March 29, 2022 – The City of Milwaukee used the wrong measure in determining that three commercial buildings should be razed because the cost of repairing them exceeded half their value, the Wisconsin Court of Appeals has held.

In U.S. Black Spruce Enterprise Group, Inc. v. City Milwaukee, 2020AP1113 (March 15, 2022), the Court of Appeals District I held that the city should have used the cost necessary to make the buildings safe for use as unoccupied buildings, not the cost to make them safe to reopen to the public.

Repeated Calls to Police

Since 2008, U.S. Black Spruce Enterprise Group, Inc. (Black Spruce) has owned three buildings that were part of Northridge Mall in Milwaukee. The mall closed in 2003.

During the time that Black Spruce has owned the buildings, they have fallen into disrepair.

The Milwaukee Police Department (MPD) has received numerous calls about thefts and trespasses and even homeless people living in the buildings.

But the MPD is unable to respond to all of the calls, given the number of the calls and given the risks to officers entering the buildings in their rundown state.

Black Spruce and the city entered into stipulations designed to secure the buildings while the lawsuit played out. Among other things, the stipulations required Black Spruce to provide on-site 24/7 security service and cooperate with MPD.  

Repair Costs Too Great

In April, 2019 the city issued three raze orders for the buildings, pursuant to Wis. Stat. section 66.0413(1)(b)1 and Milwaukee City Ordinance section 218-4

Section 66.0413(1)(b)1 allows a municipality to order a building to be razed if “the cost of repairs” is greater than 50% of the building’s value.

The orders specified the following:

• The buildings were dilapidated, vandalized, and out of repair;

• The cost to repair each building was greater than 50% of its value, and therefore presumed to be unreasonable;

• The buildings were unsafe as defined in Milwaukee City Ordinance section 200-11, and were therefore public nuisances.

Black Spruce appealed the raze orders to city’s Standards and Appeals Commission (Commission). The Commission affirmed the orders.

Black Spruce appealed the Commission’s decision to Milwaukee County Circuit Court. The circuit court affirmed the Commission’s decision; Black Spruce appealed.

A Contest Over Costs

Judge Timothy Dugan wrote the opinion for a 2-1 majority of the court of appeals. Presiding Judge M. Joseph Donald joined Judge Dugan. Judge Maxine White dissented.

Black Spruce argued that the raze orders were unreasonable because the cost of repairs calculated by the city in determining whether to raze the buildings were inflated.

For instance, the repair costs calculated by the city included repairs to the building’s electrical, heating, and plumbing systems – costs necessary to open the buildings to the public.

Black Spruce argued that that the costs of repairs should be limited to the cost of complying with the stipulations – in other words, the costs necessary to secure the buildings for unoccupied uses.

Costs Limited to Necessities

The majority agreed with Black Spruce.

Judge Dugan noted that Section 66.0413 does not define “cost of repairs.” However, he explained, in Donley v. Boettcher, 79 Wis. 2d 393, 255 N.W.2d. 574 (1977), the Wisconsin Supreme Court held that the costs of repairs should be limited to the necessities of the case.

“In other words, the cost of repairs are only those that are considered necessary to remove the public nuisance and protect the public interest because ‘a municipality is required to use the least drastic way of removing a public nuisance,’” Judge Dugan wrote.

A court must consider the building’s use when determining the cost of repair under section 66.0413(1)(b)1, Judge Dugan explained. The city failed to do that, Judge Dugan wrote, by including costs necessary to make the building safe to reopen to the public.

What is Intended Future Use?

The city argued that Black Spruce intended to use the buildings as an Asian mart open to the public, and that the costs it calculated were appropriate.

But the majority held that Black Spruce had not decided how the buildings would be used other than as vacant unoccupied buildings, despite a general desire to do something more with the buildings in the future.

“The City acknowledges that although Black Spruce desires to redevelop the buildings, it contends that ‘over it’s twelve years of ownership, [Black Spruce] has never brought forth any real plans for development,” Judge Dugan wrote.

A Black Spruce official testified in the circuit court that contractors poised to discuss their role in any redevelopment cancelled their meetings with the company after the city issued the raze orders.

“Any development proposals Black Spruce had or has are purely speculative such that they cannot be considered the intended use of the properties for purposes of determining the costs of repairs,” Judge Dugan wrote.

Majority Misreads Precedent

In her dissent, Judge White explained that the majority had misread Donley and Village of Williams Bay v. Schiessle, 138 Wis. 2d. 83, 405 N.W.2d. 695 (1987), a court of appeals case interpreting section 66.0413(1)(b)1.

In Schiessle, the court of appeals held that the fact the building owner had taken out ads seeking renters for the building was evidence that the owner intended to open the building to the public.

As a result, the village properly included within the cost of repairs costs necessary to make the building safe for human occupancy.

The circuit court, Judge White pointed out, found that Black Spruce intended to use the property for an Asian mart shopping center.

By relying on the fact that Black Spruce had not submitted plans for such a use, Judge White wrote, “the Majority reads an extra requirement into Donley and Schiessle. These cases do not require that an owner of property have a detailed, developed plan.

“Rather, these cases simply require that a circuit court look at the owner’s intended use of the premises.”