Background
Wal-Mart Real Estate Business Trust owns and operates a retail store with grocery in the City of Berlin, Wisconsin. The City assessed the property at $7,260,000 for each of the 2020, 2021, and 2022 tax years — a value set in 2019 after Wal-Mart objected to a higher prior assessment and the assessor, relying on Wal-Mart’s own appraisal, applied a 4% market adjustment. The City had not conducted a full revaluation since 2010, and the assessor’s company used a computer-assisted mass appraisal program built on that decade-old data, with no depreciation accounted for in the model.
Wal-Mart filed complaints for all three tax years, consolidated for a bench trial, arguing the assessments were excessive under Wis. Stat. § 74.37 and violated the Uniformity Clause of the Wisconsin Constitution. Wal-Mart stipulated that the assessments carried a presumption of correctness. Its appraiser, Matthew Gehrke, MAI, opined the property’s fair market value was $3,050,000, $3,620,000, and $3,920,000 for the respective years, relying primarily on a tier-2 sales comparison approach using largely vacant or distressed comparable properties and applying a blanket 60% deduction for functional and external obsolescence in his cost-approach check. The City’s appraiser, Dominic Landretti, MAI, AI-GRS, reached values of $10,900,000, $10,900,000, and $11,500,000 using a sales comparison, cost, and income approach.
The circuit court for Green Lake County dismissed Wal-Mart’s complaints after trial. It found Gehrke not credible — characterizing him as a “hired gun” willing to tailor testimony — and found his comparable sales deeply flawed: several were “dark” or distressed properties compared to an operating store, some were transitioning to non-retail uses, and Gehrke made no adjustments to account for these differences. The court found Landretti credible and his methodology sound. Wal-Mart appealed.
The Court’s Holding
The Wisconsin Court of Appeals affirmed. Assuming without deciding that the City’s assessor failed to follow Wisconsin assessment law in maintaining the assessments, the court held that such a failure does not by itself entitle a taxpayer to relief — Wal-Mart still bore the burden of proving by significant contrary evidence that the assessments actually exceeded the property’s fair market value. That burden, the court held, Wal-Mart did not meet.
The appellate court upheld the circuit court’s rejection of Gehrke’s tier-2 sales comparison analysis on multiple grounds. Two of Gehrke’s comparables were concededly “dark” sales — including a former JCPenney Gehrke himself admitted should not have been used and a former Shopko vacant for nearly four years. Consistent with Lowe’s Home Centers, LLC v. City of Delavan, 2023 WI 8, the court rejected Wal-Mart’s argument that considering a property’s operating versus vacant status impermissibly values the business rather than the real estate: land that can sustain a business is simply worth more than land that cannot, and occupancy/vacancy is a legitimate economic characteristic for adjustment. Gehrke made no such adjustments. The court also upheld the circuit court’s concern that comparables transitioning to governmental, industrial, or manufacturing use were not reasonably comparable to an operating retail store’s highest and best use.
The court further sustained the circuit court’s rejection of Gehrke’s cost approach, noting his unexplained 60% across-the-board functional and external obsolescence deduction — which would, by Gehrke’s own admission, reduce a brand-new $10 million store to a $4 million assessed value the day it opens. The circuit court’s credibility determinations were not clearly erroneous, and Wal-Mart produced no significant contrary evidence sufficient to overcome the presumption of correctness.
Key Takeaways
- A taxpayer challenging a property assessment as excessive must prove the assessed value exceeds fair market value — demonstrating the assessor’s methodology was flawed is necessary but not sufficient; even a legally defective assessment process does not automatically yield a tax refund.
- Under Lowe’s, using vacant or “dark” properties as comparable sales for an operating retail store is disfavored, and failing to make any adjustment for vacancy/occupancy in a sales comparison approach is a fundamental methodological defect.
- A blanket percentage deduction for functional and external obsolescence in a cost approach, unsupported by market data or adequate explanation, will not withstand scrutiny — appraisers must be able to justify the quantum of their adjustments.
- Circuit court credibility findings regarding competing expert appraisers are factual determinations reviewed only for clear error; a trial court’s decision to credit one appraiser’s methodology over another’s will rarely be overturned on appeal.
Why It Matters
This decision reinforces the high evidentiary bar Wisconsin places on taxpayers challenging property assessments. It signals that the “dark store theory” — the practice of valuing operating big-box retail stores by reference to sales of vacant, distressed, or repurposed comparable properties — continues to face serious headwinds in Wisconsin courts following Lowe’s. Appraisers who select such comparables without rigorous adjustment, or who apply unexplained obsolescence deductions, risk having their entire valuation rejected, leaving the taxing authority’s assessment intact even if the assessor’s own methodology was imperfect.
For municipal assessors, the case offers some reassurance: a city that has not conducted a full revaluation in over a decade does not automatically lose an excessive-assessment challenge simply because its assessment practices were dated or the assessor could not fully explain his predecessor’s methodology — so long as the taxpayer’s own evidence is insufficient to prove an excessive result. The case is unpublished and may not be cited as precedent in Wisconsin courts except for the limited purposes of Wis. Stat. Rule 809.23(3).