The “Dark Stores” loophole.
The terminology just sounds so ominous. What’s it mean? It’s complicated.
Large retailers contend their property tax assessments should include the values of similar vacant or “dark” stores. However local government advocates say that reasoning doesn’t make sense.
“That would be like me assessing your house as if it were foreclosed, abandoned and boarded up. These are active, growing, thriving businesses on busy street corners in downtown Wisconsin,” said Jerry Deschane, executive director with the Wisconsin League of Municipalities. “They’re being valued at what they’re actually worth, not what theoretically they would be worth if they were vacant.”
Essentially big retailers have sued local municipalities, arguing their property assessments were too high. The courts have regularly ruled in favor of the retailers. Thus, municipalities that lost in court have to repay the businesses what they over-charged. Local leaders have resorted to the following talking points.
They are bad.
They are evil.
They do not pay their fair share.
Because big, bad corporations are evil and don’t pay their fair share, who suffers? That’s right. You, the little guy.
You have to pay higher taxes because big, bad, evil corporations don’t pay enough.
We’ve tried to fix this but the big, bad state of Wisconsin won’t listen to us.
It’s such an easy case to make. But it’s not automatically correct.
Lots of local officials around the state, including Franklin mayor Steve Olson and Milwaukee mayor Tom Barrett spent a great deal of time lobbying against the so-called “loophole.” So they were mighty upset that legislative leaders in Madison early in 2018 said legislation to address the so-called “dark store” tax loophole was dead for the current legislative session.
Olson presides over a city in Franklin that has a horrendous business climate. Yet he continues to fight openly, publicly against businesses located in his city.
The mayor pleads innocence, that he’s not bashing businesses like Menards. That’s laughable, especially when he publicly states places like Menards “own” the legislative leadership in Madison that refuse to schedule the bills he supports because of their financial contributions to said legislative leaders.
I’m stunned Olson would make such inflammatory and irresponsible remarks.
Olson fired back on social media.
I’ve been trying to raise public awareness of the efforts by big box stores to reduce their property assessments and property tax bills due to a loophole in state law. My post with the picture of the refund check to Lowes reached more than 40,000 readers.
Steve Olson’s Facebook page, 2/23/18
While the State Legislature is pushing through bills with little meaning for taxpayers municipalities are writing checks to big box stores who have sued us using a bad court interpretation of the STATE tax manual allowing them to reduce their property assessments by a lot. I was sick to my stomach this afternoon signing the first of two checks to Lowes after they sued Franklin. This one for $25k and the next for about $35k. YOUR money. Wisconsin Manufacturers and Commerce and John Menard own the legislature leadership. You get to pay the bill.
Mayor Steve Olson’s Facebook page, 2/16/18
I was sick to my stomach this afternoon signing the first of two checks to Lowes after they sued Franklin.
Assembly Speaker Robin Vos (R-Rochester) offered some common sense when he spoke to the Racine Journal Times.
Vos said he’s skeptical of the legislation.
“I don’t believe we should be raising taxes on anybody,” Vos said. “Whether they own a business, a dark store, a shopping mall, a home … unfortunately, I think what they’re hoping to do is try to have business pay higher taxes and I’m just concerned about that.”
Vos, however, said that there are some abuses that need to be fixed.
“I certainly believe we need to have assessors do a better job … but I’m not sure that this bill is the right answer for that problem,” Vos said.
As far as the loophole shifting the tax burden to property owners, Vos said that is not true.
“Businesses today pay a higher percentage of the overall property tax burden than they did 10 years ago,” Vos said. “If that’s true, we would have seen the opposite and we’re not. I think that’s an example of rhetoric getting ahead of the reality.”
Vos said he would like to see the issue evaluated in greater depth to find a more appropriate solution.
“I would prefer to take the summer to do a study to try to determine the best way to solve this problem,” Vos said. “It’s going to take time and study to find the proper answer, and I think this is people looking for a political solution to say they did something rather than looking for the right answer.”
The bills were dead as of February. Franklin didn’t toss in the towel. They spent more money.
Mayor Steve Olson had proposed a referendum:
“A Resolution Scheduling an Election for an Advisory Referendum that Recommends the State Legislature Protect Local Businesses, Apartment Owners, and Homeowners from Property Tax Burden Shifts by Passing Legislation to Close Property Tax Loopholes Related to the “Dark Store” and Walgreens v. City of Madison Commercial Property Valuation and Taxation Interpretations.”
You will note the incredibly biased spin of that wording.
To their credit the Franklin Common Council voted 4-1 in August against placing the referendum on the ballot. Alderman Dan Mayer was the lone affirmative vote.
No one in Wisconsin has been following this issue more than Scott Manley of the Wisconsin Manufacturers and Commerce. I worked with him for many years when we both were employed by the Wisconsin State Senate. Manley is extremely sharp, and quite frankly, I trust him more than anyone else on this matter.
On a whim I called my old colleague Manley back in March and asked him if he was pursuing any update on this story.
At that time Manley told me he just finished writing an op-ed piece he was going to pitch to local newspapers. Manley forwarded me his op-ed piece:
Dark Store Issue is Really About Higher Taxes
Everybody loves an underdog, and that’s especially true when a storyline pits the “little guy” versus a large corporation.
This is the narrative local governments have spun in the so-called “dark stores” debate. They’ve positioned the issue as greedy corporations attempting to shift their tax burden to homeowners. This makes for an interesting story, but it’s simply not true.
In reality, there are two indisputable facts that have been left out of the debate on this issue. First, the property tax burden has actually shifted from homeowners to businesses over the last decade – the exact opposite of what your local politicians have likely told you.
Second, the dark store legislation is an effort to legalize tax hikes on businesses that assessors have been attempting to impose, illegally, for more than a decade.
This debate isn’t about “closing a loophole” or forcing someone to “pay their fair share.” It’s about local governments wanting to tax to the max and villainize the businesses that provide jobs in their communities.
Let’s look at the data from the Wisconsin Department of Revenue. From 2008 to 2017, the share of residential property taxes statewide has actually decreased 2.4 percent. On the contrary, the share of property taxes paid by businesses has increased by more than 10 percent over the same time period.
In other words, if property tax collections were a pie, the slice from homeowners has gotten smaller, while the slice from businesses has increased. Any politician who tells you businesses are shifting their burden to homeowners is simply wrong.
Why are businesses paying more? It’s due in part because some assessors have unlawfully raised the property assessment of businesses by inappropriately adding the value of certain lease payments to the value of the land and building. The Supreme Court declared this practice illegal in 2008, but that hasn’t stopped assessors from continuing their efforts to impose this illegal tax hike on businesses.
Some politicians have criticized businesses for challenging these unlawful assessments — as if it’s their patriotic duty to be overtaxed.
Keep in mind that cities, towns and villages have a self-interest in assessing property higher because it means they can collect more taxes. That’s why it’s so important that our laws allow property owners to challenge their assessment with an unbiased third-party review to ensure fairness and adherence to the law.
When these disputes go to court, businesses consistently win because the higher assessment was not lawfully imposed. The courts then force the local government to give back the amount of the tax that never should have been collected in the first place.
It’s frustrating that local officials complain about having to give back money they illegally took from property owners. After being forced to return the money they had no authority to take in the first place, local governments then have the gall to complain that businesses aren’t paying their fair share.
Here’s some advice to local officials: if you don’t like paying back money that you took illegally, and if you don’t like paying legal fees when taxpayers take you to court to get their money back, just follow the law.
Instead of following the law, local officials are looking to change it.
They’re vigorously lobbying for a new law that will allow them to raise taxes in a manner the courts have consistently told them they cannot do. They’re asking the legislature to give them taxing authority that no other state in the country has allowed.
This municipal “tax to the max” scheme is so bad, even big-taxing Governor Jim Doyle had the good sense to veto the idea in 2009.
There are many other concerns with these bills, including unconstitutionality, which I cannot mention in the limited space afforded by this column. I will, however, give an example.
Through no fault of their own, and with no changes to their land or building, Badger Meter’s facility in Mount Pleasant would see a $68,000 per year increase in their property taxes if the dark store bills became law.
Raising taxes on homegrown companies like Badger Meter, who are actively bringing workers back to our state, is not the way to make Wisconsin prosperous. It also happens to be incredibly unfair.
WMC negotiated a compromise prohibiting a vacant property that is dilapidated or distressed from being used as a comparable for assessment purposes. Lobbyists for local governments could have taken that compromise and declared a legislative victory. They rejected that compromise because that’s not what this issue is really about.
Instead, they’re holding out for the oppressive tax-hiking authority that no other state is willing to authorize. Governor Doyle rejected this idea before, and the legislature should reject it again.
—-Scott Manley, WMC
A new legislative session begins in Madison in January. “Dark Store” legislation will be proposed again, and our mayor will be in search of TV cameras. The same Republican leaders who killed the legislation this year are back in their same leadership roles.
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