County resolution challenges 'Dark Store' tax loopholes

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HUDSON—St. Croix County officials are urging Wisconsin lawmakers to overturn property tax policies they say benefit big-box retailers at the expense of small businesses and homeowners.

Wisconsin is the latest state to see a spike in lawsuits filed by corporate retailers like Lowe's and Walgreens seeking lower property value assessments.

County Supervisor Roy Sjoberg, who chairs the board's administration committee, said the lawsuits result in property tax loopholes that shift a bulk of communities' tax burdens from larger stores to property owners and "mom-and-pop" businesses.

The League of Wisconsin Municipalities estimates the average Hudson household could see an annual tax increase of $374-- about 9 percent-- without state intervention.

Committee members unanimously voted to recommend a resolution to the full county board calling on Gov. Scott Walker and Wisconsin state legislators to to overturn a 2008 Wisconsin Supreme Court ruling, now dubbed the "Walgreens decision."

The board approved the recommendation 14-2 at the Tuesday, May 2 meeting.

The Walgreens decision refers to a 2008 case in which the company successfully argued against the city of Madison that property value assessments for properties leased above market rate should be based off of market rent.

LWM says the ruling has allowed the company to seek tax-related property assessments that are nearly half the market price.

"What this is going to do is put a stoppage to the game where an operating large-box store can say, 'we're only worth as much as we would be when we're empty,'" said Sjoberg. "They've been successful through a court case, and they want to replicate this."

A LWM document attached to the recommendation describes a second "loophole" companies employ using the "Dark Store Theory."

Companies allege that assessors should base the value of their buildings off the value of vacant buildings of a similar size.

In one example LWC provided, the city of Wauwatosa, Wisc., assessed a Lowe's store property value at $13.6 million. Although city assessors believe the market value was closer to $17.7, Lowe's argued that the value is about $7 million.

Lowe's said the price should be based on the values of vacant stores of similar sizes in the market.

"What has happened here is that a number of stores, Walgreens is one of them, will build a new store and then abandon the old one," Sjoberg said. "... They're able to ignore, through a couple bad court decisions, the operating revenue that's coming in."

The resolution outlined two specific clarifications the county would like to see in Wisconsin legislation:

• Factor leases into the tax-related valuation of leased properties

• Assessors will base valuation on sales in the same market segment with a "similar highest and best use" instead of vacant properties of similar sizes.

Agnes Ring, who represents District 2, was the sole county supervisor to voice opposition to the resolution.

She said that although she supports the concept, she is not yet comfortable with the language.

"It's like saying to our households, 'if you make more money, we get to charge you more property taxes,'" she said.