City does not challenge whether MRMC is devoted to 
traditional educational activities.  The City argues that MRMC 
is not substantially and primarily devoted to educational 
purposes.  We agree with the City.  Therefore, we do not address 
whether MRMC is devoted to traditional educational activities.   
¶72 On the first prong of the two-part test, the parties 
disagree whether the focus of this inquiry should be on MRMC's 
activities as a whole or on MRMC's activities at the day care 
facility.  MRMC argues that the focus should be on whether its 
activities at the day care facility, rather than its activities 
as 
a 
whole, 
are 
substantially 
and 
primarily 
devoted 
to 
educational purposes.   
No.  2005AP1160 
 
33 
 
¶73 Because MRMC is the taxable entity, we must consider 
the entirety of MRMC's activities, not just its activities at 
the day care facility.  We agree with the City that under the 
five-part statutory test, both the organization (MRMC) and the 
property (day care facility) must qualify for exemption under 
Wis. Stat. § 70.11(4).  Hence, (1) the organization must qualify 
as an educational association; and (2) the property of the 
organization must be owned and used exclusively for the purposes 
of the association.  Janesville Cmty. Day Care, 126 Wis. 2d at 
235.  If only the organization's activities at the property were 
relevant 
in 
determining 
whether 
an 
organization 
is 
an 
educational association, the second part of the statutory test 
would become superfluous because the use of the property would 
already be determined. 
¶74 This interpretation is supported by case law.  In 
Trustees of Indiana University, the issue was whether an Indiana 
University alumni organization that ran a summer camp in 
Wisconsin 
used 
by 
the 
university 
for 
physical 
education 
curriculum, was an educational association.  The court not only 
considered the organization's activities at the camp, but also 
No.  2005AP1160 
 
34 
 
considered its activities at the campus in Indiana.  See 
Trustees of Ind. Univ., 170 Wis. 2d at 304.16 
¶75 Thus, the issue is whether MRMC as a whole is 
substantially and primarily devoted to educational purposes.  
MRMC’s primary purposes as stated in its bylaws are: 
(1) to aid and support the development and 
provision of health services in the Milwaukee region 
by assisting its members to develop and operate, high-
quality, 
efficient 
and 
effective 
programs 
of 
education, 
research 
and 
patient 
care; 
(2) 
to 
facilitate the efficient development and functioning 
of the Medical Center Campus.   
MRMC is a coordinating body for its members.  Assisting its 
members by providing a high quality educational program for the 
young children of employees and students does not transform MRMC 
into an educational association.  According to its bylaws, MRMC 
has many purposes; education is not singled out as being 
primary.  Education of young children is incidental to MRMC’s 
primary goal of "aid[ing] and support[ing] the development and 
provision of health services in the Milwaukee region" and 
                                                 
16 MRMC relies on Engineers & Scientists of Milwaukee, Inc. 
v. City of Milwaukee, 38 Wis. 2d 550, 157 N.W.2d 572 (1968), to 
argue that the court in that case looked solely at the 
organization's primary activities at the property to determine 
whether the organization was an educational association.  MRMC's 
reliance on that case is misplaced because the court there 
meshed the first and second statutory tests together and focused 
on whether the organization was an educational association whose 
property was owned and used exclusively as an educational 
association.  Under the statutory test, however, the first 
inquiry 
is 
whether 
the 
organization 
is 
an 
educational 
association.  If so, the second inquiry is whether the property 
is 
used 
exclusively 
for 
the 
purposes 
of 
an 
educational 
association.  
No.  2005AP1160 
 
35 
 
"facilitat[ing] the efficient development and functioning of the 
Medical Center campus."  
¶76 We note, in addition, that Campus Day Care is not 
MRMC’s primary business activity, as it is not MRMC's primary 
source of revenue.  MRMC engages in three business activities: 
air ambulance programs, operation of Campus Day Care, and 
leasing of a warehouse building to certain of its members.  The 
bulk of MRMC’s revenue for 2001, 2002, and 2003 did not come 
from Campus Day Care.  In 2001 MRMC received $1,051,014 in 
revenue from Campus Day Care, while it received $5,484,032 from 
its 
transportation 
services. 
 
In 
2002 
and 
2003 
the 
transportation services generated far more income for MRMC than 
Campus Day Care.  In 2002 Campus Day Care generated $1,218,942 
in 
revenue, 
while 
the 
transportation 
services 
generated 
$6,348,561.  In 2003 Campus Day Care generated $1,374,689, while 
transportation revenue generated $7,049,754. 
¶77 In sum, we conclude that MRMC is not primarily devoted 
to educational purposes.  Therefore, MRMC is not an educational 
association under Wis. Stat. § 70.11(4), and the property is not 
exempt from property tax.   
CONCLUSION 
¶78 We affirm the court of appeals and hold that MRMC is 
not exempt from property tax under Wis. Stat. § 70.11(2) or (4).  
We hold that, under the totality of the circumstances, MRMC is 
the beneficial owner of the property at the present time.  This 
case is distinguishable from Gebhardt where the parties agreed 
that the court's determination would govern the tax assessment 
No.  2005AP1160 
 
36 
 
on the ice arena for all the years that the property was subject 
to the lease agreement.  The beneficial ownership of property 
may change over time if there is a significant change in the 
totality of the circumstances.  We also hold that MRMC is not an 
educational association because its primary purpose is not 
educational.  We remand this case to the circuit court for 
further proceedings in accordance with this holding.   
 
By the Court.—The decision of the court of appeals is 
affirmed and the cause is remanded to the circuit court for 
further proceedings consistent with this opinion. 
 
 
 
 
 
No.  2005AP1160.lbb 
 
1 
 
 
¶79 LOUIS B. BUTLER, JR., J.   (concurring in part, 
dissenting in part).  The majority concludes that the Milwaukee 
Regional Medical Center ("MRMC") is the beneficial owner of the 
day care facility located on public land owned by Milwaukee 
County ("County").  Majority op., ¶64.  As a result, the 
majority reasons, MRMC does not qualify for a property tax 
exemption under Wis. Stat § 70.11(2).  Majority op., ¶¶5, 78.  
The majority also concludes that MRMC does not qualify for the 
§ 70.11(4) tax exemption as an educational association.  Id.1   
¶80 Regarding the issue of beneficial ownership, I agree 
with the majority that we apply a fact-specific balancing test, 
under which we weigh the indicia of ownership of the County 
against the indicia of MRMC's ownership, considering all 
relevant factors pertaining to ownership.  See City of Franklin 
v. Crystal Ridge, Inc., 180 Wis. 2d 561, 568, 509 N.W.2d 730 
(1994); Gebhardt v. City of West Allis, 89 Wis. 2d 103, 109, 278 
N.W.2d 465 (1979); Mitchell Aero, Inc.  v. City of Milwaukee, 42 
Wis. 2d 656, 662, 168 N.W.2d 183 (1969).  However, I write 
separately because I disagree with the majority opinion's 
application of that standard, and am troubled by the extent to 
which the majority opinion appears to change that standard. 
¶81 The majority claims to apply the totality of the 
circumstances 
balancing 
test 
for 
establishing 
beneficial 
ownership set forth in Crystal Ridge, Gebhardt, and Mitchell 
Aero.  See majority op., ¶¶35-36.  However, reciting the 
                                                 
1 I agree with and join this latter conclusion. 
No.  2005AP1160.lbb 
 
2 
 
standard and properly applying it are very different things.  I 
conclude that the majority's application of the test for 
determining beneficial ownership is flawed in two basic ways.  
First, it fails to consider the totality of the circumstances by 
focusing almost entirely on current financial benefits provided 
in the lease agreement while ignoring those lease terms that 
provide significant future financial benefits.  Second, the 
analysis is incomplete and biased in favor of MRMC ownership 
because it focuses narrowly on five indicia of MRMC ownership 
while failing to discuss in any depth even one indicia of County 
ownership.  Below, I address in turn these two problems in the 
majority's analysis, and conclude that a proper application of 
the test would result in a determination of County beneficial 
ownership.   
I 
¶82 The majority's application of the beneficial ownership 
test changes the focus from a consideration of all benefits 
provided to each party under the lease to only those benefits 
that are currently in effect.  Id., ¶64.  This approach 
significantly alters the totality of the circumstances test, and 
is inconsistent with Crystal Ridge, Gebhardt, and Mitchell Aero. 
¶83 The totality of the circumstances test requires taking 
into account the terms of the lease as a whole, not just those 
referring to current conditions and events.  This principle was 
affirmed in the context of the beneficial ownership balancing 
test applied in Crystal Ridge, Gebhardt, and Mitchell Aero, all 
of which, in considering the totality of the circumstances, 
No.  2005AP1160.lbb 
 
3 
 
considered the lease as a whole, which the majority fails to do 
here.   
¶84 In Crystal Ridge, this court examined all of the 
provisions of the lease between the parties, including among the 
emphasized indicia the fact that "upon expiration of the lease, 
the 
lessor 
acquires 
a 
full 
possessory 
interest 
in 
the 
buildings."  Crystal Ridge, 180 Wis. 2d at 570.  Consequently, 
the county was determined to be the beneficial owner in that 
case, based on the totality of the circumstances of the lease 
and the parties' relationship.  Id. at 570-73.    
¶85 In 
Gebhardt, 
this 
court 
explained 
that 
because 
ownership is often referred to as a "bundle of sticks," when we 
determine beneficial ownership, we examine all of the relevant 
sticks, not just the stick of title ownership.  Gebhardt, 89 
Wis. 2d at 108-09.  The Gebhardt court examined factors in a 
lease for a recreational ice arena reflecting both present and 
future conditions, noting, for example, that "under the terms of 
the lease the respondents bear the risk of loss should the ice 
arena be destroyed during the lease period."  Id. at 109.  In 
finding the State to be the beneficial owner, the Gebhardt court 
found "controlling" "the fact that upon expiration of the lease 
the state acquires a full and complete possessory interest in 
the property."  Id. at 115. 
¶86 The Mitchell Aero decision contains the following 
explanation of the "bundle of sticks" analysis of beneficial 
ownership: 
Ownership is often referred to in legal philosophy as 
a bundle of sticks or rights . . . .  What combination 
No.  2005AP1160.lbb 
 
4 
 
of rights less than the whole bundle will constitute 
ownership is a question which must be determined in 
each case in the context of the purpose of the 
determination.  In this case for exemption one needs 
more than the title stick to constitute ownership. 
Mitchell Aero, 42 Wis. 2d at 662.  In Mitchell Aero, this court 
examined the entire lease over a twenty-year period in light of 
all relevant considerations, including provisions of the lease 
referencing future or hypothetical scenarios such as the 
parties' rights in the face of damage from natural disasters, 
condemnation, or property abandonment.  Id. at 663-65. 
¶87 In contrast with our decisions in these cases, where 
the court looked at the leases at issue in their entirety under 
the totality of circumstances test, the majority in this case 
confines its analysis to the terms of the lease that reflect the 
present conditions of the parties.  The majority ignores those 
terms reflecting benefits that will be granted to the County in 
the future, suggesting that the parties come back to court to 
re-litigate the tax exemption issue as those benefits come to 
fruition.  Requiring the parties to re-litigate this issue each 
time a lease term comes to fruition would not only be contrary 
to the totality of the circumstances test, it would also be an 
unjust imposition on litigants and an impractical drain on the 
judiciary's resources. 
II 
¶88 The majority mentions in passing, and in an incomplete 
manner, the numerous indicia of County ownership.  The majority 
produces side-by-side lists of indicia of County ownership and 
indicia of MRMC ownership.  Majority op., ¶¶55-56.  However, its 
No.  2005AP1160.lbb 
 
5 
 
list of County ownership indicia fails to take into account all 
of the factors identified by the circuit court.  While the 
majority 
opinion 
asserts 
that 
in 
compiling 
the 
list 
it 
"benefit[ed] from the circuit court's analysis," majority op., 
¶55 n.13, the majority's list omits the following indicia 
favoring County ownership that were included in the circuit 
court's list:  (1) the County's right to terminate the lease and 
take possession of the property if construction was not 
completed on time; (2) MRMC's duty to indemnify the County for 
damages; and (3) MRMC's responsibility to keep the day care 
center in clean condition, serving at least 140 children.  
Compare Milwaukee Reg'l Med. Ctr., Inc. v. City of Wauwatosa, 
2006 
WI 
App 
139, 
¶41, 
295 
Wis. 2d 211, 
720 
N.W.2d 161 
(Wedemeyer, P.J., concurring in part, dissenting in part), with 
majority op. ¶55.  
¶89 Rather than considering in depth the various indicia 
of beneficial ownership favoring both County ownership and MRMC 
ownership, the majority narrowly focuses on the following 
indicia favoring MRMC ownership:  (1) the length of the lease 
term; (2) MRMC's exclusive occupancy of the property; (3) MRMC's 
current retention of the title of the day care facility; (4) the 
current minimal rent which MRMC pays the County; and (5) the 
County's lack of involvement in the day-to-day operation of the 
facility.  Majority op., ¶¶57-62.   
¶90 The majority fails to adequately explain the basis for 
its emphasis on these five factors.  The first two factors that 
the majority claims have significant weight in the balancing 
No.  2005AP1160.lbb 
 
6 
 
test——the length of the lease and MRMC's exclusive occupancy——
are common lease terms and are therefore merely indicative of 
lessee status and are not particularly weighty indicia of 
ownership. 
 
The 
majority 
itself 
concedes 
that 
exclusive 
possession is to be expected with a lease agreement, but 
nonetheless proceeds to place great emphasis on this factor.  
See majority op., ¶58. 
¶91 The third indicia highlighted by the majority, current 
retention of title by MRMC, should bear no more weight than the 
undisputed fact that the County will ultimately retain legal 
title to the land.  As the majority concedes, possession of 
legal title does not guarantee that a party is an "owner" for 
tax exemption purposes; rather, the whole purpose of the 
"beneficial owner" inquiry is to move beyond such original 
surface determinations based on mere technical title.  See 
majority op., ¶33.  Consequently, it is difficult to fathom why 
the MRMC's (temporarily) retained paper title should bear more 
weight in our analysis than any of the indicia of County 
ownership.  
¶92 The final two indicia emphasized by the majority 
warrant more discussion.   
¶93 I respectfully disagree with the majority's view that 
because the County (unlike the governmental units in Gebhardt 
and Crystal Ridge) is not directly involved in the day-to-day 
operation of the facility, it does not retain significant 
control over the use of the child-care facility.  While the 
County does not set the price of child care or employ County 
No.  2005AP1160.lbb 
 
7 
 
employees to operate the center, there are many significant 
respects in which the County retains control over the center.  
Foremost, the County strictly limits MRMC's use of the property 
to "a child care center to serve employees and students of the 
Milwaukee Regional Medical Center, its member organizations and 
the general public and for no other purpose . . . ."  This 
language is similar to the lease requirement in Gebhardt 
limiting the respondent's use of the facility to "ice skating 
related sports and recreation."  See Gebhardt, 89 Wis. 2d at 
111.  Additionally, the County mandates that MRMC must maintain 
a child-care program capable of serving at least 140 children.   
¶94 In addition to mandating the type and size of the 
service provided by MRMC, the County restricts future changes to 
the facility.  The County retains extensive control over any 
modifications made to the child-care facilities and grounds, as 
was the case in both Gebhardt and Crystal Ridge.  See Gebhardt, 
89 Wis. 2d at 111; Crystal Ridge, 180 Wis. 2d at 569-70.  MRMC 
must gain approval from the County for any additions or 
alterations costing more than $50,000, and the County's written 
consent for any substantial improvements made in the last ten 
years of the lease.  Furthermore, the County requires MRMC to 
provide fencing and forbids placing signs on the property 
without permission.  The lease also requires MRMC to keep the 
facilities in good, clean and safe condition, and allows the 
County the right to enter the premises, with notice, at any 
reasonable time to determine if MRMC is meeting its obligations 
under the lease.  By emphasizing the County's lack of day-to-day 
No.  2005AP1160.lbb 
 
8 
 
operation of the facility while omitting discussion of these 
indicia of control, the majority engages in an incomplete 
analysis.   
¶95 The majority's narrow focus on the "present financial 
benefit" factor fails to acknowledge the other benefits the 
County receives from the lease agreement, including important 
non-financial benefits.  See majority op. ¶¶60-62.  For example, 
the record indicates that the County entered into the lease 
agreement with MRMC because there is a public benefit to 
providing child-care services on County public land.  The lease 
agreement states, "WHEREAS, Lessor is satisfied that it is in 
the best interest of Milwaukee County and its residents to make 
said land available to Lessee for the purposes herein stated."   
¶96 In addition, while the majority points to the 50-year 
lease as an important indicia of MRMC ownership because the 
lease term allows MRMC to engage in long-term planning, the 
opinion fails to acknowledge similar long-term or future 
benefits to the County.  See majority op., ¶57.  Such future 
financial benefits to the County include MRMC's obligation to 
pay the County an agreed upon market rental rate for the final 
twenty years of the lease; the County's right to possession if 
construction 
was 
not 
completed; 
the 
County's 
right 
to 
indemnification; and the County's right to complete title and 
possession of the child-care facility free of any encumbrances 
at the end of the lease.   
¶97 This last benefit is particularly significant because, 
under the current lease, the County will claim title to the 
No.  2005AP1160.lbb 
 
9 
 
improvements to the property, valued at $1,172,400 in 2003, 
without any expenditure by the County.  In Gebhardt, this court 
determined that a similar lease provision restoring a full and 
complete possessory interest in the property to the State upon 
termination of the lease was a controlling factor in our 
conclusion that the State had beneficial ownership.  Gebhardt, 
89 Wis. 2d at 115.  The majority here fails to explain why the 
future transfer to the County of more than a million dollars in 
improvements is not worth substantive consideration, in contrast 
with the indicia of MRMC ownership it chooses to emphasize. 
¶98 Additionally, the County's current financial benefits 
are not insignificant.  These include MRMC's payment of a pro 
rata share of the County’s obligation to the City of Wauwatosa 
for the construction of a new fire station and fire fighting 
positions; MRMC's obligation to purchase water, sewer, and 
security services from the County throughout the lease term; and 
the County's receipt of insurance coverage throughout the lease.  
These current financial benefits, taken with non-financial 
benefits and future financial benefits, weigh in favor of a 
determination of County beneficial ownership.  
¶99 In my view, when the County anticipates a public 
benefit from an agreement and that benefit is exceeded (MRMC 
serves more than 140 children), that benefit must weigh heavily 
on the side of the County being the beneficial owner, along with 
the other above-mentioned indicia.  To ignore the significance 
of these benefits may distort the importance of the current 
favorable financial terms enjoyed by MRMC.  It is possible the 
No.  2005AP1160.lbb 
 
10 
 
current financial terms are simply the terms required for the 
County 
to 
recruit 
a 
non-governmental 
partner 
to 
provide 
important public benefits, such as ensuring the availability of 
child-care services to county residents.  Indeed, this court 
recognized in Gebhardt that, "public policy favors this type of 
tax-exempt 
treatment 
for 
conveyance-leaseback 
arrangements 
between private enterprise and governmental bodies."  Gebhardt, 
89 Wis. 2d at 115.  A full analysis of the circumstances in 
these types of agreements requires taking into account the non-
financial benefits that often represent the impetus for making 
the agreement in the first place.  
¶100 Such a full analysis is lacking from the majority 
opinion.  I do not disagree with the existence of the facts 
listed by the majority opinion as indicia supporting MRMC 
ownership; however, many of the listed facts are merely benefits 
accorded to MRMC as a lessee, and do not necessarily indicate 
beneficial 
ownership.2 
 
As 
Wis. Stat. § 70.11(2) 
provides, 
"[l]easing the property exempt under this subsection, regardless 
of the lessee and the use of the leasehold income, does not 
render that property taxable."   
                                                 
2 For example, the majority lists as indicia of MRMC 
ownership the following lessee-specific benefits:  (1) the term 
of 
the 
lease; 
(2) 
exclusive 
occupancy, 
as 
traditionally 
accompanies a lease; (3) the right to notice before the County 
enters the property, which is also generally accorded to 
lessees; (4) MRMC's retention of title of the day care facility, 
but only through the duration of the lease; and (5) the amount 
of rent paid, which I have already addressed.  Majority op., 
¶56. 
No.  2005AP1160.lbb 
 
11 
 
¶101 In short, I fail to understand the justification for 
the majority's disproportionate emphasis on the above indicia 
purportedly favoring MRMC ownership.  Even if the above-
mentioned indicia warrant the weight the majority gives them, by 
discussing a select number of MRMC ownership indicia in detail 
without similarly addressing any of the County ownership 
indicia, the majority opinion fails to apply the comprehensive 
balancing test established by Crystal Ridge, Gebhardt, and 
Mitchell Aero, which requires an examination of all relevant 
indicia.    
¶102 Once the indicia of County ownership that were omitted 
by the majority are taken into account, and once all indicia of 
beneficial ownership, not just those five favored by the 
majority, are carefully considered, it becomes clear that the 
indicia weigh in favor of County, not MRMC, ownership.   
¶103 In conclusion, the majority opinion fails to accord 
appropriate 
weight 
to 
indicia 
of 
ownership 
showing 
that 
Milwaukee County retains considerable control over the MRMC 
child-care facility, receives significant present and future 
financial benefits, and obtains non-financial benefits from the 
child-care facility lease agreement.  As a result, I would 
affirm that portion of the circuit court's ruling in this case 
that would allow MRMC a tax exemption under Wis. Stat. 
§ 70.11(2). 
¶104 For the foregoing reasons, I respectfully concur in 
part and dissent in part. 
No.  2005AP1160.lbb 
 
12 
 
¶105 I am authorized to state that Chief Justice SHIRLEY S. 
ABRAHAMSON joins this opinion.   
 
 
 
 
No.  2005AP1160.lbb 
 
 
 
1