BUTLER PENS PRO-WALGREENS DECISION

By Michael Horne

Just months after being portrayed as a dangerous liberal intent on eliminating the rights of property owners, and losing re-election to a handpicked candidate of the corporate elite, Supreme Court Justice Louis Butler wrote the unanimous decision favoring Walgreens in its tax assessment dispute with the City of Madison.
In the decision, released yesterday, Tuesday, July 8th, 2008, Butler agreed with Walgreens that the assessors in Madison improperly valued two stores in that city when they based their calculations on the above-market rent paid by the drug store chain.
Instead, he wrote, the assessors should have used the lower market rental rate in their calculations. The savings could amount to $150,000 in Madison, and another $600,000 if you include the 18 Walgreens in Milwaukee that have challenged their assessments. Other chain stores that had been assessed based on above market rents they paid would also have a claim.
The biggest question the average reader would have is "Why does Walgreens agree to pay above market rents?" The answer is that Walgreens stores are owned by developers and are built with "super adequacies" -- special features required by Walgreens. These features, amortized over the length of the lease (20 - 60 years) result in a rental rate that is premium to the market. This is the amount the Madison assessors used to base their valuation of the properties. However, the Wisconsin Property Assessment Manual, cited by Butler, cautions that above-market rents should not be the basis of assessments, and gives the reasons therefor.
Milwaukee Assessment Commissioner Mary Reavey is taking a different approach to the issue. She tells milwaukeeworld, "If I were Madison I would have not agreed that the contract rates were higher than market. We have seen that these and other franchise properties have created their own market in a sense." She says her department feels there are enough Walgreens in the marketplace to base her valuations on sales of comparable real estate, thus avoiding the complications of this case.
In any event, this can be viewed as Butler's valedictory opinion -- you wonder if he was assigned it just because it was so pro-business. It shows that Butler decided cases based on the law as he interprets it, and not on political pressures, as was charged against him in the campaign.

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OCONOMOWOC FACES REALITY IN PABST FARMS
The City of Oconomowoc will have a public hearing this evening, Wednesday, July 9th, 2008, to discuss developer Maureen Stapelton's plans to build -- hold your breath, please -- affordable housing in the community's Pabst Farms development. "We approved jobs in this community and now we have a responsibility to give (employees) a place to live today," she told The Daily Reporter's Sean Ryan.
City officials had zoned the Pabst development for low density construction and a decided automotive focus. Stapleton says the recent, if belated, awareness of high gasoline prices has business owners concerned about relying on their workers traveling great distances to their jobs.
This news brought the following response from former Milwaukee mayor John O. Norquist, now head of the Chicago-based Congress for the New Urbanism: "General Growth, the biggest retail developer in the country, pulled out of PBR Farms because the numbers don't work. GG knows the the Happy Motoring fantasy is over and that sprawl is the biggest risk factor in real estate. Someone should tell WisDOT and SEWRPC. Wisconsin is focused on investing in infrastructure suitable for the 1960s." Norquist went on to point out an article in the Chicago Tribune that said suburban office space demand is at the lowest level since the last recession. Today's younger workforce prefers the city.
--Michael Horne