Opinion ID: 1710181
Heading Depth: 1
Heading Rank: 2

Heading: just compensation and billboard valuation

Text: [1, 2] ¶ 13. The first issue presented is whether Wis. Stat. § 84.30 provides the exclusive remedy for just compensation for the taking of Vivid's signs. Resolution of this issue requires interpretation of § 84.30. A question of statutory interpretation is a question of law which this court reviews de novo. See Hughes v. Chrysler Motors Corp., 197 Wis. 2d 973, 978, 542 N.W.2d 148 (1996). Our primary goal in statutory interpretation is to discern the legislature's intent. See id. (citing Scott v. First State Ins. Co., 155 Wis. 2d 608, 612, 456 N.W.2d 152 (1990)). This court ascertains that intent by first examining the plain language of the statute. See Anderson v. City of Milwaukee, 208 Wis. 2d 18, 25, 559 N.W.2d 563 (1997) (citations omitted). If the plain language is ambiguous, we then turn to the scope, history, context, subject matter and purpose of the statute to determine legislative intent. See Hughes, 197 Wis. 2d at 978 (citing Scott, 155 Wis. 2d at 612).
¶ 14. In Vivid II, this court determined that Vivid was entitled to just compensation under Wis. Stat. § 84.30(6). See Vivid II, 182 Wis. 2d at 81. [W]e have concluded that just compensation is statutorily required by sec. 84.30(6). Our determination is based entirely on the statute and does not involve the just compensation provision contained in article I, section 13 of the Wisconsin Constitution. Id. at 80. In determining that Vivid was entitled to just compensation under § 84.30, we failed to make clear what we now explicitly conclude: § 84.30 is Vivid's exclusive remedy for recovering just compensation. ¶ 15. Wisconsin Stat. § 84.30 is the Wisconsin adaptation of the federal Highway Beautification Act (HBA), 23 U.S.C. § 131. The Wisconsin legislature adopted a state counterpart to the federal act to avoid a reduction in federal highway funding. If Wisconsin does not act, it will lose about $6.7 million in federal aid highway funds. Robert W. Larsen, Outdoor Sign Regulation in Eden and Wisconsin, 1972 Wis. L. Rev. 153, Note at 164 (citing Milwaukee Journal, Feb. 28, 1971, at 22, col. 3, part 1). ¶ 16. Vivid argues that although Wis. Stat. § 84.30 provides that Vivid is due just compensation, it may proceed under either § 84.30 or Wis. Stat. § 32.10 for determination of just compensation because the action is an eminent domain proceeding. We disagree. The language and framework of § 84.30 indicate that it is the exclusive remedy for determining just compensation for removed signs that meet the criteria of § 84.30(6). ¶ 17. As noted above, we discern the intent of the legislature by first turning to the plain language of the statute. See Anderson, 208 Wis. 2d at 25. The plain language of Wis. Stat. § 84.30 models 23 U.S.C. § 131 and sets forth the overall framework for recovering just compensation. Subsection (6) (reprinted below) [3] sets forth the criteria for the types of signs for which just compensation is allowed. Subsection (7) (reprinted below) [4] provides the measure of just compensation if a sign meets the criteria of subsection (6). Subsection (8) (reprinted below) [5] sets forth the procedure for recovering just compensation. The signs in question in this case meet the criteria of § 84.30(6)they were nonconforming signs lawfully in existence on March 18, 1972. Therefore, following the framework of § 84.30, just compensation must be measured under subsection (7) and recovered following the procedure under subsection (8). ¶ 18. Vivid argues that although the signs may meet the criteria of Wis. Stat. § 84.30(6), this statute is not the exclusive remedy. Vivid essentially asks this court to ignore statutory language. At oral argument Vivid stated that the question in this case is whether the little amendment that was grafted onto the end of § 84.30(6) makes an eminent domain case become magically a Highway Beautification Act removal case. What Vivid characterizes as a little amendment that the legislature grafted onto the end of a statute is critical to determining legislative intent. In 1978, 23 U.S.C. § 131(g) was amended to add that just compensation must be paid for removed signs whether or not removed pursuant to or because of this section. The Wisconsin legislature followed suit and amended § 84.30(6) in 1979, adding the similar language: regardless of whether the sign was removed because of this section. See Ch. 253, Laws of 1979. [3] ¶ 19. By amending Wis. Stat. § 84.30(6) to add language that provides that the DOT shall pay just compensation regardless whether the sign was removed because of this section, the legislature provided that just compensation is paid for this type of sign whether the sign is removed because of eminent domain, the HBA, a local ordinance, or any other reason. It does not matter why Vivid's signs were removed. Following the framework of § 84.30, if the signs meet the criteria of § 84.30(6), just compensation must be paid as measured under § 84.30(7) following the procedures of § 84.30(8). ¶ 20. Additionally, if Vivid were allowed to rely on Wis. Stat. § 84.30(6) only for the determination that it is entitled to just compensation in the first place, but then turn to Wis. Stat. ch. 32 for determining the amount of just compensation, § 84.30 would become, in essence, a nullity. Every party whose signs meet the criteria of § 84.30(6) would nonetheless use chapter 32 for determining just compensation because that chapter allows for litigation expenses including attorney fees. See Wis. Stat. § 32.28. Section 84.30 does not provide for attorney fees and therefore, in all likelihood no one would rely on that statute. ¶ 21. Accordingly, following the language and framework of Wis. Stat. § 84.30, we conclude that § 84.30 is the exclusive remedy for determining just compensation for signs meeting the criteria of § 84.30(6).
¶ 22. Having determined that Wis. Stat. § 84.30 provides the exclusive remedy for compensation for removed signs meeting the statutory requirements, the question remains: what constitutes appropriate just compensation? Section 84.30(7) provides that [t]he just compensation required by sub. (6) shall be paid for the following: (a) The taking from the owner of such sign, all right, title and interest in and to the sign and his leasehold relating thereto.... § 84.30(7). Stated another way, the plain language of the statute requires that the sign owner be compensated for the value of all right in the sign, the value of the title, the value of the interest in and to the sign, and the value of the leasehold interest. The plain language of the statute does not, however, defined what constitutes the value of the right, title and interest in and to the sign, nor does it define what constitutes the value of the leasehold. We therefore turn to extrinsic aids to determine the meaning of these terms and the interests compensable. ¶ 23. Just compensation is the fair market value of the property. Fair market value, as in any other type of case, is ordinarily measured as the price that the aggregate assetthe lease, permit and signwould bring in the marketplace in a voluntary sale to a knowledgeable buyer, considering all relevant factors. 8A Nichols on Eminent Domain, § 23.04[1] at 23-47 (footnote omitted) (3d ed. 1997). ¶ 24. The State argues that under Wis. Stat. § 84.30(6) and (7), the only compensable interests are the value of the sign structure and the value of the leasehold interest. The State asserts that the value of the leasehold interest encompasses the value of the sign site. Vivid, on the other hand, argues that the compensable value of an outdoor advertising sign is more than just the wood, nails, and paint that make up the sign structure. [A] sign built of teak and ebony is no more valuable to a sign company than one built from pine. Respondent's brief at 42. [4] ¶ 25. We agree with Vivid that the value of an outdoor advertising sign is more than just the sign structure and leasehold value of the land on which the sign sits. An important aspect of outdoor advertising is the value of the location. As Vivid argues, the materials of the sign do not influence its value. Rather, location is of paramount importance in outdoor advertising. [B]illboard locations, as compared to billboards themselves, are unique. Depending upon the viewable distance in either direction, the amount of traffic passing the location, and the type of viewing public, a location of a particular billboard may have a value over and above its nuts and bolts value. In this sense, in the billboard industry, it is virtually impossible to separate location from the structure. City of Scottsdale v. Eller Outdoor Advertising Co., 579 P.2d 590, 598 (Ct. App. Ariz. 1978). A sign located near Janesville and next to Interstate 90, a main east-west interstate highway, is certainly more valuable than a sign located near Janesville but adjacent to County Highway A. In valuing outdoor advertising, the location has a value in and of itself. See, e.g., Donald T. Sutte, MAI, The Appraisal of Outdoor Advertising Signs, Appraisal Institute (1994) ([L]ocation is as important to a sign as it is to other types of real estate. (at 17); Signs are purchased for their locations, the signboard structures themselves, and the land leases that run with the sites on which the signs stand. (at 18)). [5] ¶ 26. In sum, just compensation consists of the fair market value of the property taken. In regard to outdoor advertising, we conclude that the value of the sign is derived largely from the location of the sign. Therefore, all right, title and interest in and to the sign and...leasehold relating thereto must include not only the value of the sign structure and leasehold value, but also the value of the location.
¶ 27. Having determined that the State must compensate Vivid not only for the sign structure and leasehold but also for the location of the sign, we now consider the valuation methods for determining such just compensation. ¶ 28. There is nothing in the plain language, legislative history, scope, context or purpose of Wis. Stat. § 84.30 or its federal counterpart, 23 U.S.C. § 131, that restricts courts to a particular valuation method to determine just compensation. Ideally, as with any dispute, the parties can resolve their differences regarding just compensation without litigation. However, [i]f the department and the owner do not reach agreement as to such amount of compensation, the department or owner may institute an action to have such compensation determined under s. 32.05. Wis. Stat. § 84.30(8). [6] ¶ 29. In this case, the DOT and Vivid did not reach an agreement as to the amount of just compensation. Accordingly, either party could institute an action under Wis. Stat. § 32.05 for determination of just compensation. Under § 32.05, the parties must comply with several procedural steps. However, either party may ultimately appeal a determination of just compensation to the circuit court. See Wis. Stat. § 32.05(10)(a). The issue of just compensation must be tried by a jury unless jury trial is waived by both parties. See id. Generally, any professionally accepted appraisal methodology...will be admissible in such cases with objections normally going to the weight, not the competency of the testimony. 8A Nichols on Eminent Domain, § 23.04 at 23-52 (footnote omitted). See also Eller Outdoor Adver. Co., 579 P.2d at 598. The court shall enter judgment for the amount found to be due.... Wis. Stat. § 32.05(10)(b). ¶ 30. Like Wis. Stat. § 84.30, Wis. Stat. § 32.05 does not dictate a particular valuation method to determine just compensation. Rather, § 32.05 requires that the issue of just compensation be determined by a jury. We discern no authority in the statutes for the State's assertion that just compensation must be determined using the cost approach. [7] ¶ 31. There are three recognized valuation methods for billboards: cost approach, income approach and market approach. See 8A Nichols on Eminent Domain, § 23.04[4] at 23-51 through 23-59. In the present case, the State presented evidence regarding the cost approach. Vivid presented evidence regarding both the income and market approaches. Admission of evidence is left to the discretion of the circuit court. See Leathem Smith Lodge, Inc. v. State, 94 Wis. 2d 406, 409, 288 N.W.2d 808 (1980). Three of us conclude that the circuit court did not erroneously exercise its discretion in admitting evidence from both the State and Vivid regarding different valuation methods for the jury to determine which method is more credible and more adequately reflects just compensation. [6] [8] ¶ 32. Under the cost approach to valuing billboards, advocated by the State, the sign structure and the leasehold interest in the sign site are first valued separately. The sign structure is valued by using cost-less-depreciation which simply considers the cost of reproducing the sign as new (the wood, bolts, etc.) minus depreciation. See, e.g., Soo Line R. Co. v. Dept of Revenue, 89 Wis. 2d 331, 350, 278 N.W.2d 487 (Ct. App. 1979) (regarding property tax assessment of railroad). The value of the leasehold interest is the difference between the contractual rent that the sign company is paying to the land owner and the market rent at the time of the appraisal. See 23 CFR § 750.303(c) (1989). The value of the sign structure and the leasehold interest are then combined as the measure of just compensation. The State put no value on the leasehold interest in this case because there was no difference between Vivid's contractual rent and the market rent. Thus, the State in effect valued only the sign structure. [7] [9] ¶ 33. Vivid offered testimony regarding both the market and income approaches. The market approach uses the GIM to value the billboards by looking to the sale of reasonably comparable property. See, e.g., Rosen v. Milwaukee, 72 Wis. 2d 653, 662, 242 N.W.2d 681 (1976) (regarding property tax assessment) (quoting State ex rel. Enterprise Realty Co. v. Swiderski, 269 Wis. 642, 645, 70 N.W.2d 34 (1958)). A GIM is a unit of comparison. It is determined by dividing the sales price of a group of signs by the annual gross rental income generated by those signs. For an example of how the GIM generally works, see below. [8] See 8A Nichols on Eminent Domain, § 23.04[4][c] at 23-57-58. For an analysis of how the GIM worked in this case, see below. [9] ¶ 34. Vivid argues that the GIM used in the market approach is a valid valuation method because it actually measures the fair market valuewhat a willing buyer would pay to a willing seller. Three of us agree. Vivid is entitled to just compensation, see Vivid II, 182 Wis. 2d at 73, and just compensation is the fair market value of the property taken, in this case, two billboards. Fair market value is what a willing buyer would pay to a willing seller, neither being under compulsion. See 8A Nichols on Eminent Domain, § 23.04[1] at 23-47. Here there is ample evidence, not contradicted by the State, that the outdoor advertising industry uses the GIM to determine the value of signs in a transaction between a willing buyer and a willing seller. [10] ¶ 35. Because in the market for the purchase and sale of billboards, buyers and sellers negotiate price as a function of the income the signs produce,.... id. at 23-58, appraisers developed the gross income multiplier as the best means to determine the price a willing buyer would pay to a willing seller. See id. The Gross... [Income] Multiplier approach appears particularly appropriate where the evidence establishes that the sign involved in the condemnation cannot be relocated onto the remaining property or elsewhere in the immediate area. This approach best measures the value of the location inherent in the value of the aggregate asset of the lease, permit and billboard because it is predicated on income produced by the sign at the location, avoiding the shortcoming of the cost approach which ignores the location altogether. Id. at 23-59 (footnotes omitted). A factor which weighs heavily in a court's decision to admit evidence of the market approach and GIM is the assertion that the billboard cannot be relocated. See, e.g., Eller Outdoor Adver. Co., 579 P.2d 590. ¶ 36. As we discussed above, location is an extremely important part of valuing a billboard. The market approach using the GIM takes the value of the location into consideration. It reflects the fair market valuewhat a willing buyer would pay a willing sellerthe measure used by the outdoor advertising industry itself in actual practice. Accordingly, three of us conclude that the market approach using the GIM is an appropriate valuation method for the jury's consideration. Certainly, given the nature of the billboard industry, a willing seller would set a price to reflect the value of the location. Three of us believe that questions regarding the appropriateness of what the appraiser uses as comparable sales to determine the GIM, and other questions such as the length of the leasehold interest, are factors for the jury to consider. ¶ 37. The State argues that the GIM approach is an invalid valuation method as a matter of law because non-compensable business profits (explained below) [10] are inextricably intertwined with the valuation. The State relies in part on a 1993 memorandum from the Federal Highway Administration (FHWA) to regional FHWA administrators regarding guidance on valuation of billboards. The FHWA stated that total reliance on the GIM or income approaches is not appropriate because it is difficult to separate out lost business profits which are not compensable. The FHWA did provide, however, that the GIM and income approaches could be used if components attributable to lost business profits were documented and excluded from the valuation. Three of us first note that the guidance from the FHWA is a memorandum, not regulations. More importantly, three of us fail to discern what business profits are associated with an outdoor advertising sign once the sign is in place. Although the FHWA stated that the GIM is inappropriate because it is virtually impossible to separate the income attributable to the business, the FHWA failed to explain what constitutes income attributable to the business. ¶ 38. The State also failed to indicate what constitutes lost business profits. In contrast to a resort which requires day-to-day labor by the owners and employees, see, e.g., Leathem Smith, 94 Wis. 2d at 416, little if any labor is required to maintain a billboard, except for occasionally changing a light bulb. With respect to outdoor advertising, three of us discern little if any profits attributable to the labor and skill of Vivid. Profits are largely attributable to the location of the sign. [11] ¶ 39. Regardless of which approach the jury ultimately concludes reflects the proper determination of just compensation, the circuit court must instruct the jury to exclude any evidence of lost business profits or expected lease or contract renewals. See Dusevich v. Wis. Power & Light Co., 260 Wis. 641, 642, 51 N.W.2d 732 (1952) (regarding lost business profits); Reibs v. Milwaukee County Park Commission, 252 Wis. 144, 148-49, 31 N.W.2d 190 (1948) (regarding expectation of lease renewal). [11] In the present case, the circuit court correctly instructed the jury that it could not consider lost business profits. Using the GIM method, Vivid's appraiser testified that the fair market value for the two signs was $43,100. The jury returned a special verdict, awarding Vivid $37,800 as just compensation for both signs. Although three of us believe that it is difficult to discern lost business profits in outdoor advertising valuation and the State has pointed to no particular lost business profits, the jury may have, in some measure, taken non-compensable lost business profits into consideration in awarding an amount lower than that resulting from the GIM calculation. ¶ 40. Three of us conclude that the market approach to valuing outdoor advertising, using the GIM is an appropriate valuation method. As the standard used in the industry for valuing signs, the GIM reflects fair market value. While we agree that lost business profits are not compensable in determining just compensation, three of us discern no lost business profits associated with outdoor advertising. The value of billboards, once constructed and in place, is largely a function of the location, not the labor and skill of the sign company. Three of us cannot say that the circuit court erroneously exercised its discretion in admitting evidence of the market approach using the GIM. [12] ¶ 41. The State also challenges Vivid's introduction of evidence regarding the income approach which values property on the basis of the income prior to taking and projected income after the taking. Leathem Smith, 94 Wis. 2d at 411. Vivid introduced this evidence, not as a valuation method for these signs, but as a check on the valuations determined using the market approach. The income approach resulted in a valuation of the billboards of $39,300. [12] ¶ 42. As a general rule, income evidence is not admissible where there is evidence of comparable sales. See id. at 413. There are, however, three exceptions: 1) profit is produced without the owner's labor; 2) profits derived from the property's use are the chief source of its value; and 3) the property is so unique that comparable sales data is not available. See id. at 414. We agree with the court of appeals that valuation of billboards falls within the second exception: profits derived from the use of the billboard is the chief source of its value. (Of course, as discussed above, in the billboard industry profits are determined largely by location.) ¶ 43. Valuation of billboards may also fall within the third exception to introducing income evidence: the billboard is so unique that comparable sales data is not available. However, as mentioned above, the question regarding the appropriateness of what the appraiser uses as comparable sales is a question for the jury. [13] ¶ 44. The income approach has been criticized as a veiled attempt to recover non-compensable business damages. Nevertheless, nearly every court that has been confronted with this argument has held to the contrary and allowed the jury, in assessing just compensation, to consider the income generated by the rental of the sign faces to the advertisers. 8A Nichols on Eminent Domain, § 23.04[4] at 23-56 (citing State v. Waller, 395 So. 2d 37, 41-42 (Ala. 1981); Arkansas State Highway Comm'n v. Cash, 590 S.W.2d 676, 678 (Ark. Ct. App. 1979;) Eller Outdoor Adver. Co., 579 P.2d at 597-98; City of Norton Shores v. Hiteco Metrocom, 517 N.W.2d 872 (Mich. Ct. App. 1994); State v. Weber-Connelly, Naegele, Inc., 448 N.W.2d 380, 384 (Minn. Ct. App. 1989); National Adver. Co. v. State Dept. of Transp., 611 So. 2d 566, 570 (Fla. Dist. Ct. App. 1992)). [14] ¶ 45. In sum, three of us conclude that the circuit court properly allowed the parties to introduce evidence regarding different valuation methods for the jury to weigh in determining the appropriate just compensation for the signs. The circuit court also correctly instructed the jury not to consider lost business profits. ¶ 46. Finally, the State argues that the circuit court erred in excluding Vivid's own testimony before the City of Reedsburg Board of Review. The State wanted to cross-examine Vivid's operations manager regarding testimony made by Vivid representatives at proceedings before the Board of Review using the cost-less-depreciation approach to value sign structures in Reedsburg for tax purposes. The State also wanted to admit Vivid's Statement of Personal Property which showed Vivid's self-assessments of the values of signs using the cost-less-depreciation valuation method for property tax purposes. The State wanted to use these statements to impeach the witness and for the truth of the matter asserted. The circuit court excluded this evidence as irrelevant, and the court of appeals affirmed. [15] ¶ 47. Questions of admissibility of evidence are questions within the circuit court's discretion. See Grube v. Daun, 213 Wis. 2d 533, 541-42, 570 N.W.2d 851 (1997) (citing State v. Pharr, 115 Wis. 2d 334, 342, 340 N.W.2d 498 (1983)). Where this court is asked to review such rulings, we look not to see if we agree with the circuit court's determination, but rather whether `the trial court exercised its discretion in accordance with accepted legal standards and in accordance with the fact of record.' Grube, 213 Wis. 2d at 542 (citing State v. Pharr, 115 Wis. 2d 334, 342, 340 N.W.2d 498 (1983)). [16] ¶ 48. We need not determine whether the evidence of Vivid's testimony before the City of Reedsburg Board of Review or its self-assessments for its Statement of Personal Property was relevant. Because the State had already introduced undisputed testimony regarding the value of the sign structure, using the cost approach, evidence of Vivid's tax assessments was cumulative. See Wis. Stat. § 904.03. We cannot say that the circuit court erroneously exercised its discretion when it excluded this evidence. Accordingly, we affirm the court of appeals on this issue.