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Mayor fights for fairness

Superior Mayor Jim Paine designated Dec. 11 Dark Store Day to call attention to a pair of bills designed to close the dark store loophole, a tax avoidance tactic that allows single-tenant commercial operations and big box stores to have assessments reduced to lessen their property tax burden, leaving it to homeowners to pick up the tab. Photo illustration by Jed Carlson/jcarlson@superiortelegram.com

Superior Mayor Jim Paine joined local leaders across Wisconsin to designate Dec. 11 as Dark Store Day.

The goal was to call attention to legislation designed to close the "dark store loophole," property tax avoidance tactics that aren't available to residential or owner-occupied commercial properties.

Big-box retail chains and single tenant commercial properties use these strategies to significantly reduce their property taxes; other taxpayers — mainly homeowners and owner-occupied small businesses — will see their property taxes increase as they shoulder more of the property tax levy.

"The potential property tax increase for other taxpayers in our community if the dark store strategy and Walgreens decision is fully implemented is 0.5 percent," said Paine, referring to the tactics the bills were written to eliminate.

Paine and local leaders statewide are calling on state legislators to stop this tax shift by scheduling a vote in January on Senate Bill 291 and Senate Bill 292.

"I urge the state Legislature to pass these bills," Paine said. "These bills have lots of support. People are beginning to realize what will happen if the loophole is not closed."

Sen. Janet Bewley, D-Delta, who is among the legislators to introduce the bipartisan bills to the Senate, said the bills could be considered during the next legislative session. The Committee on Revenue, Financial Institutions and Rural Issues unanimously approved the bills, which are now available for scheduling. However, she said the companion bills introduced in the Assembly have gone through a public hearing but have not garnered committee approval.

SB 291 closes a gap in Wisconsin's property assessment laws that allow single-tenant commercial properties, like Walgreens and CVS, to argue the value of their property is not what it appears. Resulting from a 2008 Wisconsin Supreme Court ruling, chain drug stores have been paying taxes on their properties in Wisconsin at half their actual fair market selling price.

According to the League of Wisconsin Municipalities, Walgreens properties in the Milwaukee metro area are selling for $5 million or more, but attorneys argue their actual sale prices don't represent market value and underlying leases are the wrong tool for determining value for property tax purposes.

Walgreens and CVS have won dramatic assessment reductions across the state since 2008 by arguing that the rent they pay for their newly-constructed, highly-visible corner locations doesn't accurately reflect the fair market value for property tax purposes, according to the League.

City Assessor Brad Theien said the issue hasn't been raised here, but it could be if the bills aren't adopted.

SB 292 nullifies a related but different tax avoidance tactic. National big-box retail chains and other commercial property owners are challenging their assessed values using the "Dark Store Strategy" to argue their thriving businesses must be assessed for tax purposes as though they were a vacant, boarded up property.

The bill makes it clear that the dark store loophole is closed in Wisconsin.

"By dollar amount, big box retailers are some of our largest taxpayers," Paine said. "But they get away with some of the lower (assessments) for the square footage of their property ... if they get away with paying less, by having to pay less than our local retailers do, they're shoving that burden on local taxpayers and that isn't fair at all."

The Indiana legislature and Michigan courts have recently invalidated the dark store theory in those states.

"It affects many different buildings that are assessed," Bewley said. She said it's a matter of fairness because the tax levy that raises revenue for a community has to be spread over the entire value, and the burden shifts to other property owners when some are undervalued.

"Our small businesses and our homeowners, they work hard and they pay their fair share. And they don't try to escape and get out from underneath their responsibilities ... so we've got to be fair," Bewley said. "We can't let the big guys get away with paying less than what they owe, especially when they're willing to let that fall on the backs of hardworking people."

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