THE ABANDONED STORE OR "DARK STORE" METHOD AND ITS ANTICIPATED IMPACT ON THE FAIRNESS OF THE PROPERTY TAX SYSTEM

The main intent of Village communication channels is to inform our residents, as opposed to expressing our own opinion. The following article deviates from that format. In the following article, Village staff has expressed an opinion, because we believe that this topic will have a significant impact on the fairness of how the property tax burden is distributed amongst the different property tax payers in the Village.

PROPERTY TAX OVERVIEW
In Wisconsin, the majority of public services provided to communities are funded through the collection of a property tax. Property taxes in our community are used to provide: emergency services (such as police and fire), construction and maintenance of locally owned roads, snow and ice removal, public education through KUSD, public access to library materials and services, community planning and economic development, parks, administrative support, and more.

The assessment process in Wisconsin (and other states that use a property tax to fund services) was established to ensure that all property taxpayers are treated equitably and uniformly. The goal of a local assessor is to apply a uniform method of determining value to each taxable property in the community to ensure that each property assumes its fair and equitable share of the financial responsibility for the services.

ABANDONED STORE OR "DARK STORE" METHOD
Throughout multiple communities in multiple states, several of the country's largest retailers and their tax attorneys have begun appealing their property assessments in an effort to pay a smaller portion of the property tax load. Large national retailers, through their tax attorneys, have argued that, unlike other properties, the values for their income producing properties, for tax purposes only, should be determined by comparing them not to comparable stores but to abandoned (or dark) stores.

While thus far this tax avoidance method or strategy has mainly been used by the nation's largest big box retailers, it is quickly gaining the attention of other large manufacturing and industrial property tax payers. Village Administrator Michael Pollocoff explained, "Lawsuits have recently been brought against the Village that we believe will create an unfair shift in the property tax burden for local businesses and residents here in Pleasant Prairie."

EFFECT ON PUBLIC SERVICES AND OTHER TAXPAYERS
"For states that use a property tax to fund services, this tax avoidance strategy is a real problem," explained Pollocoff. "In Michigan and elsewhere, where tax tribunals and courts have decided in favor of this abandoned store comparison, communities must pay tax refunds to these big box retailers from the funds used to pay for services. With multiple large retailers challenging assessments over multiple years, these refunds can run into the hundreds of thousands of dollars, if not more."

"In addition to having to cut into service dollars to pay the tax refund, these cases affect property tax collections going forward. It's incredibly difficult to correct the outcome of these cases once they've been decided, and it shifts more of the tax burden onto the other property tax payers in the community."

"In Pleasant Prairie, if unabated, this practice will cause a significant tax shift to all other taxpayers. Calculations indicate an increase in Pleasant Prairie's tax rate of between 12 and 18 percent."

"When one property tax payer pays a smaller piece of the tax levy pie, the other property tax payers in the community pick up the slack and pay a larger piece of the pie. That doesn't bode well for the average homeowner and other local businesses that cannot afford to have tax attorneys make this same argument on their behalf. It creates a system that favors those who can afford the expense of litigation."

POTENTIAL SOLUTION
Other states, such as Indiana and Michigan are taking steps to address the abandoned (or dark) store method of valuing big box properties. The Indiana Legislature recently passed a piece of legislation requiring assessors to value big box stores on the basis of the cost to construct the building. The Michigan Legislature is also considering various proposals.

The League of Wisconsin Municipalities, a group comprised of nearly all of the cities and villages throughout Wisconsin, is recommending that the State of Wisconsin follow the lead of the Indiana State Legislature (currently controlled by the GOP) and pass legislation that would prohibit valuing thriving big box stores the same as old abandoned properties. They recommend that this take place before even more of the tax burden is shifted to homeowners and small local businesses.

Pollocoff stated, "We agree that action at the State level in Wisconsin is necessary to close access to this abandoned store method in order to maintain equity and fairness for all property tax payers. We believe that a uniform method of valuing property for tax purposes must be used in order to prevent a larger property tax payer from gaining an unfair advantage over others."

RELATED ARTICLES
For those wishing to learn more or to conduct an independent search for information about this topic, typing dark store method, dark store theory, or dark store loophole into your search engine of choice (such as Google, Bing, Yahoo, etc.) will offer a list of articles and news stories from various sources and states relating to the topic. Articles relating to this topic have appeared in or at: the Indianapolis Business Journal, Connecticut Today, the Detroit Free Press, MiBiz, the Michigan Morning Sun, Crains Detroit, Fox 59, and others. An article written by a property tax attorney can be found in the National Real Estate Investor.