2016 WI 99

SUPREME COURT OF WISCONSIN

CASE NO.: 2014AP2947

COMPLETE TITLE: Regency West Apartments LLC,

 Plaintiff-Appellant-Petitioner,

 v.

City of Racine,

 Defendant-Respondent.

REVIEW OF A DECISION OF THE COURT APPEALS

OPINION FILED: December 22, 2016

SUBMITTED ON BRIEFS: 

ORAL ARGUMENT: September 9, 2016

SOURCE OF APPEAL:

COURT: Circuit

COUNTY: Racine

JUDGE: Gerald P. Ptacek

JUSTICES:

CONCURRED:

DISSENTED: ABRAHAMSON, J., joined by BRADLEY, A. W., J. 

dissent

NOT PARTICIPATING: 

ATTORNEYS:

For the plaintiff-appellant-petitioner, there was a brief 

by Maureen A. McGinnity and Foley and Lardner LLP, Milwaukee, 

and oral argument by Maureen A. McGinnity

For the defendant-respondent, there was a brief by Robert 

E. Hankel, and Robert E. Hankel, S.C., Mount Pleasant., John M. 

Bjelajac, and Bjelajac and Kallenbach, LLC, Racine and oral 

argument by Robert E. Hankel.
2016 WI 99

NOTICE

This opinion is subject to further 

editing and modification. The final 

version will appear in the bound 

volume of the official reports. 

No. 2014AP2947

(L.C. No. 2013CV1546 & 13CV1848)

STATE OF WISCONSIN : IN SUPREME COURT

Regency West Apartments LLC,

 Plaintiff-Appellant-Petitioner,

 v.

City of Racine,

 Defendant-Respondent.

FILED

DEC 22, 2016

Diane M. Fremgen

Clerk of Supreme Court

REVIEW of a decision of the Court of Appeals. Reversed and 

remanded. 

¶1 PATIENCE DRAKE ROGGENSACK, C.J. Regency West

Apartments, LLC brought actions against the City of Racine in 

circuit court pursuant to Wis. Stat. § 74.37(3)(d) (2011-12)1 to 

recover refunds from claimed excessive taxation for 2012 and 

2013. We review a per curiam, unpublished decision of the court 

of appeals,2 affirming an order of the Racine County Circuit 

 

1 All subsequent references to the Wisconsin Statutes are to 

the 2011-12 version unless otherwise indicated.

2 Regency West Apts. LLC v. City of Racine, No. 2014AP2947, 

unpublished slip op. (Wis. Ct. App. Sept. 16, 2015). 
No. 2014AP2947 

2

Court3 that dismissed Regency West's claims of excessive 

taxation.4 

¶2 The City of Racine's appraisers valued Regency West's 

property at $4,425,000 as of January 1, 2012 and at $4,169,000 

as of January 1, 2013 for purposes of tax assessment. Regency 

West claims both appraisals fail to comply with appraisal 

principles required by Wisconsin law, and that those appraisals 

resulted in excessive taxation. 

¶3 Our discussion centers on whether Racine's appraisals 

of Regency West's property comply with Wisconsin law. 

Specifically, we review whether Racine employed the methodology 

required by Wis. Stat. § 70.32(1) for valuing federally 

subsidized property that is subject to I.R.C. § 42 restrictions;5

whether Regency West has overcome the presumption of correctness 

set out in Wis. Stat. § 70.49; and whether Regency West proved 

the tax assessments for 2012 and 2013 were excessive. 

¶4 We conclude that the valuation methodologies Racine 

used for the 2012 and 2013 assessments did not comply with 

Wisconsin law. Accordingly, we also conclude that Regency West 

has overcome the presumption of correctness for the 2012 and 

 

3 The Honorable Gerald P. Ptacek of Racine County presided.

4 Regency West commenced separate refund actions for 2012 

and 2013, which were consolidated for trial. 

5 I.R.C. § 42 provides "a dollar-for-dollar reduction in 

federal tax liability for investors in exchange for equity 

participation in low-income rental housing." 1 Wisconsin 

Property Assessment Manual at 9-40; see 26 U.S.C. § 42. 
No. 2014AP2947 

3

2013 tax assessments, and that the circuit court and the court 

of appeals erred in concluding otherwise. And, finally, we 

conclude that Regency West has proved that Racine's tax 

assessments for 2012 and 2013 were excessive. Accordingly, we 

reverse and remand to the circuit court to calculate the amount 

of Regency West's refund.

I. BACKGROUND

¶5 Regency West is the owner and developer of a property 

located in Racine, Wisconsin. Regency West constructed the 

property in 2010-11, with the first units placed in service 

September of 2011, and the project being fully leased in 

February of 2012. 

¶6 The property has 9 two-story buildings consisting of 

72 residential units, all of which are family units. All units 

are federally regulated housing pursuant to I.R.C. § 42. These 

federal regulations include income and rent restrictions. As 

part of the restrictions, the property is subject to a Land Use 

Restriction Agreement (LURA) that provides that for 30 years, 51 

of the 72 units are restricted to tenants earning up to 50 

percent of the median income in Racine County and 21 are 

restricted to tenants earning up to 60 percent of the median 

income in Racine County. The maximum rents that Regency West 

may charge are set by Wisconsin Housing and Economic Development 

Authority (WHEDA). 

¶7 For purposes of assessing real estate taxes, Racine's 

appraisers valued Regency West's property at $4,425,000 as of 

January 1, 2012 and at $4,169,000 as of January 1, 2013. 
No. 2014AP2947 

4

Regency West contested both tax assessments, claiming that the 

appraisals that underlie the tax assessments did not comply with 

Wisconsin law. Regency West did not challenge the 2012 

assessment before the board of review because Racine did not 

timely deliver the assessment to Regency West. However, Regency 

West did challenge the 2013 assessment before the board of 

review. The board upheld that tax assessment. 

¶8 The matter now before us is Regency West's refund 

action brought in circuit court pursuant to Wis. Stat. 

§ 74.37(3)(d). Therefore, we review the record made in the 

circuit court and the circuit court's determination, not the 

determination of the assessor or the board of review. See

Nankin v. Vill. of Shorewood, 2001 WI 92, ¶¶24-25, 245 Wis. 2d 

86, 630 N.W.2d 141. 

¶9 Trial testimony turned on various methods of real 

estate appraisal by which the value of Regency West could be 

determined. The City presented testimony from its assessor, 

Janet Scites, as well as the Chief Assessor for the City of 

Racine, Ray Anderson. Scites testified that for 2012 she 

applied a direct capitalization of income approach, using "mass 

appraisal techniques."6 With a direct capitalization of income 

approach to valuation, an appraiser computes the property's net 

operating income (income less expenses or NOI) and divides it by 

 

6 Mass appraisal techniques have been used to value all 

properties in a taxing district using uniform benchmarks. 

Standard on Mass Appraisal of Real Property, 2013, International 

Ass'n of Assessing Officers.
No. 2014AP2947 

5

the applicable capitalization rate (ratio between NOI of 

comparable properties and their sale prices).7

¶10 One of Regency West's construction lenders provided 

estimates of potential gross income and expenses to Racine for 

use in the 2012 valuation. However, Racine's assessor said that 

the expense projections in that report were too high. 

Accordingly, Scites applied a 40 percent estimated expense ratio 

that she believed was reflective of other Section 42 properties. 

She testified that she did so "to stabilize expenses."

¶11 Racine's assessor used a 6 percent capitalization rate 

derived from market-rate properties, not from the market for 

Section 42 properties.8 To this, Scites added the 2.5 percent 

property tax rate, for a loaded capitalization rate of 8.5 

percent.9 Racine's appraisers divided the NOI they calculated 

based on "stabilized expenses" by an 8.5 percent capitalization

rate thereby yielding a value of $4,425,000 for 2012. 

¶12 With respect to the 2013 assessment, Racine valued 

Regency West's property at $4,169,000 as of January 1, 2013. 

 

7 The capitalization rate is an estimate of the rate of 

return an investor would expect in order to invest in the 

subject property. 

8 Ray Anderson testified that the capitalization rate was 

given to them by a brokerage firm in Southeastern Wisconsin. 

9 The Wisconsin Property Assessment Manual (WPAM) requires 

that an appraiser add the effective tax rate to create the 

loaded capitalization rate for the subject property when doing 

an income-based valuation. 1 Wisconsin Property Assessment

Manual at 9-23. 
No. 2014AP2947 

6

The City's assessors used the comparable sales approach, rather 

than the income approach, to appraise the property. They relied 

on the sales of three properties, which they claimed were 

reasonably comparable properties. 

¶13 One of the properties, Lake Oakes, had few Section 42 

housing units; most were market-rate units. The other two 

properties the City's assessors relied on, Woodside 

Village/Albert House and McMynn Tower, had no Section 42 units. 

Each of those developments was either entirely HUD § 8 housing 

or HUD § 8 housing with a small number of commercial units.10 

The assessor did not adjust for differences in government 

restrictions on the different types of federally regulated 

housing when appraising Regency West's property. Instead, 

Scites testified that she considered the restrictions for 

Section 8 and Section 42 properties to be sufficiently similar.

¶14 Racine also presented the testimony of two outside 

appraisers, Peter Weissenfluh and Dan Furdek. The outside 

appraisers used four appraisal methods for both their 2012 and 

2013 assessments. First, Weissenfluh and Furdek used the 

comparable sales approach. The appraisers relied on a 

combination of Section 42 and Section 8 properties, and Furdek 

 

10 HUD § 8 housing has entirely different restrictions than 

does Section 42 housing. For example, Section 8 properties do 

not have tenant income or rent restrictions, and the government 

provides rent subsidies when tenant income is insufficient to 

pay the rent charged. Compare 42 U.S.C. § 1437f (HUD § 8) with 

26 U.S.C. § 42 (I.R.C. § 42). 
No. 2014AP2947 

7

testified that he believed the restrictions on the properties 

were irrelevant as long as the rental income from the properties 

was the same. Next, they used two variations of the income 

approach: the direct capitalization method and the discounted 

cash flow method. Finally, they used the cost approach. Each 

of Furdek and Weissenfluh's valuations resulted in higher 

valuations than Racine's. 

¶15 In contrast, Regency West argued that it had overcome 

the presumption of correctness afforded the City's tax 

assessment for two reasons. First, the City had failed to 

comply with the Wisconsin Property Assessment Manual (WPAM)11 in 

its appraisals of Regency West's property as Wis. Stat. 

§ 70.32(1) requires. Second, Regency West presented sufficient 

contrary evidence that Racine's appraisals were excessive. In 

that regard, Regency West presented testimony from Michael 

Lerner and, its appraiser, Scott McLaughlin. Michael Lerner has 

vast experience working with Section 42 housing whereas Scott 

McLaughlin specializes in appraising subsidized housing. 

Relying solely on the income approach, which he explained was 

consistent with WPAM, McLaughlin appraised the property at 

$2,700,000 for 2012 and $2,730,000 for 2013.

¶16 At the conclusion of the trial, the circuit court 

dismissed Regency West's excessive tax claims for both years. 

The circuit court concluded that Regency West had failed to 

 

11 All references to the Wisconsin Property Assessment 

Manual are to the 2011 version unless otherwise indicated. 
No. 2014AP2947 

8

overcome Wis. Stat. § 70.49's presumption of correctness given 

to the 2012 and 2013 tax assessments. 

¶17 The circuit court found that Racine did not do an 

individual valuation of Regency West's property for 2012, but 

instead, it "applied mass appraisal techniques." The court 

found that Scites "estimated expenses based upon her experience 

and used a capitalization rate of 8.5%." The court then 

concluded that "[d]ue to the number of assessments needed to be 

done (7,500), the City used mass appraisal techniques, [which 

was] an appraisal method approved by the Property Assessment 

Manual for commercial property" in arriving at $4,425,000 as the 

property's value in 2012. 

¶18 The court of appeals affirmed the circuit court's 

dismissal of Regency West's complaint. With respect to the 2013 

assessment, the court rejected Regency West's argument that 

Section 42 and Section 8 properties are not reasonably 

comparable for purposes of the comparative sales approach. The 

court reasoned that both types of subsidized housing are found 

within the same section of the WPAM, and Racine's assessors had 

opined that the rents from all the properties were essentially 

the same. With respect to the 2013 assessment, the court 

concluded that reliance on market-rate properties for the NOI 

was immaterial because Racine used the comparative sales 

approach for that valuation; and for 2012, reliance on a marketrate NOI was reasonable because Regency West was newly 

constructed and did not have actual expenses to consider. 
No. 2014AP2947 

9

¶19 Consequently, the court of appeals concluded that 

Regency West had not overcome the presumption of correctness 

accorded to tax assessments by Wis. Stat. § 70.49 and, 

therefore, Regency West was unable to show that its 2012 and 

2013 tax assessments were excessive. 

¶20 We granted Regency West's petition for review and now 

reverse. 

II. DISCUSSION

A. Standard of Review

¶21 This is a refund action commenced under Wis. Stat. 

§ 74.37(3)(d). It permits "an aggrieved person to recover that 

amount of general property tax imposed because the assessment of 

property was excessive." Wis. Stat. § 74.37(1). A claim for 

excessive assessment is a "new trial, not a certiorari action." 

Trailwood Ventures, LLC v. Vill. of Kronenwetter, 2009 WI App 

18, ¶6, 315 Wis. 2d 791, 762 N.W.2d 841. Therefore, "we review 

the record made before the circuit court, not the board of 

review." Adams Outdoor Advert., Ltd. v. City of Madison, 2006 

WI 104, ¶24, 294 Wis. 2d 441, 717 N.W.2d 803 (citing Nankin, 245 

Wis. 2d 86, ¶25). 

¶22 As we review the record made in the circuit court, we 

interpret and apply Wis. Stat. § 70.32 to determine whether 

Racine's appraisals for 2012 and 2013 followed the statute's 

directives. We also interpret Wis. Stat. § 70.49(2) to 

determine whether Regency West has overcome the presumption of 

correctness that attached to Racine's tax assessments. 

Statutory interpretation and application present questions of 
No. 2014AP2947 

10

law that we independently review, while benefitting from the 

analyses of the court of appeals and the circuit court. Oneida 

Cty. Dep't of Soc. Servs. v. Nicole W., 2007 WI 30, ¶9, 299 

Wis. 2d 637, 728 N.W.2d 652; see also Soo Line R.R. Co. v. DOR, 

97 Wis. 2d 56, 59-60, 292 N.W.2d 869 (1980). 

B. General Appraisal Principles

¶23 "The power to determine the appropriate methodology 

for valuing property for taxation purposes lies with the 

legislature." Walgreen Co. v. City of Madison, 2008 WI 80, ¶19, 

311 Wis. 2d 158, 752 N.W.2d 687. Wisconsin Stat. § 70.32(1) 

provides that "property shall be valued by the assessor in the 

manner specified in the Wisconsin property assessment manual." 

"The Manual, in turn, provides that '[t]he goal of the assessor 

is to estimate the market value of a full interest in the 

property, subject only to governmental restrictions. All the 

rights, privileges, and benefits of the real estate are included 

in this value. This is also called the market value of a fee 

simple interest in the property.'" Walgreen, 311 Wis. 2d 158, 

¶20 (quoting 1 Wisconsin Property Assessment Manual (2007) at 7—

4). 

¶24 The objective of an appraisal is to determine "the 

full value" that an owner would receive at a "private sale." 

Wis. Stat. § 70.32(1). For purposes of determining full value, 

property is separated into seven classifications based on use. 

Wis. Stat. § 70.32(2). Regency West is residential property. 

§ 70.32(2)(a)1. 
No. 2014AP2947 

11

¶25 Wisconsin Stat. § 70.32(1) provides the methodological

framework that appraisers must follow when appraising property. 

It delineates a three-tier approach: 

In determining the value, the assessor shall consider 

recent arm's-length sales of the property to be 

assessed if according to professionally acceptable 

appraisal practices those sales conform to recent 

arm's-length sales of reasonably comparable property; 

recent arm's-length sales of reasonably comparable 

property; and all factors that, according to 

professionally acceptable appraisal practices, affect 

the value of the property to be assessed. 

Wis. Stat. § 70.32(1); see also State ex rel. Markarian v. City 

of Cudahy, 45 Wis. 2d 683, 686, 173 N.W.2d 627 (1970).

¶26 "An assessor has an obligation to follow the three 

tier assessment analysis." Adams, 294 Wis. 2d 441, ¶47. 

Nevertheless, this hierarchy of appraisal methods does not 

permit an assessor to use an appraisal method when insufficient 

data exist to perform an accurate valuation under that method. 

To the contrary, an assessor must not appraise a property using 

unreliable data. Metro. Holding Co. v. Bd. of Review of City of 

Milwaukee, 173 Wis. 2d 626, 631-32, 495 N.W.2d 314 (1993).

¶27 Under the first tier of appraisal methods set out in 

Wis. Stat. § 70.32(1), an appraiser should rely on recent arm'slength sales of the subject property to determine the property's 

value. This approach is universally considered the most 

reliable method of appraising property. Markarian, 45 Wis. 2d

at 686. However, both parties agree that this method is not at 

issue in the present case because there were no sales of the 

subject property to consider. 
No. 2014AP2947 

12

¶28 Under the second tier of appraisal methods, an 

appraiser values a property by considering recent, arm's-length 

sales of "reasonably comparable" properties. Id.; 1 Wisconsin 

Property Assessment Manual at 9-45. The WPAM defines 

"reasonably comparable" properties as those properties that 

represent the "subject property in age, condition, use, type of 

construction, location, design, physical features and economic 

characteristics." 1 Wisconsin Property Assessment Manual at 7-

22. 

¶29 Moreover, "if there has been no arms-length sale and 

there are no reasonably comparable sales [] an assessor [may] 

use any of the third-tier assessment methodologies." Adams, 294 

Wis. 2d 441, ¶34. "The income approach, which seeks to capture 

the amount of income the property will generate over its useful 

life, and the cost approach, which seeks to measure the cost to 

replace the property, both fit into this analytic framework." 

Id., ¶35.

¶30 However, when valuing subsidized housing, the WPAM 

suggests that the "Cost Approach is the least reliable valuation 

method" because of "the difficulty in estimating external 

obsolescence." 1 Wisconsin Property Assessment Manual at 9-45. 

Accordingly, an assessor should apply the cost approach when 
No. 2014AP2947 

13

evaluating subsidized housing only when other approaches are not 

available.12

¶31 Because an appraiser must consider all aspects of the 

subject property that may affect its value, appraisers must 

consider whether a property's value is affected by its 

classification as residential property subject to Section 42 

subsidized housing restrictions. See Metro. Holding, 173 

Wis. 2d at 631-32.

¶32 The income approach is often the most reliable method 

for assessing subsidized housing. 1 Wisconsin Property 

Assessment Manual at 9-45 ("The income approach may be the most 

useful method for valuing subsidized housing . . . ."). The 

income approach is superior when applied to subsidized housing 

"due to the conditions of the agreement and the limited 

availability of data." Id.

¶33 The WPAM recognizes dissimilarities between subsidized 

properties and market-rate properties. It instructs that 

federally regulated properties are to be treated "as a separate 

market and distinct from conventional (market level) projects." 

1 Wisconsin Property Assessment Manual at 9-42. Specifically, 

federally regulated properties have "operational constraints 

 

12 Wisconsin Stat. § 70.32(1g) prohibits assessors from 

considering the effect of Section 42 tax credits when valuing 

property. It is nearly impossible to apply the "cost approach" 

to subsidized housing because the "cost approach" requires an 

appraiser to examine the cost of replacing the property, which 

will necessarily be impacted by the tax credits an owner 

receives in return for constructing the property. 
No. 2014AP2947 

14

(regulations) and risk factors that are different from a market 

rate property." Id. As such, appraisals that fail to account 

for differences between those properties and market-rate 

properties contravene the WPAM and Wis. Stat. § 70.32. Metro. 

Holding, 173 Wis. 2d at 630-32.

¶34 The WPAM provides that to be "reasonably comparable," 

other properties must have "similar restrictions" to the subject 

property. 1 Wisconsin Property Assessment Manual at 9-45 ("To 

be considered [reasonably] comparable, the recent arm's-length 

sales should have restrictions similar to the subject 

property."). With these foundational principles in mind, we 

turn to the 2012 and 2013 appraisals that underlie the tax 

assessments for Regency West's property.

C. Regency West's Property

1. 2012 tax assessment

¶35 Regency West placed its first units in service 

September of 2011, and the project was fully leased in February 

of 2012. Both Racine and Regency West valued the subject 

property as of January 1, 2012, using the income approach. 

However, they did not apply it in the same way. First, Racine 

did not do an individualized appraisal of Regency West's 

property, but instead, employed "mass appraisal techniques" 

because its appraisers had 7,500 properties to value in 2012. 

Regency West's appraisal was based on the subject property. 

Second, Racine did not consider the projected expenses and 

income for the subject property when calculating its NOI.

Regency West used projected expenses and income for the subject 
No. 2014AP2947 

15

property. Third, Racine employed a capitalization rate based on 

market-rate properties; Regency West applied a capitalization 

rate derived from a Section 42 housing market.

¶36 In calculating Regency West's NOI for 2012 under its 

mass appraisal technique, the City's appraiser used market-rate

vacancy and market-rate expenses instead of the vacancy and 

expense projections that were specific to the subject property. 

This approach fails to account for the vast differences in 

federally regulated housing discussed above and distorts the 

actual value of Regency West's property. 

¶37 An appraiser must not value federally regulated 

housing as if it were market-rate property. Doing so causes the

assessor to "pretend" that the subject property is not hindered 

by federal restrictions. Metro. Holding, 173 Wis. 2d at 631; 

see also 1 Wisconsin Property Assessment Manual at 9-45 ("Any 

income approach used must consider all the impacts of the 

subsidy program."). The restrictions and underlying agreements 

implicit in federally regulated housing will affect the 

property's value. See Bloomer Hous. Ltd. P'ship v. City of 

Bloomer, 2002 WI App 252, ¶31, 257 Wis. 2d 883, 653 N.W.2d 309 

("An assessor must consider the effects of the restrictions on 

subsidized housing."); Walworth Affordable Hous., LLC v. Vill. 

of Walworth, 229 Wis. 2d 797, 802–03, 601 N.W.2d 325 (Ct. App. 

1999) (reasoning that because the subject "property is 

encumbered with income and rental restrictions resulting from 

the [Federal Housing Tax Credits], these restrictions must be 

considered in the property's valuation."). As discussed above, 
No. 2014AP2947 

16

the WPAM recognizes these differences and directs that assessors 

are not to treat federally regulated housing as if it were 

market-rate housing for purposes of determining property values. 

1 Wisconsin Property Assessment Manual at 9-42 ("Subsidized 

housing properties operate differently than conventional 

(market-rate) properties."). 

¶38 Our decision in Metropolitan Holding unambiguously 

requires assessors to use income and expenses for the subject 

property when valuing subsidized housing under the income 

approach. Metro. Holding, 173 Wis. 2d at 634 (remanding the 

"case with instructions that [t]he Board order the city assessor 

to assess Layton Garden using the capitalization of income 

approach based on actual income and expenses"). 

¶39 In Metropolitan Holding, the plaintiff, Layton Garden, 

argued that its property was valued artificially high because 

the City of Milwaukee had relied on market-rate expenses when 

determining the property's NOI. Id. at 630. We agreed with 

Layton Garden and overturned the City of Milwaukee's tax 

assessment based on that valuation. Id. We reasoned that by 

employing market-rate rents and market-rate expenses, the city 

assessor "pretended that Layton Garden was not hindered by the 

HUD restrictions and valued the property at the amount the 

property would bring in an arm's-length transaction if 

Metropolitan were able to charge market rents." Id. at 631; see 

also Mineral Point Valley Ltd. P'ship v. City of Mineral Point 

Bd. of Review, 2004 WI App 158, ¶11, 275 Wis. 2d 784, 686 N.W.2d 

697 (concluding that the assessor must value properties 
No. 2014AP2947 

17

individually, not based on hypothetical income and expenses 

(citing Metro. Holding, 173 Wis. 2d at 629)). 

¶40 Wisconsin Stat. § 70.32(1) requires assessors to value 

property based on "the best information that the assessor can 

practicably obtain." Here, there was available to Racine's 

assessor projected expenses and income for this newly opened 

property. However, Racine chose not employ that information and 

chose instead to calculate the NOI for its income-based 

valuation through mass appraisal techniques that were not 

particularized to Regency West's property. We conclude that in 

that regard, Racine did not comply with the directive of 

§ 70.32(1) because it did not use the "best information" that 

was available to its assessor.

¶41 In contrast to the City's approach, Regency West used

income and expenses specifically projected for the subject

property when it calculated the NOI for its income-based 

valuation. These projected expenses are the best information 

that could practicably be obtained. We conclude that for this 

newly opened property, the use of projected expenses complies 

with the mandate of Wis. Stat. § 70.32(1). 

¶42 In addition to calculating a NOI for the subject 

property, an income-based valuation requires determining the 

applicable capitalization rate. Therefore, we consider whether 

appraisers, when valuing federally regulated properties, may 

derive the capitalization rate from market-rate properties. We 

conclude that they may not.
No. 2014AP2947 

18

¶43 The capitalization rate expresses the rate of return 

an investor would expect to receive from an investment in the 

subject property. 1 Wisconsin Property Assessment Manual at 9-

21. The determination of the applicable capitalization rate is 

a critical element in determining the value of a property 

because a small change in capitalization rate will create a 

significant change in a property's value. This is so because 

the value of a subject property is determined by dividing its 

NOI by the applicable capitalization rate, which rate is 

expressed as a percentage. Id. Therefore, a larger percentage 

will yield a smaller total value for the property. 

¶44 When determining the applicable capitalization rate, 

assessors must consider factors that appreciably alter the value 

of the property. Otherwise, the capitalization rate will not 

truly represent the risk an investor is undertaking when 

investing in the property. 

¶45 "Capitalization rates from the marketplace are usually 

derived from the sale of market-rate projects." Id. at 9-45. 

Such capitalization rates "do not reflect the unique 

characteristics of subsidized housing. In some cases there can 

be more risk in subsidized housing, in other cases there is 

less." Id. The WPAM further explains, "Rent levels are often 

regulated and annual increases may be difficult to obtain. In 

many cases the proportion of debt to equity is different in 

subsidized projects than in market rate projects. With some 

types of projects the amount of annual equity return is limited 

(called a limited dividend)." Id. Additionally, for some types 
No. 2014AP2947 

19

of federally regulated housing, "equity investors primarily look 

to other sources beyond the cash flow of the property for their 

required return on investment." Id.

¶46 Appraisers who fail to consider property classified as 

federally regulated housing and the restrictions attendant 

thereto when deriving capitalization rates are overlooking major 

characteristics of such property. After all, a property's 

classification as federally regulated housing may substantially 

impact the risks associated with the property, thereby altering 

the market for the property.

¶47 Moreover, as discussed above, the WPAM prohibits 

appraisers from using market-rate properties when valuing 

federally regulated housing. As a corollary, appraisers may not 

derive a capitalization rate from market-rate properties. 

Rather, appraisers should use "recent market value sales of 

similar properties" to determine the capitalization rate. Id.

at 9-24. Therefore, when valuing a property using the income 

approach, appraisers must use capitalization rates derived from 

a market consistent with the market for the subject property. 13

 

13 The market of properties an appraiser may consider when 

determining the capitalization rate will often be broader than 

the market of properties that are reasonably comparable to the 

subject property. The WPAM does not require an appraiser to 

consider the specific restrictions attendant to each property an 

appraiser relies on to determine the capitalization rate; the 

property manual requires that the properties the appraiser 

relies on be "similar." See 1 Wisconsin Property Manual at 9-24 

(stating that an appraiser must use "similar properties" when 

determining the capitalization rate). Therefore, the 

capitalization rate may be derived from properties classified as 

the same type of federal housing as the subject property without 

(continued)
No. 2014AP2947 

20

¶48 The City assessor used 6 percent as a base 

capitalization rate, which she derived through mass appraisal 

techniques of market-rate properties. The assessor then added 

2.5 percent, which is the tax rate for Regency West, yielding a 

loaded capitalization rate of 8.5 percent.

14 

¶49 Both the circuit court and the court of appeals 

approved the 6 percent base rate. They relied on Mineral Point 

Valley from which they concluded that the applicable 

capitalization rate must be derived from market-rate 

properties.15 The court of appeals also relied on Bischoff v. 

City of Appleton, 81 Wis. 2d 612, 260 N.W.2d 773 (1978). Their 

reliance on either Mineral Point Valley or Bischoff is 

misplaced, and it also fails to comply with our decision in 

Metropolitan Holdings discussed in some detail above.

 

considering the property's individualized restrictions. In 

contrast, whether properties are reasonably comparable for 

purposes of the comparative sales approach to valuation requires 

a more exacting analysis. Properties used for valuation under 

the comparable sales approach must have "restrictions similar to 

the subject property." Id. at 9-45 (emphasis added). 

14 Both parties added the City of Racine's tax rate to the 

base capitalization rate they calculated, as the addition is 

required by WPAM. 1 Wisconsin Property Assessment Manual at 9-

22.

15 The circuit court also approved Racine's appraisal for 

the 2012 income valuation, saying it was ok for "commercial 

Property." However, under Wis. Stat. § 70.32(2)(a)1., Regency 

West is classified as residential property, not commercial 

property, which is set out under Wis. Stat. § 70.32(2)(a)2.
No. 2014AP2947 

21

¶50 Mineral Point Valley considered competing arguments 

about which interest rate should be used when establishing a 

capitalization rate based on the underlying mortgage for a HUD 

§ 515 property.16 Mineral Point Valley, 275 Wis. 2d 784, ¶8. 

The partnership had obtained a 50-year mortgage at 8.75 percent. 

Id. at ¶3. As part of the HUD program, the federal government 

subsidized the partnership for 7.75 percent of that interest. 

Id. Because of the subsidy, the city assessor used 1 percent as 

the capitalization rate and the partnership used 8.75 percent. 

The court of appeals precluded the use of 1 percent as the 

capitalization rate. Id., ¶13. 

¶51 Mineral Point Valley did not involve a direct 

capitalization of income approach, which is the type of 

capitalization approach all parties have used in the case before 

us for 2012. Mineral Point Valley had nothing to do with 

whether market-rate properties or Section 42 properties should 

establish the market from which sales and NOIs were obtained 

when determining the applicable capitalization rate for 

federally regulated housing.17 Therefore, Mineral Point Valley

should not be read to have concluded that an appraiser may 

calculate a capitalization rate from market-rate properties when 

valuing federally regulated property. 

 

16 See 42 U.S.C. § 1485.

17 Recall that a market-driven capitalization rate is 

determined by taking NOIs of comparable properties and dividing

those numbers by the sale prices for those properties. 
No. 2014AP2947 

22

¶52 In the case at hand, the City's assessors used a 

capitalization rate derived from market-rate properties when 

appraising Regency West's federally regulated property for 2012. 

The City's assessors should have used a market for Section 42 

properties to determine the capitalization rate. See Metro. 

Holding, 173 Wis. 2d at 634. Instead, the assessors used a 

capitalization rate provided by a brokerage firm, which did not 

account for the property's classification as subsidized housing. 

As a result, the City's assessors' use of a 6 percent base 

capitalization rate was not in compliance with Wis. Stat. 

§ 70.32(1) or with the WPAM. Taxing authorities are required to 

comply with the law when valuing properties, and failing to do 

so negates the presumption of correctness that Wis. Stat. 

§ 70.49 otherwise accords. Allright Props., Inc. v. City of 

Milwaukee, 2009 WI App 46, ¶12, 317 Wis. 2d 228, 767 N.W.2d 567 

(citing Walgreen, 311 Wis. 2d 158, ¶17). 

¶53 The court of appeals, relying on our decision in 

Bischoff concluded that an appraiser's sole reliance on an 

income approach to valuation was improper. The court of 

appeals' reliance on Bischoff is understandable, but misplaced.18

 

18 The court of appeals' rationale that Section 42 and 

Section 8 programs are similar because they are found within the 

same section of the WPAM is unconvincing. Both are subsidized 

housing; however, the similarities between the two programs 

largely end there. The two programs have vastly different 

restrictions. 
No. 2014AP2947 

23

¶54 Bischoff arose in the context of demurrer where we 

held that a complaint that alleged error in the use of the 

income approach for valuation when there had been an arm'slength sale was timely filed. Bischoff, 81 Wis. 2d at 619-20. 

We never concluded that an income approach could not be used as 

the sole method of valuation in all cases. See also Northland 

Whitehall Apts. Ltd. P'ship v. City of Whitehall Bd. of Review, 

2006 WI App 60, ¶25, 290 Wis. 2d 488, 713 N.W.2d 646 ("the 

'income approach' as utilized by its appraiser has also been 

recognized by the courts . . . as a valid method of determining 

the value of subsidized housing projects"). 

¶55 Furthermore, Bischoff did not address subsidized 

housing. As we have explained, because of the difficulty in 

appraising subsidized properties under other appraisal methods, 

the income approach may be the best determiner of value. And, 

the WPAM does not preclude appraisers from relying solely on the 

income approach when valuing subsidized properties. We have 

recognized that a single valuation approach under the third tier 

may be appropriate. Adams, 294 Wis. 2d 441, ¶53 ("There may be 

situations in which the only information available compels an 

assessor to use a single methodology to [value] property."). 

¶56 By contrast, Regency West's expert utilized a market 

for Section 42 properties when constructing the applicable 

capitalization rate. In that market, Section 42 property base 

capitalization rates averaged 7.4 percent for senior properties 

(with a high of 8.4 percent and a low of 5.9 percent) and 

averaged 7.57 percent for family property (with a high of 8.83 
No. 2014AP2947 

24

percent and a low of 6.59 percent). Regency West's expert used 

a base capitalization of 8 percent for 2012. He then added the 

same tax rate of 2.54 percent, and employed a loaded rate of 

10.54 percent in his income-based 2012 valuation. Determining 

the capitalization rate in this manner complied with the WPAM as 

Wis. Stat. § 70.32(1) requires. 

¶57 Based on its expert's calculations described above, 

Regency West valued its property at $2,700,000 as of January 1, 

2012. Racine's valuation of $4,425,000 was derived from a 

procedure that did not comply with Wis. Stat. § 70.32(1) and the 

WPAM; Regency West's valuation followed the requirements of 

§ 70.32(1) and WPAM in its valuation. Regency West's appraisal 

is the best evidence of the property's value.19 Accordingly, we 

conclude that Regency West has shouldered its burden to show 

that Racine's taxation for 2012 was excessive and a refund is 

due.

2. 2013 tax assessment

¶58 Although both parties employed the income approach to 

valuation for 2012, only Regency West did so for 2013. Racine 

applied a comparative sales approach for its 2013 assessment. 

 

19 We do not consider the appraisals of Peter Weissenfluh 

and Dan Furdek because their appraisals exceeded the valuations 

of Racine for both 2012 and 2013. See Trailwood Ventures, LLC 

v. Vill. of Kronenwetter, 2009 WI App 18, ¶¶12-13, 315 Wis. 2d 

791, 762 N.W.2d 841 (concluding that a taxation district that 

has accepted the payment it requested has agreed that its 

taxation value is the maximum value that it may seek; Wis. Stat. 

§ 74.37 permits a refund to the taxpayer or may uphold the 

status quo, but there is no authority for deficiency judgments). 
No. 2014AP2947 

25

Regency West argues that the properties the City's appraiser 

relied on, primarily Section 8 properties, were not reasonably 

comparable to the subject property, which is Section 42 housing. 

For the reasons discussed below, we conclude that Section 8 and 

Section 42 properties are not "reasonably comparable," and 

therefore the City incorrectly applied the comparative sales 

approach when valuing Regency West's property for 2013.

¶59 It is the legislature that required the use of "recent 

arm's-length sales of reasonably comparable property" when an 

appraiser is valuing a property under the second tier method. 

Wis. Stat. § 70.32(1). And in addition, § 70.32(1) also 

requires consideration of "all factors that, according to 

professionally acceptable appraisal practices, affect the value 

of the property." 

¶60 If there are no "reasonably comparable" properties, 

the comparable sales approach cannot be used. Allright Props., 

317 Wis. 2d 228, ¶29. That is, an appraiser cannot accurately 

value a property using data from the sales of properties that 

are not "reasonably comparable" to the subject property. Absent 

comparable sales, an appraiser must apply the third tier for 

valuing property. Id.

¶61 The WPAM does not leave the determination of whether 

properties are reasonably comparable wholly to the discretion of 

an appraiser. It provides appraisers with instructions for 

assessing subsidized properties under the comparable sales 

approach. To obtain the necessary information, an appraiser 

"may have to perform a statewide search to find comparable 
No. 2014AP2947 

26

sales." 1 Wisconsin Property Assessment Manual at 9–45. An 

appraiser can obtain this information "by viewing website data 

and by calling other assessors who have similar subsidized 

housing in their jurisdictions." Id.

¶62 The WPAM explicitly states when subsidized properties 

are reasonably comparable: properties being compared must have 

"restrictions similar to the subject property." Id. To 

determine if properties have similar restrictions, an appraiser 

must examine the specific restrictions that apply to each 

property, as well as the differences between these restrictions. 

And, an appraiser must consider the nature of these restrictions 

and the ways in which these restrictions affect the value of 

each property. This also suggests that an appraiser should not 

compare subsidized property to non-subsidized property as nonsubsidized property lacks the restrictions subsidized property 

carries. We have explained the necessity of understanding the 

specific restrictions appurtenant to federally regulated 

property when appraising such property. Metro. Holding, 173 

Wis. 2d at 631-32. The failure of an appraiser to consider the 

restrictions specific to the subject property is a failure to 

follow Wisconsin law. We now examine whether two specific 

classifications of subsidized housing, Section 8 and Section 42, 

are "reasonably comparable."20 

 

20 The WPAM has a section dedicated to the various 

subsidized housing credits. 1 Wisconsin Property Assessment 

Manual at 9-40. This section includes descriptions of the two 

types of federally regulated properties at issue in this case, 

Section 42 and Section 8. 
No. 2014AP2947 

27

¶63 Section 42 is a United States Treasury program that 

promotes the development of affordable housing by allowing an 

owner to receive federal tax credits for developing a parcel of 

land into Section 42 housing.21 The credits can be exchanged for 

equity in the property, which allows the owner to reduce 

construction debt with equity financing. Under the Section 42 

program, investors receive "a dollar-for-dollar reduction in 

federal tax liability . . . in exchange for equity participation 

in low-income rental housing." 1 Wisconsin Property Assessment 

Manual at 9-40.

¶64 Section 42 "credits come with many restrictions." Id. 

For example, in Wisconsin the owner is required to enter into a 

LURA that obligates the owner to maintain the project for 30 

years with rent-restricted units for income-qualified tenants. 

Id. 

¶65 In contrast, Section 8 is a rent subsidy program. 

"Project owners receive a rental subsidy payment under Housing 

Assistance Payment Contract (HAP Contract) that range from 15 to 

40 years." Id. at 9-42. The property owner is required to rent 

Section 8 units to tenants from low or very low-income families. 

"Families whose incomes do not exceed 80% of the median income 

in the area are defined as low-income; very low-income families 

do not exceed 50% of the median income." Id.

 

21 In Wisconsin, Section 42 housing is administered by 

WHEDA.
No. 2014AP2947 

28

¶66 Section 8 properties are generally a low risk 

investment. The risk is low, in part, because the federal 

government insures the owners of Section 8 housing against the 

possibility that their tenants will fail to pay rent.

¶67 In sum, Section 42 and Section 8 are vastly different 

subsidized housing programs, with different risks for the 

owners. Section 42 is a tax credit program; Section 8 is a 

subsidy program. Section 42 is a riskier investment because the 

government does not insure against non-payment of rents. In 

contrast, the government guarantees much of the rents of Section 

8 properties. Unlike owners of Section 8 properties, Section 42 

owners are required to enter into a 30-year LURA. Regency 

West's expert testified that these differences lead to vastly 

different markets for the two types of properties. 

¶68 In the case before us, the City's assessors relied on 

the sales of three properties: Lake Oakes, Woodside 

Village/Albert House and McMynn Tower. Lake Oakes possesses few 

Section 42 housing units; most units are market-rate rentals. 

Woodside Village/Albert House and McMynn Tower have no Section

42 units. One property was entirely Section 8 housing and the 

other was Section 8 housing with a few commercial units. 

Therefore, their sales were not representative of "reasonably 

comparable" arm's-length sales as the second tier of Wis. Stat. 

§ 70.32(1) and the WPAM require.

¶69 Moreover, the City's assessors did not consider the 

varying restrictions federal regulations require when valuing 

Regency West's property. Rather, Scites testified that Section 
No. 2014AP2947 

29

42 and Section 8 properties have similar restrictions. Scites 

relied almost entirely on the properties' similar rates of rent, 

without recognizing that Section 8 rents are subsidized by the 

government and Section 42 rents are not. Furthermore, nothing 

in the WPAM or Wisconsin law equates "reasonably comparable" 

with "similar rents." The failure of Racine to consider the 

properties' restrictions caused the three sales Scites relied on 

to fall outside the parameters of reasonably comparable sales. 

¶70 The City was required to consider the various 

restrictions on subsidized properties. And, as a matter of law, 

Section 8 and Section 42 do not possess the same restrictions. 

The City's 2013 assessment of the subject property relied 

totally on its assertion that the sales of Lake Oakes, Woodside 

Village/Albert House and McMynn Tower were sales of reasonably 

comparable properties. As we have explained above, WPAM 

explains the differences those properties have from Regency 

West's property such that they are not reasonably comparable. 

Accordingly, Scites' 2013 appraisal was completed in violation 

of Wisconsin law and the WPAM. The circuit court erroneously 

concluded that the City's assessors complied with Wisconsin 

law.22

¶71 We conclude that Scites' 2013 appraisal failed to 

follow Wisconsin law and the WPAM, negating the presumption of 

 

22 We emphasize that whether an assessor complied with 

Wisconsin law and the WPAM are questions of law for our 

independent review. Adams Outdoor Advert., Ltd. v. City of 

Madison, 2006 WI 104, ¶26, 294 Wis. 2d 441, 717 N.W.2d 803. 
No. 2014AP2947 

30

correctness otherwise available in Wis. Stat. § 70.49. Allright 

Props., 317 Wis. 2d 228, ¶12. 

¶72 Regency West argues that it has presented the only 

evidence of its property's value as of January 1, 2013 that 

complies with Wisconsin law and the WPAM. We agree. It did so 

in its third tier direct capitalization of income appraisal. 

That appraisal employed actual expenses and income for the 

property upon which the NOI was calculated, and it derived its 

capitalization rate from a market for Section 42 properties. 

Regency West's appraisal determined that the property's value 

was $2,730,000 as of January 1, 2013. This is sufficient 

evidence to meet Regency West's burden to show that the City's 

tax assessment was excessive and accordingly a refund is due.23

III. CONCLUSION

¶73 We conclude that the valuation methodologies Racine 

used for the 2012 and 2013 assessments did not comply with 

Wisconsin law. Accordingly, we also conclude that Regency West 

has overcome the presumption of correctness for the 2012 and 

2013 tax assessments, and that the circuit court and the court 

of appeals erred in concluding otherwise. And, finally, we 

conclude that Regency West has proved that Racine's tax 

assessments for 2012 and 2013 were excessive. Accordingly, we 

 

23 Regency West had the burden to show that that assessment 

was excessive. See Sausen v. Town of Black Creek Bd. of Review, 

2014 WI 9, ¶20, 352 Wis. 2d 576, 843 N.W.2d 39.
No. 2014AP2947 

31

reverse and remand to the circuit court to determine the amount 

of the refund due Regency West.

By the Court.—The decision of the court of appeals is 

reversed and remanded.
No. 2014AP2947.ssa

1

¶74 SHIRLEY S. ABRAHAMSON, J. (dissenting). Fortunately 

for Regency West (and unfortunately for Racine's coffers and the 

other Racine taxpayers), the majority opinion declares that the 

lower assessment of the property at issue is correct. The 

majority opinion flouts the longstanding principle that property 

tax assessors should use the best information possible in order 

to determine real property's full value, upends the proper scope 

of appellate review, and inserts itself as a fact-finder. 

Because of the majority opinion's unwarranted departures from 

precedent and usurpation of the role of the circuit court, I 

dissent. 

¶75 The essential question posed in this court is whether 

Racine's original assessments are excessive. The circuit court, 

the court of appeals, and I answer the question in the negative. 

Applying a correct legal analysis, giving deference to the 

circuit court, the fact-finder, and reviewing the record compel 

answering the question with a firm, clear "No." 

¶76 The majority opinion reaches the opposite answer, 

resting its conclusion on errors of law and on its refusal to 

consider the evidence Racine presented. Now, assessors of 

federally subsidized housing (at least Section 42 housing) 

apparently can go straight to an income approach, a third-tier 

method of assessment, bypassing the best information and other 

proper assessment methodologies along the way. 

I

¶77 Regency West, the property at issue, comprises 72 

apartment units and is owned by a limited liability corporation. 
No. 2014AP2947.ssa

2

The property is treated as commercial property for assessment 

purposes. Wisconsin Property Assessment Manual 9-1 (2011) 

[hereinafter Manual] ("For assessment purposes commercial 

property consists of . . . [a]partment houses of four or more 

units . . . ."). Although the majority opinion describes 

Regency West as residential property, the majority opinion

applies the commercial valuation principles set forth in the 

Manual.1

¶78 I agree with the majority opinion that general 

appraisal principles apply to federally subsidized housing. I 

agree with the majority opinion that the three valuation 

approaches are an arm's-length sale of the subject property 

(tier one), the sales comparison approach (tier two), and 

income, cost, and other valuation methods (tier three).2

¶79 I agree with the majority opinion that the statutory 

interpretation and application of Wis. Stat. § 70.32 presents a 

question of law that this court determines independently. The 

court determines, as a matter of law, whether the assessor's 

valuation methodology complies with statutory requirements. 

Here our agreement ends. 

¶80 I disagree with the majority opinion that, as a matter 

of law, the only valuation approach applicable in the instant 

 

1 See majority op., ¶¶24, 31, 50 n.15.

2 All parties agree that there are no recent arm's-length 

sales of Regency West, so a tier one analysis was not possible. 

The instant case is about which other tier analyses should be 

used. 
No. 2014AP2947.ssa

3

case is the income approach. The majority opinion errs as a 

matter of law.

¶81 The majority opinion errs as a matter of law when it 

totally discards and disregards in its analysis the evidence 

presented by Dan Furdek and Peter Weissenfluh, Racine's expert 

witnesses. The majority opinion describes Furdek and 

Weissenfluh's evidence, but does not consider the evidence in 

its analysis and conclusion. 

¶82 Why ignore these experts? One reason is "because," 

according to the majority opinion, "their appraisals exceeded 

the valuations of Racine for both 2012 and 2013." Majority op., 

¶57 n.20.3 A second reason for ignoring Racine's two experts, 

according to the majority opinion, is that they err as a matter 

of law in using a sale comparison approach to valuation in the 

instant case. 

¶83 The majority opinion supports its legal conclusion 

that Racine's two experts should be ignored in their entirety in 

footnote 19, citing Trailwood Ventures, LLC v. Village of 

Kronenwetter, 2009 WI App 18, ¶¶12-13, 315 Wis. 2d 791, 762 

N.W.2d 841. The footnote in the majority opinion states:

We do not consider the appraisals of Peter Weissenfluh 

and Dan Furdek because their appraisals exceeded the 

valuations of Racine for both 2012 and 2013. See

Trailwood Ventures, LLC v. Vill. of Kronenwetter, 2009 

 

3 The majority misstates Furdek and Weissenfluh's report 

because the experts' pre-reconciliation value derived from the 

income approach was actually lower than the original 

assessments. After reconciling their various approaches, 

however, their appraisal was slightly higher than the original 

assessments. 
No. 2014AP2947.ssa

4

WI App 18, ¶¶12-13, 315 Wis. 2d 791, 762 N.W.2d 841 

(concluding that a taxation district that has accepted 

the payment it requested has agreed that its taxation 

value is the maximum value that it may seek; Wis. 

Stat. § 74.37 permits a refund to the taxpayer or may 

uphold the status quo, but there is no authority for 

deficiency judgments).

¶84 The Trailwood Ventures case does not support the 

conclusion of law (reached by the majority opinion) that a court 

cannot or should not consider evidence presented that the value 

of the subject property was greater than the assessment from 

which review was sought. The Trailwood Ventures decision says 

nothing about admissible evidence or disregarding evidence that 

the value of the subject property was greater than the original 

assessment. The briefs filed in Trailwood Ventures, as well as 

the opinion, make clear that admissibility of evidence was not 

an issue in Trailwood Ventures. 

¶85 Trailwood Ventures holds only that the statutes do not 

permit a trial court to set a higher assessment under Wis. Stat. 

§ 74.37 than that from which the taxpayer appealed or impose a 

greater tax burden on the taxpayer than the one the taxpayer 

challenges. Trailwood Ventures, 315 Wis. 2d 791, ¶¶10, 12-14. 

¶86 Trailwood Ventures offers no guidance in the instant 

case. Racine's purpose of introducing its experts' evidence was 

not to increase Regency West's assessments for 2012 and 2013 or 

to levy a larger tax on Regency West for those years. Furdek 

and Weissenfluh's evidence was to serve the singular purpose of 

showing that Racine's initial assessments were not excessive. 

In misapplying Trailwood Ventures, the majority opinion commits 
No. 2014AP2947.ssa

5

a fatal error of law by utterly ignoring the evidence presented 

by Racine's two expert witnesses. 

¶87 The majority opinion is off on its own solo venture in 

discussing Trailwood Ventures. Regency West has made no 

objection to the admission of Furdek and Weissenfluh's testimony 

on the ground that their valuation was higher than Racine's 

initial estimate. Neither party's briefs in the instant case 

cite or discuss Trailwood Ventures. The majority opinion 

misinterprets and misapplies Trailwood Ventures to make new law 

in the instant case. 

¶88 A second reason the majority opinion errs as a matter 

of law in deciding that only the income method of valuation 

applies and in discarding the evidence of Weissenfluh and Furdek

is that the majority opinion concludes that the sales comparison 

approach was not a valid appraisal method in the instant case. 

The majority opinion takes a cribbed, too narrow view of the 

sales comparison approach. (Weissenfluh and Furdek also used an 

income approach.) 

¶89 The majority opinion misreads the directive in the 

Manual that "the recent arm's-length sales [of federally 

subsidized housing] should have restrictions similar to the 

subject property." Manual at 9-52 (emphasis added). The 

majority opinion reads "similar" to mean "identical" and 

concludes that Racine's two experts' comparable sales approach 

was erroneous. 

¶90 The second tier method of valuation, the sales 

comparison approach, requires an assessor to use the value of 
No. 2014AP2947.ssa

6

"reasonably comparable" properties. "'[R]easonable 

comparability' depends upon the degree of similarity between the 

properties in question." Rosen v. City of Milwaukee, 72 

Wis. 2d 653, 686, 242 N.W.2d 681 (1976). The court has 

suggested some factors to consider in determining the similarity 

of properties: 

Important considerations in determining whether 

particular property is sufficiently similar to the 

property being assessed to warrant reliance on its 

sale price as evidence of market value include its 

location, including the distance from the assessed 

property, its business or residential advantages or 

disadvantages, its improvements, size and use. It is 

also important to consider the conditions of sale, 

including its time in relation to the date of 

valuation, and its general mode and character insofar 

as they tend to indicate an arm's-length transaction.

Rosen, 72 Wis. 2d at 665. 

¶91 The Manual at 9-12 provides that the "sales comparison 

approach should be used" if there are comparable properties, and 

that "[t]o be comparable, properties should be similar in both 

physical and economic characteristics including . . . the 

ability to generate income . . . ." 

¶92 The Manual contains a section devoted to subsidized 

housing, including Section 42 housing.4 The Manual describes 10 

different types of federally subsidized housing. Regarding 

Section 42 housing, the Manual notes that these projects' 

operating income is often lower than market rate properties and 

that these projects can be risky because of tenant income 

 

4 Manual at 9-44 to 9-54.
No. 2014AP2947.ssa

7

restrictions.5 The Manual addresses generally how to assess the 

10 different federally subsidized projects. Case law and the 

Manual make clear that assessors must consider the impact that 

the subsidized housing's restrictions have on value. 

¶93 Nothing in the Manual's subsection addressing 

federally subsidized Section 42 housing discusses any 

limitations on the type of assessment methodology that should be 

used in assessing these properties. The Manual does not 

foreclose using sales comparison to value subsidized housing, 

although the majority opinion reads the Manual as if it does. 

Indeed, the Manual refers to using the sales comparison approach 

in determining the proper method of valuation for federally 

subsidized housing. See Manual at 9-52. The Manual does state 

that "the income approach may be the most useful method for 

valuing subsidized housing . . . ." See Manual at 9-53. The 

operative word is "may." 

¶94 As to using the sales comparison approach, the Manual 

explains that a comparable property should have restrictions 

similar to the subject property and information should be sought 

from several sources. The Manual states:

To be considered comparable, the recent arm's-length 

sales should have restrictions similar to the subject 

property. The assessor may have to perform a 

statewide search to find comparable sales. Sales data 

should always be confirmed by reliable sources. 

Information may be obtained by viewing website data 

 

5 Manual at 9-47. In both Racine and Milwaukee (the 

location of the comparables used by Racine's experts), Section 

42 properties usually have a waiting list.
No. 2014AP2947.ssa

8

and by calling other assessors who have similar 

subsidized housing in their jurisdictions. 

Manual at 9-52. 

¶95 The evidence presented by Furdek and Weissenfluh 

adheres to the Manual. They considered the impact of the 

Section 42 restrictions in their sales comparison valuation. I 

will comment further on their evidence later on. For now, I 

just point out that the majority opinion errs in disregarding 

out of hand the sales comparison approach in the instant case. 

¶96 In sum, the majority opinion is based on errors of law 

regarding the interpretation and application of the three tiers 

of valuation and in entirely disregarding Furdek and 

Weissenfluh's evidence. The majority opinion relies only on 

Racine's assessor, Janet Scites, and Racine's Chief Assessor, 

Ray Anderson. 

¶97 I turn to the standard of review of the evidence in 

the record. I then analyze the testimony of the competing 

experts and review the circuit court's findings of fact and 

determination under the proper standard of review. 

II

¶98 Having determined that Racine's experts complied with 

the statute and the Manual in using several methods of 

valuation, I now determine whether Racine's original assessments 

were excessive. A challenger, here Regency West, has the burden 

at trial to "produce evidence that it is more probable than not 

that the assessed value is not correct." Bonstores Realty One, 

LLC v. City of Wauwatosa, 2013 WI App 131, ¶9, 351 Wis. 2d 439,
No. 2014AP2947.ssa

9

839 N.W.2d 893. Racine may rebut with its own evidence Regency 

West's production of evidence.

¶99 The circuit court's findings of fact will not be 

overturned by an appellate court unless they are clearly 

erroneous, that is, unless they are against the great weight of 

the evidence. Findings of fact are not against the great weight 

of the evidence "merely because a different fact-finder could 

draw different inferences from the record." State v. Wenk, 2001 

WI App 268, ¶8, 248 Wis. 2d 714, 637 N.W.2d 417. 

¶100 Further, the weight and credibility that an appellate 

court gives to the evidence of an expert witness is also 

"uniquely within the province of the fact finder." Bloomer 

Housing Ltd. P'ship v. City of Bloomer, 2002 WI App 252, ¶12, 

257 Wis. 2d 883, 653 N.W.2d 309 (quoted source omitted). 

"Where, as here, there is conflicting testimony, the fact finder 

is the ultimate arbiter of credibility and when more than one 

reasonable inference can be drawn, the reviewing court must 

accept the inference drawn by the trier of fact." Bloomer, 257 

Wis. 2d 883, ¶12 (internal quotation marks omitted); see also

Mineral Point Valley Ltd. P'ship v. City of Mineral Point Bd. of 

Review, 2004 WI App 158, ¶16, 275 Wis. 2d 784, 686 N.W.2d 697 

(Deininger, P.J., concurring) ("I recognize that, in the absence 

of a recent arms-length sale, property valuation depends largely 

on matters of judgment and expertise. . . . [A]ppraised values 

of a particular property can differ sharply, and [ ] it is most 

often the fact finder's proper role to assess the weight and 

credibility of competing opinions of fair market value."). 
No. 2014AP2947.ssa

10

III

¶101 Following a four-day bench trial filled with extensive 

expert evidence from both sides, the Circuit Court for Racine 

County concluded that the original assessments were not 

excessive. 

¶102 The crux of the circuit court's decision involved 

determining the weight and credibility of conflicting expert 

evidence. Each side presented experts and, as the circuit court 

explained, "[t]he opinions provided by all experts in this case 

[were] highly subjective. All experts stabilized values, loaded 

cap rates, or made adjustments to factors used in calculating 

their valuations based on their experience and for reasons 

stated in their testimony." 

¶103 Ultimately, the circuit court concluded (and the court 

of appeals agreed) that Racine's experts were more credible and 

more persuasive. Based on this determination, the circuit court 

concluded that Racine's original assessments were not excessive. 

The court of appeals affirmed.

¶104 Deferring to the circuit court's findings of fact 

about the credibility of the expert witnesses and the weight to 

be given to each of them, I agree with the circuit court's 

conclusion that Regency West failed to carry its burden. The 

circuit court was not persuaded that Regency West established 

that it was more probable than not that the assessed values were 

excessive. The evidence supports the circuit court's 

conclusion. 
No. 2014AP2947.ssa

11

¶105 Racine's experts, Furdek and Weissenfluh, are wellversed in Wisconsin appraisal techniques as well as appraisal 

techniques for subsidized housing. Each has spent the majority 

of his career in the Milwaukee Assessor's Office; they have 

recently gone into private practice together. Contrary to the 

majority opinion's assertion, both Furdek and Weissenfluh have 

experience with Section 42 subsidized housing. In their 

respective tenures at the Milwaukee Assessor's office, they were 

directly involved with assessing Milwaukee's numerous Section 42

properties or reviewing and signing off on the assessments of 

Section 42 properties. Each has given presentations on valuing 

subsidized housing. 

¶106 These experts submitted a thorough, nearly 70-page 

assessment report using several different valuation 

methodologies. They testified at length, concluding that 

Racine's initial assessments of Regency West were not excessive. 

¶107 Furdek and Weissenfluh considered three traditional 

valuation approaches: sales comparison (tier two), income (tier 

three), and cost (tier three). The Manual at 9-52 states, 

referring to Wis. Stat. § 70.32, that "[t]he assessor should 

consider all three approaches to value when assessing federally 

subsidized properties." Indeed, all three approaches are set 

forth in the Manual at 9-52 to 9-54, discussing federally 

subsidized housing. 

¶108 Before applying these assessment methodologies, Furdek 

and Weissenfluh explained Wisconsin assessment standards 

applying to subsidized housing, thoroughly examined Racine's 
No. 2014AP2947.ssa

12

real estate climate, and stated the assumptions upon which they 

based their analyses. This extensive pre-assessment analysis 

complies with the Manual, which provides: 

Each type of property presents unique valuation 

problems. This requires the assessor to possess a 

great deal of knowledge about the current economic 

conditions of the area and any trends and factors that 

may influence the value of commercial property.

. . . .

Given the data used and the type of property 

appraised, the appraiser must consider how well each 

method employed estimates the value of the 

property. . . .

How does the appraiser determine which approach or 

approaches are most reliable? The best guidance that 

can be offered is to review the market activity for 

the subject and determine the attributes by which the 

market uses to evaluate alternative real estate 

decisions. 

Manual at 9-1, 9-39. 

¶109 Furdek and Weissenfluh also met with the Wisconsin 

Housing and Economic Development Authority (WHEDA) to discuss 

Section 42 and Section 8 federally subsidized housing. In 

Wisconsin, WHEDA administers Section 42 tax credits and 

publishes the maximum rents that may be charged to Section 42

tenants. Manual at 9-46. The WHEDA representative stated that 

Section 8 and Section 42 properties were economically 

comparable. 

¶110 Based upon their conversation with WHEDA, Furdek and 

Weissenfluh concluded that most Land Use Restriction Agreements 

(LURAs) for Section 42 properties impose similar restrictions. 
No. 2014AP2947.ssa

13

They therefore used a sales comparison approach using other 

Section 42 properties. 

¶111 Furdek and Weissenfluh primarily relied on a sales 

comparison approach that consisted of three properties. Their 

Report explains that the "sales [were] researched through 

numerous sources, inspected and verified by a party to the 

transaction." Two of the properties comprised a mix of Section 

42 units and market units. The other comparable property 

consisted of a building that was being converted into Section 42

housing. 

¶112 Because the comparables Furdek and Weissenfluh found 

were not identical to Regency West, these experts complied with 

the Manual——they made adjustments in their comparisons. They 

explained that they took into account specific differences 

between the comparables and Regency West, including the 

location, age, and non-section 42 portions, to arrive at a value 

for Regency West. Only after making these adjustments did 

Furdek and Weissenfluh use the sales comparison approach to 

arrive at the value of the Regency West property. This 

valuation corroborated the original assessments. 

¶113 Furdek and Weissenfluh also used two income 

approaches, a capitalization of income approach and a discounted 

cash flow analysis, and a cost approach. For each of these 

approaches, these experts used a combination of Regency West's 

actual expenses as well as projected expenses. The experts 

reconciled the values derived from each approach to reach a 

valuation. 
No. 2014AP2947.ssa

14

¶114 Each of these valuation methodologies, independently 

and when reconciled with the others, confirmed that Janet 

Scites——Racine's assessor whose initial assessments Regency West 

challenged——got it right. 

¶115 In stark contrast to the extensive, multi-faceted 

evidence presented by Racine's experts, Regency West presented 

one expert, Scott McLaughlin. Although McLaughlin claimed that 

he specialized in assessing federally subsidized housing, the 

record does not reflect the extent of his Wisconsin-specific 

assessment experience. That said, the majority opinion relies 

extensively (indeed exclusively) on McLaughlin's testimony and 

report. 

¶116 In the instant case, McLaughlin prepared a four-page 

report consisting only of a capitalization of income approach to 

valuation. This report was based on Regency West's projected 

expenses for 2012 and actual expenses for 2013. McLaughlin's 

report did not state his assumptions, nor did it consider market 

conditions affecting the value of property in Racine. 

Furthermore, McLaughlin's report does not explain the basis for 

his opinions or the figures that he uses. His testimony filled 

in some of this information.

¶117 McLaughlin's report concluded, based on his "extensive 

experience appraising IRC § 42 properties," that "[t]he 

inability to obtain reliable data regarding the rent and income 

restrictions for IRC § 42 properties prevents a valid comparable 

sales valuation in this case." 
No. 2014AP2947.ssa

15

¶118 Nevertheless, McLaughlin derived a capitalization rate 

based on sales of fifteen Section 42 properties. Although 

McLaughlin claimed he could not perform a comparable sales 

analysis of Regency West because he did not have the Land Use 

Restriction Agreements (LURAs) for his list of fifteen Section 

42 sales, McLaughlin relied on data from Section 42 sales to 

derive a capitalization rate for his income approach.6 The 

majority opinion unsuccessfully attempts to explain away this 

inconsistency in McLaughlin's evidence regarding the 

availability of comparables. 

¶119 Based upon an income valuation approach alone, 

McLaughlin concluded that Regency West's value was nearly two 

million dollars less than the valuations that Racine or Furdek 

and Weissenfluh reached. 

¶120 McLaughlin and the majority opinion rely solely on the 

income approach to conclude that Racine's original assessment 

was excessive. The majority opinion is unsuccessful in 

explaining away precedent. The cases have stated time and time 

again that the income approach "may never be the sole basis for 

an assessment of property." Waste Mgmt. of Wis. v. Kenosha Cty. 

Bd. of Review, 184 Wis. 2d 541, 558, 516 N.W.2d 695 (1994); see 

 

6 There is no evidence that McLaughlin attempted to obtain 

the LURAs for any of these fifteen properties or communicated 

with WHEDA, buyers, sellers, or brokers to obtain information. 
No. 2014AP2947.ssa

16

also Bischoff v. City of Appleton, 81 Wis. 2d 612, 260 

N.W.2d 773 (1978).

7

¶121 After comparing evidence presented by the experts, the 

circuit court unsurprisingly ruled in favor of Racine. The 

circuit court was persuaded by Racine's appraisers and experts, 

but was not impressed by McLaughlin. The circuit court stated 

its finding that Racine's assessors were more credible as 

follows:

Credibility of the assessors and experts is critical 

to this analysis. Based upon the years of experience, 

knowledge, and demeanor, this Court finds the 

testimony of the City's assessors and experts more 

credible than that of the plaintiff's expert, Scott 

McLaughlin. The City's assessors and experts are very 

familiar and experienced in valuing property in the 

Racine and Southeastern Wisconsin area and McLaughlin 

is not. 

Based on my review of the record, without even giving deference 

to the circuit court, I agree with the circuit court. 

¶122 I conclude that Regency West has failed to present 

sufficient evidence showing that the initial assessments were 

excessive. Racine's assessors and experts presented the more 

persuasive evidence that Racine's initial assessments were not 

excessive. 

IV

 

7 See State ex rel. I.B.M. Corp. v. Bd. of Review, 231 

Wis. 303, 312, 260 N.W. 784 (1939) ("Though net income from the 

rental of either real or personal property is always a proper 

element to consider, it cannot be considered as the sole 

controlling factor in determining value of either real or 

personal property. Such a rule, if given approval, would 

require a holding that non-income producing property is 

practically valueless for taxation purposes.").
No. 2014AP2947.ssa

17

¶123 Before I end my analysis, I discuss court procedure. 

I dissented in an unpublished order granting review in the 

instant case. I repeat my objection in this published dissent 

to inform litigants and lawyers about court procedure. 

¶124 On November 16, 2015, the court adopted a procedure 

governing when a justice may hold for further discussion a 

petition for review in which a Supreme Court Commissioner 

recommended granting review. 

¶125 The procedure applies when the justices vote on the 

Wisconsin Supreme Court Commissioners' recommendations on 

petitions for review by e-mail. Most months the court votes on 

the recommendations in person, in closed conference. The new email procedure states:

Regarding petitions for review, certifications, 

petitions to bypass, original actions, petitions for 

supervisory writ, and petitions for writ of mandamus, 

prohibition, quo warranto, and habeas corpus, some 

months are scheduled as mail-in conferences, whereby 

each justice votes, by e-mail, on the recommendations 

of each Commissioner. A justice, who wishes to hold a 

matter for which a Commissioner has recommended 

granting review, must submit in writing, with his or 

her e-mail votes, the specific reason(s) why he or she 

would not approve the grant as recommended by the 

Commissioner. Within 5 calendar days of that writing, 

all justices shall vote, by e-mail, to grant the 

matter, deny the matter, or otherwise approve the 

suggestions in the written proposal. If sufficient 

votes to grant the matter remain, the grant order 

shall issue within two business days. If the matter 

no longer has the requisite votes to grant, it shall 

be discussed in a court conference, but in any event, 

no later than at the next in-person petition for 

review conference. 
No. 2014AP2947.ssa

18

¶126 The new procedure was adopted without any notice to 

the Supreme Court Commissioners and Clerk of the Supreme Court, 

let alone the litigants, lawyers, and the public.8 

¶127 Although I did not vote in favor of adopting this 

procedure, I have followed it. At the very least, the court 

should follow its adopted procedures. As I have written before, 

a scent of lawlessness pervades the court. 

¶128 The effect of several newly adopted procedures 

(whether the effect is intended or not) is to silence an 

individual justice's voice——whether that justice wants to hold a 

petition for review for further discussion, write separately on 

a matter, or dissent. 

¶129 I have pledged to continue to discharge my duties on 

this court as the people of the state have four times elected me 

to do. The commitment I made to myself nearly 40 years ago and 

in four successive elections since then remains: Be 

independent, impartial, and non-partisan, and help the court 

system improve. I will continue to implement that commitment 

whether in the majority or in dissent. 

¶130 We are a court of seven. Each justice is only one 

voice of seven. I will continue to be one justice with one 

 

8 The procedure was adopted pursuant to the Introduction to 

the Supreme Court's Internal Operating Procedures, which states 

that the Internal Operating Procedures "may be changed without 

notice as circumstances require." The Supreme Court Internal 

Operating Procedures are available in Volume VI of the Wisconsin 

Statutes (2013-14). 
No. 2014AP2947.ssa

19

voice, but mine will not be a timid voice as I continue to serve 

the people of the state of Wisconsin. 

¶131 For the reasons set forth, I write on the merits of 

the case and court procedure. 

¶132 I am authorized to state that Justice ANN WALSH 

BRADLEY joins this dissent.
No. 2014AP2947.ssa

1