The hidden ripoff- how "dark stores" raise your property taxes

Next week, there will be a hearing in the State Assembly’s Ways and Means Committee on two bills that seek to better define how commercial properties are assessed and taxed in Wisconsin. AB 386 deals with so-called “dark store” assessments on retail and other commercial property, while AB 387 has to do with the value of leased property.

The two bills have drawn sponsorship from a wide variety of legislators from both parties from numerous parts of the state – a rare feat in this Legislature. And if you look at the ripoff that retail businesses have been trying to pull on Wisconsin homeowners, you will see why these laws should be supported by anyone that is not a puppet for corporate retailers.

The leasing bill is intriguing (it values the property based on how much a renter would pay on the open market for the space vs the current below-market deal), but I want to concentrate on the “dark store” bill, since that has been an increasing issue in local communities, particularly as some retail stores close up in light of consumer tastes shifting to online shopping (Sears at Southridge Mall in Greendale being one of the latest victims).

A lawsuit in suburban Green Bay illustrates how this controversy is playing out throughout the state.

Big-box retailer Menards and the village of Howard continue to battle over a $6.7 million difference of opinion on how much the company's store on Woodman Drive is worth.

The next round will be fought in court, now that the retailer has sued the village in a dispute over Howard's 2017 assessment of its store, on 18.7 acres at 2300 Woodman Drive….

Howard assessed the store at $12.45 million. Menard Inc., which said it spent $10.6 million on land and building costs, claims the store should be assessed at $5.8 million. Menards compares the site to closed stores that include a Beaver Dam Home Depot, a Sheboygan Sears and the long-vacant Cub Foods on Green Bay's east side.

Cub Foods, on an eight-acre site, is assessed for $1.8 million and pays $40,000 a year in taxes. A redevelopment project beginning this month is projected to raise its value to $5.5 million.

That case will go to trial early next year, but for future cases, the dark store bill in the Legislature seeks to decide this question by telling assessors they should use the following criteria

1. Sales or rentals of properties exhibiting the same or a similar highest and best use with placement in the same real estate market segment.

2. Sales or rentals of properties that are similar to the property being assessed with regard to age, condition, use, type of construction, location, design, physical features, and economic characteristics…..

The bill also provides that a property is not comparable to the property being assessed if the seller has placed restrictions on the highest and best use of the property or if the property is dark property and the property being assessed is not dark property. The bill defines “dark property” as property that is vacant or unoccupied beyond the normal period for property in the same real estate market segment.

This store....


Is not this store...

The City of Wisconsin Rapids is among the latest communities to give support to the “dark store” bill, and said that it is a matter of tax fairness to keep homeowners from paying more than they should.

The goal of these bills is to avoid a large tax shift from commercial properties to other classes of property, primarily residential and small business. Alderperson Thaddeus Kubisiak, the council member who introduced the resolution, said, “this legislation will ensure that the dark store tax strategy being used by big box retail chains to cut their property tax bills in half in Michigan and other states does not take hold in Wisconsin.”

The legislation clarifies that when assessors use sales of comparable properties for determining the value of a property they must use properties that are within the same market segment and similar to the property being assessed with regard to age, condition, use, type of construction, location, design, and economic characteristics. Mayor Zachary Vruwink added, “These bills explicitly provide that assessors may not use a dark and vacant store as a comparable for property that is not dark or vacant.”

The City of Sheboygan’s Common Council also gave its unanimous support to the dark store bill this week, and pointed out how much of a tax shift happens in their community of less than 50,000 people.

Sheboygan officials said the city has already been hit by more than $550,000 in lost tax revenue in recent years following challenges by local businesses over their tax bills. The biggest loss came when the former owners of Memorial Mall won more than $800,000 in tax refunds two years ago over contested property assessments.

For the city, the mall case amounted to more than $530,000 in lost taxes between 2010 and 2016, with losses also hitting other local jurisdictions, according to information provided by the city. Local Walgreens stores have also seen reductions in their property bills following challenges to their assessments.

But the taxes aren’t really “lost”, as that $530,000 will now be an extra assessment put onto everyone else that owns property in the community, particularly homeowners. Dark-store assessments are a flat-out subsidy of retailers at the expense of the everyday resident.

And I guess that explains why the greedheads at Wisconsin Manufacturers and Commerce are opposed to this bill, because those guys want all the giveaways that they can get, no matter who else pays the price for those subsidies. For a bunch of guys who complain about paying taxes, WMC sure doesn’t mind if everyone else has to pay up for their free ride!

Any legislator worth salt needs to get behind both of these bills and shoot them through as soon as possible, before more homeowners get screwed over by (elected and donation-receiving) judges decide in favor of these retailers. Sure, dark stores and sub-market assessments might not get a rube’s blood boiling like the thought of some poor black person getting welfare, but it is a much bigger theft from the little guy.