Let’s say you are a real estate investor.
You are planning to purchase a commercial building. You are considering two. They are about the same in size, physical condition and architecture, and are in similar locations.
The biggest difference between the two buildings is one has been vacant for a couple of years, while the other is fully occupied by a tenant with 10 years left on the lease.
Which building would you be willing to pay more for? Which is more valuable in the marketplace?
The answer is obvious. The building that is occupied by a tenant is clearly more valuable than the similar but vacant building.
However, for the purposes of property taxes, retail chains with stores in Wisconsin have been arguing that their buildings should be assessed as if they were vacant. Those retailers say the value of the property should be based only on the bricks, mortar and the dirt is sits on, and not on whether or not there is a tenant; nevermind the fact that having a tenant in place clearly makes the property more valuable.
Since a 2008 Wisconsin Supreme Court case won by Walgreen Co., chain retailers such as Walgreen, Menards Inc. and Target Corp. have used this so-called “dark store argument” to successfully challenge their property assessments, getting those assessments, and therefore their property taxes, lowered.
Guess what happens when retailers are able to make this argument and have their properties assessed lower, at a below-market value, as if they were vacant? The property tax burden is shifted onto everybody else, including homeowners.
Some municipalities have cried foul about this and fortunately, some in Madison are listening. Bills sponsored by state Rep. Rob Brooks (R-Saukville), Sen. Roger Roth (R-Appleton) and Sen. Duey Stroebel (R-Cedarburg) would end the “dark store” assessment argument and require assessments to be done based on market value, which is the way it should be.
But Wisconsin Manufacturers & Commerce, which has considerable influence, is taking the side of the chain retailers and opposing the legislation. WMC wants to support business, which is great. But in this instance it is wrongheadedly supporting a practice that unfairly shifts the property tax burden. Property taxes are already too high for homeowners in Wisconsin.
WMC says some assessors are overly aggressive in seeking higher assessments for commercial property. Assessments should obviously be done fairly, and property owners have every right to challenge them. But it can’t be ignored that an occupied commercial property has more value than a vacant one, and the assessment ought to reflect that.
I know brick-and-mortar retailers are struggling to compete in the increasingly digital retail environment, but they still need to pay their fair share of property taxes. They are trying to take advantage of the “dark store argument” to get a property tax break.
End the “dark store argument” and assess all property in the state fairly, based on what it is worth in the marketplace.
