If a strategy used by a national chain retailer works in one city or state, they’re certain to try it on others. The dark store strategy that has helped retailers in some areas slash their property tax bills by sort-of-but-not-really threatening to close is spreading, and has now reached Wisconsin.
Here’s how a basic dark store strategy works. A retailer pays its property taxes like a good member of the community, then sues, demanding to pay a much smaller tax bill. That’s where the “dark stores” come in: What if the store were to close down and sit empty? That’s the implied threat that stores are making against small municipalities in Wisconsin.
Assessments are based on how a property is used, and an unused store can be worth millions of dollars less. A former Lowe’s or Target that closes can sit around for years waiting for a suitable buyer or new tenant. The retailers want the same tax bill they’d have if the store were sitting idle.
For example, a Menards store in Howard, WI, has been officially assessed for $12.45 million. The chain spent $10.6 million on buying 18 acres of property and building the store that sits on it, but argues that it should only be assessed at $5.8 million. Why? The retailer’s attorney argues that “the tax imposed on the property was excessive,” and the 2016 assessment was also “excessive.”
Imagine that you’re running the government of a suburb or exurb that mostly consists of owner-occupied housing and big box stores. If the big box stores cut their tax bill down to that of a vacant store, either homeowners and other businesses have to pick up the budgetary slack, or the government has to cut services. Which will it be?
In Oshkosh, WI, the government had to give $300,000 back to retailers using this strategy. The smaller a town’s residential base is, the more it will hurt each homeowner when the stores go faux-dark.
by Laura Northrup via Consumerist