Big Property Owners Gear Up To Sue City

Milwaukee’s 2020 assessment process generated a record number of appeals. So many that the city suspended the process for 2021.

Almost a year later, a record dollar value of challenges remains. The Common Council’s Judiciary & Legislation Committee recommended Monday to allow 94 unresolved claims, representing $876 million in city-assessed value, to go to court.

The city received 5,592 appeals in 2020. The overwhelming majority of claims came from single-family homeowners representing themselves and arguing over changes that would result in a property tax bill changing by a few hundred dollars. The Assessor’s Office and Board of Review resolved those claims, either adjusting the assessed values or denying the claim.

But large property owners employ legal teams to contest their assessments and pursue legal action even after a Board of Review decision. In the largest claim remaining, the petroleum distributor, U.S. Venture Inc. argues the assessed value of its property at 9125 N. 107th St. should be reduced from $39.8 million to $8.86 million, a property tax bill reduction of $860,723.

In total, the owners of the 94 contested properties believe the combined value of their properties should be reduced from $876 million to $583 million. The change would reduce their combined property tax bills by $7.09 million.

That’s up from $604 million in city-assessed value challenged in 2020 and $641 million in 2019.

The Assessor’s Office is not incentivized to increase assessments. The amount of property tax revenue the city brings in is set separately by the Common Council and capped by the state. As Assessment Commissioner Steve Miner repeatedly explained last year after the city saw record values, the purpose of the assessment process is to equitably divide how much of the whole an individual property owner should pay. Alderman Scott Spiker compared it to dividing a dinner check between friends.

All else being equal, lowering the value of any given property would result in a marginally higher tax rate and greater property tax bill for the more than 150,000 other property owners in the city.

Residential property assessments went up an average of 11.95% across the city in 2020, but some areas saw declines while others saw increases. Milwaukee’s residential and commercial property grew in value to $30.5 billion in 2020. It’s the first time the city’s equalized value has exceeded the pre-Great Recession high of $28.65 billion recorded in 2008. The values, under state law, are to be current as of the pre-pandemic date of January 1st, 2020.

Miner attributes the growing residential values, which are to mirror comparable sales prices, to low interest rates and a limited number of available homes for sale. But commercial properties, which are also assessed on an income basis in addition to comparable properties, can produce substantially more divergent assessments.

A number of commercial property owners have used what is known as the “dark store loophole” to compare their properties to vacant buildings, often other big box stores, to demand a lower assessment. True to form, nine of the 94 claims are from Walgreens.

Other challenges come from a who’s who of Milwaukee property owners.

The Mandel Group has eight challenges, largely to the commercial condominium units within its larger apartment buildings. Metropolitan Associates has seven challenges outstanding, Marcus Corp. is challenging the value of the Saint Kate The Arts Hotel, J. Jeffers & Co. is challenging the value of the Huron Building, Jackson Street Management is contesting the value of The Westin Milwaukee hotel, DLC Management is challenging the value of six properties that form the Midtown shopping center, North Wells Capital is challenging the value of HUB640 and Robert Joseph is contesting the value of his rooftop condo atop the Lofts on Broadway building.

By estimated tax impact Irgens has the second-largest single challenge. The development firm believes the new BMO Tower should be valued at $54.2 million, not $106.2 million, reducing its tax bill by $722,130. It is also challenging the values on two other downtown properties.

If the city loses any of the cases in court, it would have to refund the difference in property tax payments. The refunds come not just from the city, but proportionally from each of the property taxing entities, including Milwaukee County, Milwaukee Public Schools, the Metropolitan Milwaukee Sewerage District, Milwaukee Area Technical College and, if applicable, business improvement districts.

The legal claims could take years to resolve. The city recently settled with Jackson Street Management for $558,044 regarding assessments going back to 2017 for two of its downtown hotels. A similar $13,231 settlement for the Aloft Hotel is working its way through the Common Council, as is a $14,361 settlement for the Lincoln Warehouse building, 2018 S. 1st St.

A full list of the challenges can be found on Urban Milwaukee.