Court Opinion

ID: 9523526
Source: CourtListenerOpinion
Date Created: 2023-08-07 02:43:36.559959+00
Date Added: 2024-06-11T13:06:21.239746
License: Public Domain

WEDEMEYER, EJ.
¶ 38. (concurring in part; dissenting in part). I write separately because I would affirm the trial court's order on both the beneficial owner issue and the educational association issue.

A. Beneficial Owner Issue.

¶ 39. The majority concludes that the Milwaukee Regional Medical Center, rather than Milwaukee County, is the beneficial owner of the day care facility involved here, and therefore does not qualify for property tax exemption under Wis. Stat. § 70.11(2). Although the issue of beneficial ownership is, in my view, a close question, I would affirm the trial court's determination that the County maintained ownership of the property.1
¶ 40. The question of whether the County, as lessor, maintained "beneficial ownership" of the property at issue here, or whether beneficial ownership became vested in the Milwaukee Regional Medical Center, as lessee, is reviewed on a case-by-case basis. See Mitchell Aero, Inc. v. City of Milwaukee, 42 Wis. 2d at 662; Gebhardt, 89 Wis. 2d at 109-10; Crystal Ridge, Inc., 180 Wis. 2d at 568. The fact-specific analysis is based on an examination of all factors relating to *237ownership. The key question is whether the tax-exempt entity, here the County, maintained significant control over the property.
¶ 41. The trial court, here, addressed the factors that favored concluding that the County was the beneficial owner:
Under the test or factors that would weigh in favor of County ownership, I think the following list, perhaps not exhaustive, but: [1] MRMC is required to obtain County approval of construction plans, [2] the lease would terminate and lessor would have right of possession if all construction was not completed in time. [3] The use of the property is limited to running a day care.
[4] I think it is important that this facility also, I think from, at least without having gone out there and looked at it, but my sense is that it has more possible alternative uses than some of the other buildings.
[5] The lessor has the right to enter the premises. [6] The lessee cannot sell, convey or sublet without written permission from the County. [7] The lessor [i]s required to be included as an additional insured. [8] The lessor is required to restore complete possessory interest upon termination of the lease. [9] The lessee can remove personal property on termination of the lease. However, is required to indemnify for any damages.
[10] The County is not required to purchase back the property from the MRMC. [11] MRMC is required to obtain consent before constructing a parking lot. [12] They are required to pay the County for exterior security. [13] MRMC is required to obtain fire insurance equal to 80 percent of value naming the County as co-insured. [14] They are required to obtain liability insurance naming [the] County as additional insured. [15] They have to get permission before making substantial improvements during the last ten years of the *238lease. [16] They are required to keep the day care in good state of clean condition, [17] plus service at least 140 children. [18] They have to purchase their electricity and water from the County and [19] any additional or alterations to the facility costing over $150,000 require consent of the County. Many of those things I read are similar to the various conditions set forth in the Gebhardt and Crystal Ridge decisions.
Next, the trial court addressed the factors which suggested that the Milwaukee Regional Medical Center was the beneficial owner:
On the list showing, or tending to show MRMC ownership, [1] MRMC can mortgage their leasehold interests, [2] they are responsible for preparing construction site and building property. [3] They only pay a dollar's rent for first 30 years. [4] They do not pay the County any revenues from the activities on the property. [5] They have title to the facility and any fixtures, equipment or other property upon the premises. [6] The County does not reserve any right for its use of the property for its own purposes. [7] They have - the length of the lease is 50 years. [8] They have no involvement in the operation of the day care. [9] County does not set the prices or hours of operation, and [10] County's approval with respect to any alterations cannot be unreasonably withheld.
After balancing the factors favoring County ownership versus Milwaukee Regional Medical Center ownership, the trial court determined:
I believe that the County does have significant control over the property as set forth in the Gebhardt and Crystal Ridge cases.
They have to, MRMC has to gain permission from the County before it engages in many activities related to their leasehold interest, such as subleasing, building *239any additions, constructing a parking lot, etc. and while the County cannot unreasonably withhold consent, they still have and retain the right to say no if they don't agree with some change in use of the property that they, MRMC wants to engage in and therefore, comparing the cases, I think that the County exercises enough control.... They are the owners.
So, I'm finding that based on this record, that the County is the beneficial owner of the property. I find comparisons in this case much closer to Gebhardt and Crystal Ridge than Mitchell Aero.
¶ 42. I agree with the trial court's assessment. These tax exemption cases require a balancing of factors. The reason these cases must be assessed on a case-by-case basis is because there is no bright-line rule. All cases will have factors leaning both ways. Here, the trial court, after assessing all of the factors, concluded that the circumstances in the instant case are closer to the rulings that the County maintained beneficial ownership and therefore the day care property should be exempt from paying taxes to the City of Wauwatosa. I agree with the trial court's assessment. In balancing all the "ownership" factors here, and applying the three pertinent cases, the scale tips in favor of the County maintaining beneficial ownership. Therefore, Wis. Stat. § 70.11(2), which grants tax exemption to all County-owned property applies, and the day care center is exempt from general property taxes for the tax years in question.
¶ 43. Moreover, I reject the City's contention that the trial court erred because it simply listed the factors without actually balancing the weight of each factor. The case law in this area does not require a balancing of the weight of each individual factor. Rather, the cases dictate a listing of all the indicia demonstrating ownership by the County and a listing of all the indicia *240demonstrating ownership by the Milwaukee Regional Medical Center. Once the indicia have been identified, the trial court's balancing involves determining whether the indicia results in the County maintaining sufficient control so as to justify tax exemption. This is exactly what the trial court did in this case. It concluded, based on the indicia, that the County executed a lease, which retained sufficient control over the property for purposes of tax exemption.
¶ 44. I also respectfully disagree with the majority's conclusion that the County does not receive a sufficiently significant financial benefit to retain beneficial ownership. In reviewing Mitchell Aero, Gebhardt, and Crystal Ridge, I am not convinced that those cases require proof of an immediate financial benefit in order to find that the County retained beneficial ownership. Rather, my review of those cases suggests that financial benefit was one among many "indicia" of ownership to be considered. These cases present a difficult determination because no two cases involve the same ownership indicia. Thus, we look at all the factors to determine whether the tax-exempt status should apply.
¶ 45. Here, in addition to the control the County retained, the County also receives a not-insignificant financial benefit. Milwaukee Regional Medical Center is required to purchase its electricity, water, sewer and security from the County. It is required to maintain hazard and liability insurance, naming the County as a co-insured and/or an additional insured. The Milwaukee Regional Medical Center agreed to share in the County's legal obligation for payment of fire protection services.2 These are significant financial benefits to the *241County. In addition, there is a public benefit which inures to County residents by having the day care facility located on the County grounds. In addition, the County receives the financial benefit of future rent and the deferred capital value of the building.3 When the lease expires, the leasehold returns to the County without requiring the County to pay any money to the former tenant. Thus, in my opinion, the County retains a sufficiently significant financial benefit to maintain beneficial ownership. As our supreme court pointed out in Gebhardt: "We note that public policy favors this type of tax-exempt treatment for conveyance-leaseback arrangements between private enterprise and governmental bodies." Id., 89 Wis. 2d at 115.
¶ 46. Although the facts in this conveyance-leaseback arrangement are slightly different than all three of the cases discussed herein, I agree with the trial court that that indicia of ownership tips in favor of the County retaining beneficial ownership and, therefore, the property should be tax exempt.

*242
B. Educational Association Issue.

¶ 47. The trial court ruled that Wis. Stat. § 70.11(4) did not apply to this case because the Milwaukee Regional Medical Center does not qualify as an educational association. The majority opinion agrees with the trial court's ruling on this issue. I concur in that part of the majority's opinion.
¶ 48. Based on the foregoing, I respectfully concur in part and dissent in part with the majority opinion in this case. I would affirm in toto the trial court's order.

 It is undisputed that the County owns legal title to the property. The issue in this case is whether by leasing the property to the Milwaukee Regional Medical Center, the latter became the beneficial owner, and therefore rendered the property subject to taxation.

 Before the lease was executed, the County agreed to pay to the City of Wauwatosa 85% of the construction costs for a new *241fire station (up to a maximum of $800,000), and be responsible for approximately 74% of the cost for the fifteen additional firefighter positions resulting from the construction. Pursuant to the lease with the County, the Milwaukee Regional Medical Center agreed to pay a pro rata share of those costs, thereby relieving the County of a portion of its obligation under its agreement with the City of Wauwatosa. The financial benefit to the County of this provision during the years at issue here was $6645.30.

 Beginning in year 31 of the lease, the Milwaukee Regional Medical Center will pay fair market value rent to the County, which is estimated to be approximately $5900 annually. At the conclusion of the leasehold, the County will receive, free of any encumbrances, the day care facility, which was constructed at a cost of at least $400,000.