By: Rob Harris
Municipalities tax real estate based on the property’s valuation. In the case of a golf club property, should a well-managed club be subjected to higher taxes because its value is higher than that of a golf course that is not as well-managed?
This question is pending before the Wisconsin Court of Appeals in a case involving Kohler Co.
The particular tax appeal does not involve Whistling Straits–the Kohler-owned course that hosted last week’s PGA–but rather Kohler’s Blackwolf Run course.
The lower court sided with Kohler, rejecting the higher taxes that the Village of Kohler sought to impose.
On appeal, the Village argues that the court erred because it viewed the value of the golf course as independent of the value associated with the club’s management. As the Village argues on appeal, “business value, if any, associated with Blackwolf Run is ‘inextricably intertwined’ with the real estate, and taxable,as a matter of law.”
As the Village argues in its brief to the Court of Appeals:
“A world-renowned golf facility, such as Blackwolf Run, is a perfect example of a property where business value,if any, is ‘inextricably intertwined’ with, and appended to,the real estate itself. A ‘top 100′ golf course generates income based on the high quality and notoriety of the golf course improvements, not management ability or brand name. If a high end golf course is sold, the golf course and the quality of the golf course design transfers with the land itself.It does not stay with the seller or dissipate upon sale. A recently sold golf course’s layout and design will not change,and as long as it maintains competent management, its quality and ranking also will not change.
“Because the business value, if any, associated with Blackwolf Run is not independent of the property and would transfer to any buyer of the real estate, any such value falls under the scope of Wisconsin’s ‘inextricably intertwined’case law and is assessable, as a matter of law. …The location of Blackwolf Run,along the beautiful banks and valleys of the Sheboygan Rìver,would not change, but would automatically transfer to any buyer of the real estate. The challenging and highly regarded layout of the Blackwolf Run Golf Courses and its famous Pete Dye design and the fact that numerous high-profìle tournaments have been played at Blackwolf Run would also remain after any sale. A new owner could change the name to Bandon Dunes East and it would still be a ‘top 100′ golf course…
“Therefore, Blackwolf Run’s ‘raison detre’-providing a high quality, beautiful and challenging golf course at a premium price-’is a transferrable value that is inextricably intertwined with the land and “all buildings and[golf course] improvements thereon, and all fixtures and rights and privileges appertaining thereto.”‘
“The quality of the Blackwolf Run golf courses has an inherent income producing capacity. The inclusion of this inherent capacity in a real estate assessment depends only upon whether it can survive the sale of the underlying real estate, not whether a subsequent owner actually succeeds in fully exploiting that capacity….
“Because the business value, if any, associated with Blackwolf Run is generated by the golf course itself and is appended to the property, its real estate assessment must include that value, as a matter of law.”
Kohler, having prevailed in the lower court, will be filing its brief in the weeks ahead.