Wisconsin Supreme Court hears arguments in Outagamie County transportation fee case

The Wisconsin Supreme Court heard oral arguments Monday in a case involving an Outagamie County town that created a “transportation utility district” as a method for raising the funds to pay for the construction and maintenance of roads and related infrastructure outside of the typical property tax system and its levy limits. 

The lawsuit against the Town of Buchanan, brought by an anti-tax organization represented by the right-wing Wisconsin Institute for Law & Liberty (WILL), could close this funding route to municipalities as the construction costs for those kinds of public projects increase. 

“There is statewide interest in the outcome of this case,” the town’s lawyers state in their written argument. “Wisconsin municipalities are now facing substantial increases in public improvement construction costs but limited revenue sources because of tax levy limits and limited State shared revenue. It is publicly reported that many municipalities are considering alternative revenue sources such as transportation utility fee or tax (commonly referred to as a TUF). Greendale, Appleton, Hudson, Oshkosh, Tomahawk and Wauwatosa are among the municipalities reported to be considering a ‘transportation utility fee.’”

The town, located directly to the east of Appleton, created a transportation utility district in 2019 to fund projects including road and sidewalk construction, stormwater management and street light installation. That money would then come from a fee assessed on each property within the district by estimating how much each would use the roads. In total, the fee raises about $875,000. 

The anti-tax group, Wisconsin Property Taxpayers, Inc., sued the town arguing that the fee was a general property tax and therefore subject to the state’s property tax limits, and also that the fee violated the state’s uniformity clause, which requires that property taxes be based on property value. 

“There is no state statute that authorizes municipalities to impose a ‘transportation utility fee’ (which, despite the name, Buchanan concedes “is really a taxation of property,”),” WPTI’s brief states. “The Court will not find the phrase ‘transportation utility fee’ anywhere in the statutes. Nor will it find any statute that authorizes a tax against all properties for their estimated or predicted use of the roads. Buchanan’s theory is that its TUF qualifies as a “taxation of property” authorized by Wis. Stat. § 66.0827, but its square peg does not fit the round hole, for multiple reasons.” 

An Outagamie County judge ruled against the town and the case bypassed the court of appeals when the state Supreme Court agreed to fast track it. 

The town’s argument is that Wisconsin statute 66.0827 allows certain municipal governments to create these utility districts and fund them with property taxes, which it says it is doing by assessing the fees based on each property’s estimated use of the roads. 

The town’s attorney, Richard Carlson, argued that the Legislature created this ability for a reason and it wouldn’t make sense as a statute if towns weren’t allowed to use it to collect money for the district’s fund. 

 “Why have this thing [if] you can’t do anything with it?” he asked.

“Could the Legislature be that stupid to adopt this thing and have this litany of defects as outlined by the Wisconsin Property Taxpayers?” Carlson demanded. “I don’t think so. I think it’s straightforward. I like to refer to it as ‘just fix the damn road’ statute. And I don’t think that that’s a bad way for you guys to think about it either.”

WILL attorney Lucas Vebber said during the arguments that transportation utility fees allow local governments such as Buchanan to set up a “shadow government” as a way to avoid levy limits. 

“It can’t just be a shadow government that the town can create as a means of just evading statutory levy limits,” he said. 

During the arguments, the questions from the seven justices largely focused on how exactly the fee should be classified to determine what rules the transportation district is subject to. 

Carlson, when discussing the deliberation process the town’s leadership had when determining to use this method, underlined just how difficult it’s gotten for local governments to pay for the regular upkeep of their infrastructure. He said that the reconstruction of a major local road, funded partially by grants from the state and federal government, cost $3.6 million for less than a mile. In 2020, the town’s levy limit was about $2.3 million.