Development in Highway Setbacks

The Department of Transportation (“DOT”) recently made a number of changes to Trans. 233, an administrative rule that gives the DOT the authority to review all land divisions abutting state trunk and connecting highways. The changes were made in response to a number of the concerns raised by the WRA and other interest groups. The only concern that was not adequately addressed by the DOT was the setback provision. The setback provision prohibits all permanent structures and improvements (driveways, parking lots, signs, etc.) within 50 feet of the highway right-of-way and, thus, remains one of the most controversial sections of Trans. 233. The DOT argues that this provision is necessary for safety reasons and to protect the state’s investment in its roads by allowing efficient expansion of highways to alleviate congestion. The WRA and other groups argue that this provision allows the DOT to keep land values low to make it less expensive to acquire the property if the DOT needs to expand the highway. The two sides have been negotiating on the issue of setbacks for the last 8 months, but have failed to reach agreement.

Under its recent changes, the DOT has amended the current setback provision to allow for a more flexible “variance” procedure. While permanent structures and improvements are still prohibited within the setback, the flexible variance procedure allows improvements in the setback area if the DOT determines (according to its 20-year highway and transportation plan and other broad criteria) that the subject highway will not likely be expanded within the next 20 years. While this change is an improvement over the setback provision in the current rule, the WRA and other groups believe that the provision continues to prevent landowners from enjoying the reasonable use of their property.

In January, the WRA and other groups are preparing to seek changes to the setback provision through the Wisconsin Legislature’s Joint Committee for Reviewing

Administrative Rules (“JCRAR”). JCRAR has the authority to review administrative rules, request changes, and/or suspend the rule until changes are made. The groups determined that it was in their best interests to allow the other changes to go into effect while they continued to negotiate on the setback provision.

For more information contact Tom Larson.

Smart Growth Dividend Aid Program

To encourage higher density residential development and more affordable housing, Wisconsin’s “Smart Growth” Law includes a Smart Growth Dividend Aid Program. The Dividend Aid Program is a voluntary program that will be funded as part of the 2001-03 state budgets, with the first grants to be distributed in the fiscal year 2005-06. All cities, villages, towns, and counties are eligible, but, in order to be considered for funding, must have (a) a comprehensive plan, and (b) zoning and subdivision ordinances in effect that are consistent with the comprehensive plan. Under the funding formula, each community will receive: (1) one aid credit for each new housing unit sold or rented on lots no more than ¼ acre, in the year prior to the year of application; and (2) one aid credit for each new housing unit that was sold at no more than 80% of the median sales price for new homes in the county in which the city, village, or town is located. Because most towns are not serviced by public sewer and thus are unable to build houses on ¼ acre lots, the legislature will likely create a separate aid program for rural areas.

For more information contact Tom Larson.

Comprehensive Planning Grants

To help local communities in Wisconsin develop comprehensive plans, Wisconsin’s Smart Growth Law allocated $3.5 million in the form of planning grants. Local communities are eligible for one of two different grants -- transportation planning grants ($1 million) and comprehensive planning grants ($2.5 million). Under the transportation planning grant program, communities are eligible for grants to create the transportation element of their comprehensive plan. The first grant cycle concluded this past summer, with approximately 45 communities receiving some form of award. Under the comprehensive planning grant programs, communities are eligible for funding to complete all 9 elements of a comprehensive plan. The state received approximately 103 grant applications during the first cycle and grant awards are expected to be determined by February 2001. Because all local units of government in Wisconsin (approximately 1800) will be required to have a comprehensive plan by the year 2010 if they want to make local land-use decisions, additional funding will be needed. Accordingly, more funding will likely be allocated to one or more of these grant programs as part of the 2001-03 state budget, and other state budgets in the future.

For more information contact Tom Larson.

Use-Value Penalty

As part of the state’s 1999-2001 biennial budget, a few controversial changes were made to the use-value program, which assesses farmland based upon its use for agricultural purposes rather than its fair market value. The objective of the use-value law is allow farmers to continue farming their land without being forced to sell it due to increased taxes. Because communities, in theory, will have to increase property taxes on non-agricultural land to make up for the loss in revenue that would have been generated by taxing farmland at its fair market value, the use-value assessment system represents a tax subsidy to owners of agricultural land or a tax shift to owners of non-agricultural land.

To make sure that the tax subsidy will be used to keep the land in agricultural production, a penalty was created as a means to discourage land speculation and recoup some of the subsidy paid by owners of non-agricultural property. Under the penalty, any person who changes the use of the land to a non-agricultural use will be assessed a penalty equal to the difference between the property taxes that would have been levied on the land if the land had been assessed at fair market value and the property taxes levied on the land for the last two years that the land had been valued under the use-value system ((fair market value - assessed value under the use-value system) x mil rate x 2). Because this penalty can be substantial and have an impact on someone’s decision to purchase the land or the price they are willing to pay for it, sellers are required to disclose to prospective buyers that the land is assessed under the use-value system.

From a policy perspective, the penalty presents an interesting dilemma for the WRA. On one hand, it serves as a deterrent to new development by increasing the costs of land acquisition. On the other hand, it seeks to lessen the tax burden on other property owners who are essentially paying a subsidy to farmers to keep the land in agricultural production. As evidenced by competing policies, the penalty provision has huge political ramifications due to its impacts on farmers, developers, local units of government, school districts, environmental groups, and property owners.

Despite the policy dilemma, the penalty, as drafted, has presented some significant problems for the real estate industry. For example, the law fails to define key terms like “fair market value” and “change of use.” As a result, each community has come up with their own way of calculating the penalty, which has been problematic for developers. To make the penalty more equitable for developers, the WRA will be working with the Department of Revenue and other interest groups to make changes to the formula as part of the 2001-03 state budget.

For more information contact Tom Larson.

Boundary Agreements

Annexation has long been one of Wisconsin’s most contentious and complex land-use issues. Each year, rural legislators propose a myriad of legislative solutions to balance the power between towns wanting to maintain their rural character and cities/villages trying to accommodate the demand for more development. To date, cooperative boundary agreements, which are voluntary agreements entered into by the neighboring communities that determine the location of a common boundary between the respective communities, seems to be the most politically viable solution.

Recently, a new cooperative boundary proposal has been endorsed by the Wisconsin Towns Association, the Wisconsin Alliance of Cities, and the League of Wisconsin Municipalities. Under this proposal, a community that has entered into a boundary agreement may become eligible to exempt itself from that portion of the county general property tax levy that is used to fund specified sheriff services, that portion which is used to fund specified county planning and zoning costs, or both. Both towns and cities or villages are eligible for an exemption if they have (a) entered into a boundary agreement with ½ or more of the cities and villages (for towns) (towns, if you are a city or village) with which it has a common boundary, or (b) if ½ or more of the aggregate number of municipalities in the county have entered into a boundary agreement. (Towns are also allowed to withdraw from county zoning if the town has meet requirements (a) or (b) above.) To be eligible for an exemption from county planning and zoning costs, a tow must also have its own zoning ordinance.

For more information, contact Tom Larson.