Opinion ID: 1868480
Heading Depth: 1
Heading Rank: 5

Heading: did the city improperly use only the income approach?

Text: ¶ 48 On several occasions we have stated that an assessment cannot be based solely upon the income approach. E.g., Waste Mgmt., 184 Wis.2d at 558, 516 N.W.2d 695; Bischoff, 81 Wis.2d at 619, 260 N.W.2d 773; I.B.M., 231 Wis. at 312, 285 N.W. 784. This rule reflects the fact that variables other than income-generating capability influence fair market value. Absent relevant sales information an assessor must determine market value from the best information the assessor can practicably obtain, considering all elements which collectively have a bearing on the value of the property. Waste Mgmt., 184 Wis.2d at 557, 516 N.W.2d 695; see 1 Property Assessment Manual, ch. 21, at 21.4-11. Elements bearing upon fair market value include cost, depreciation, replacement value, income, industrial conditions, location and occupancy, sales of like property, book value, amount of insurance carried, value asserted in a prospectus, and appraisals procured by the owner. Waste Management, 184 Wis.2d at 557, 516 N.W.2d 695; see I.B.M., 231 Wis. at 311-12, 285 N.W. 784. ¶ 49 Adams argues that the City used only the income approach to value its billboards. The City does not disagree, although it contends that it reached its assessment after considering the alternative methods of comparable sales and the cost approach and rejecting them. ¶ 50 The rule against the exclusive use of the income approach originated in Wahl v. H.W. & S.M. Tullgren, Inc., 222 Wis. 306, 310, 267 N.W. 278 (1936). See Bldgs. Dev. Co. v. City of Milwaukee, 225 Wis. 357, 359, 274 N.W. 298 (1937) (interpreting Wahl as holding that income alone cannot control the determination of fair market value). In Wahl the plaintiff, who was interested in securing a low appraisal of an apartment building, urged this court to reverse the fair market value determined by the circuit court for the reason that the income-generating capability of the building did not support the circuit court's finding. Wahl, 222 Wis. at 309-10, 267 N.W. 278. The court rejected the plaintiff's contention, concluding that the fair market value based upon the income approach was not consistent with the original purchase price or the reproduction cost of the building, both of which were much greater. Id. at 310, 267 N.W. 278. ¶ 51 Implicit in Wahl is the court's concern that reliance upon a single factor in determining fair market value may result in skewed appraisals due to aberrant market conditions. See id. The reason the income approach yielded a low valuation of the building in Wahl was that it was the middle of the Great Depression and monthly rent for apartments was one-third to one-half the rent obtained prior to the Depression. Id. The lesson from Wahl and its progeny is that an assessor must consider all factors relevant to fair market value to ensure that an assessment is not skewed. ¶ 52 The Property Assessment Manual reflects the need to consider all factors that bear upon fair market value. Usually, more than one  and often all three  of the approaches apply to a given property. 1 Property Assessment Manual, ch. 7, at 7-18. The only limiting factor: whether available and appropriate data exists to develop any and all approaches. Id. ¶ 53 There may be situations in which the only information available compels an assessor to use a single methodology to assess property. See 1 Property Assessment Manual, ch. 7, at 7-28. [12] In any event, an assessor must have the ability to discount, even disregard, factors that do not really bear on the value of a property. See State ex rel. Kesselman v. Bd. of Review, 133 Wis.2d 122, 129-30, 394 N.W.2d 745 (Ct.App.1986). The Property Assessment Manual directs appraisers to use the assessment methodology or methodologies that are most reliable. 1 Property Assessment Manual, ch. 7, at 7-28. The Property Assessment Manual states: The best guidance that can be offered is to review market activity for the subject and determine the attributes by which the market uses to evaluate alternative real estate decisions. Generally, the greatest weight should be placed on the approach for which the greatest amount of reliable and appropriate data is available that will yield the highest degree of confidence. 1 Property Assessment Manual, ch. 7, at 7-28. ¶ 54 Where there is sufficient data to estimate market value under both the income and cost approaches, [a]ssessors should select a final estimate of value through the process of `reconciliation.' Id. at 7-18. Reconciliation requires an assessor to evaluate the data available under the alternative approaches and decide whether to derive the value from one of the approaches or a combination of approaches. Id. ¶ 55 In this case, we think that we would nullify the so-called Bischoff rule if we permitted the City assessor to reject all approaches and factors other than an income approach. We think it extraordinary that the assessor rejected out of hand such factors as cost, depreciation, replacement value, and insurance carried. The City assessor concluded, in effect, that the Wisconsin Supreme Court in Vivid (approving cost approach), the Wisconsin Department of Revenue in three revenue rulings (approving cost approach), the assessors in most communities in Wisconsin (using cost approach), and rulings in other states approving the cost approach, were simply irrelevant. Thus, the City Assessor deemed unreliable the cost approach, a method that nearly all jurisdictions use to assess billboards. [13] ¶ 56 We consider the City assessor's failure to consider collectively all the factors, especially cost-less-depreciation, that reasonably affected the value of Adams' billboards a failure to follow the Property Assessment Manual and the rulings of this court. No presumption of correctness may be accorded to an assessment that does not apply the principles in the Property Assessment Manual. The circuit court upheld that presumption, notwithstanding Adams' full-blown appraisal and all of Adams' expert testimony. Under the facts of the present case, the City improperly relied upon only the income approach to assess Adams' billboards, in violation of Bischoff, 81 Wis.2d at 619, 260 N.W.2d 773, and in contravention of the directive in the Property Assessment Manual to reconcile the applicable approaches to value.