For nearly 90 minutes on Tuesday, the auditorium in the county’s Ives Grove Office Complex turned into a metaphorical courtroom as members of the Racine County Government Services Committee heard arguments on both sides of the “dark store” loophole issue.
The dark store loophole, broadly defined, allows businesses that appeal their property tax assessment to a lower amount to occasionally use empty stores or vacant land as evidence for the lower amount.
Jerry Deschane, League of Wisconsin Municipalities executive director, spoke in favor of legislation that would close the dark store loophole.
“This is driving a shift in property taxes from large properties onto homeowners and small independent businesses,” Deschane said. “If this is not corrected — and it needs to be corrected by legislation — the problem will continue to grow. It will accelerate to the point where we estimate that it will drive an 8 percent increase in the average homeowner’s property tax bill.”
Deschane points to the Wisconsin Supreme Court ruling on Walgreens v. City of Madison as a major contributor to the dark store issue.
Deschane said the state Supreme Court essentially ruled that municipalities cannot use the actual lease income of a property as part of its assessment. Instead, they must use a “market rate lease” which, he argues, is “always considerably lower and is not a fair representation of the income potential of that property, which is really what an assessment is supposed to do.”
Cory Fish, director of tax, transportation and legal affairs for Wisconsin Manufacturers and Commerce, spoke to oppose any legislation whatsoever on the issue.
Fish said the characterizations of the legislation proposed to solve the problem have been “disingenuous.”
“The (tax) shift has been towards business — and you can certainly cherry-pick municipalities where that’s not been the case, and I’m not going to deny that — but statewide when looking at the total tax revenue, the shift has been towards business,” Fish said. “This legislation affects everyone statewide, so I really don’t think we should make legislation by cherry-picking a few municipalities.”
Fish said it is “absurd” to think a law that has been on the books for decades would suddenly be taken advantage of by businesses in the mid-2000s.
“However, something did change in the mid-2000s, but it was the behavior of tax assessors and not businesses,” Fish contended. “The vast majority of tax assessors in this state are not increasing tax assessments, in our view, illegally, in order to gin up litigation to cause a problem. But there are a few activist tax assessors who are actually part of a group, who want to include the business value while taxing property.”