July 13, 2023 – A transportation utility fee (TUF) charged to property owners by a town is a property tax subject to the state’s municipal levy limit, the Wisconsin Supreme Court has unanimously ruled in Wisconsin Property Taxpayers, Inc., v. Town of Buchanan, 2023 WI 58 (June 29, 2023).

Justice Rebecca Bradley wrote the majority opinion. She also wrote a concurring opinion, which Justice Patience Roggensack joined.

Road Repair Woes

In 2018, the Town of Buchanan’s (Town) town board (Board) learned that the Town would have to rebuild up to 44% of its roads over the next decade.

In November 2018, the Town’s residents approved, by referendum, the imposition of a TUF to pay for the anticipated road repairs.

In December 2019, the Board approved an ordinance that:

• created a transportation utility district (TUD);

• imposed a TUF on every piece of developed property in the town; and

• obligated the Board to adopt a resolution to set a formula for calculating the TUF.

Not All Properties Alike 

The Town’s administrator then set the annual amount to be raised by the TUF and the Board announced the formula for the TUF.

Under the formula, all residential properties would pay about $300, while the amount paid by commercial properties would vary based on: 1) the size and type of the business; and 2) the number of trips on municipal roads the business was expected to generate.  

The TUF money collected by the town in 2021 meant that the Town’s net increase in municipal tax revenue exceeded the levy limit by 34%. 

Lawsuit: TUF Is a Property Tax

In 2021, Wisconsin Property Taxpayers, Inc. (WPT) sued the Town in Brown County Circuit Court.

WPT argued that the TUF was really a property tax subject to the municipal levy limits established in Wis. Stat. 66.0602, and that revenue raised must therefore be set off by a decrease in the Town’s general property tax levy.

WPT also argued that the TUF violated the Uniformity Clause of the Wisconsin Constitution (Article VIII, Section 1) because the Town hadn’t allocated the TUF based on property values.

The Town argued that the TUF was special tax – not subject to municipal levy limit – under Wis. Stat. section 66.0827.

The circuit court granted summary judgment to WPT. The parties then filed a joint petition to bypass the Wisconsin Court of Appeals, and the supreme court granted the petition.

TUF is Property Tax Subject to Levy Limit

Justice R. Bradley began her opinion for the court by pointing out that section 66.0827 authorizes “taxation of the property” in a TUD, rather than taxing the use of roads in the TUD.

The phrase “taxation of the property” in section 66.0827, R. Bradley wrote, “is merely another way of saying ‘property tax.’”

“Accordingly, section 66.0827 provides a mechanism for allocating taxation within a utility district but does not authorize taxation above and beyond a municipality’s levy limit,” Justice R. Bradley wrote.

The Town argued that section 66.0827 had no purpose if money collected for a TUD was subject to the municipal levy limit – why would a municipality take the trouble to create a TUD if it couldn’t function as a separate source of revenue?

But R. Bradley reasoned that the legislature knew how to write a statute allowing a municipality to raise revenue outside the municipal levy limit.

“The legislature could have specifically authorized municipalities to fund utility districts through a ‘special tax’ as defined in section 74.01(5), but it did not,” Justice R. Bradley wrote.

Calculation Method Illegal

Because the TUF was a property tax, R. Bradley concluded, it must comply with the procedures established in ch. 70 of the Wisconsin statutes.

That chapter requires that property taxes to be calculated on the market value of the properties subject to the tax – a requirement that the Town failed to comply with in setting the amounts of the TUF.

“In calculating estimated use of roads, the Town bases the TUF on the class of the property and its commercial characteristics, not the value of the property,” Justice R. Bradley wrote.

No Exception from Levy Limit

Justice R. Bradley also concluded that section 66.0602(3) listed no exemption from the municipal levy limit for TUF funds.

“It is the legislature’s prerogative to choose which types of spending are exempt from levy limits – and which are not,” Justice R. Bradley wrote. “In the absence of an applicable exception, the Town may not increase its property tax levy beyond the limit allowed by law.”

And R. Bradley pointed out, in response to the town’s argument that if the TUF weren’t exempt from the levy limit there would be no point to a TUD, that establishing a TUD allowed municipalities to tax residents who benefitted from a transportation improvement rather than spreading the cost to all residents.

She cited special districts created by the legislature for Lambeau Field and American Family Field (then Miller Park) as examples.

“In a similar fashion, municipalities may apportion particular costs among properties within established utility districts in which the municipality provides the public improvement, rather than imposing costs on all pro​perties within the municipality,” Justice R. Bradley wrote.

Court Should Have Taken Up Uniformity Clause Issue

R. Bradley used her concurring opinion to argue that the supreme court should have addressed the WPT’s Uniformity Clause argument. She argued that both the public and municipalities had an interest in an answer to the constitutional question raised by that argument.

The Town argued that the TUF was a special assessment, which under supreme court precedent would make it exempt from the Uniformity Clause.

Justice R. Bradley disagreed.

“The Town established the TUF to raise general funds for improving roads throughout the municipality on an ongoing basis,” she wrote.

“While individual properties will benefit from improvements to the streets on which they are located, the cost of any improvement is not isolated to the properties located on a particular street.”