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Dark store loophole bills

State lawmakers are introducing bills to close what critics call the "dark store loophole" and increase how much mega-retailers, such as Eau Claire-based Menards, pictured, pay in property taxes.

Republican state lawmakers have unveiled a pair of bills they say would prevent owners of big-box retail stores from lowering their property tax bills while shifting local tax burdens to small businesses and homeowners.

Rep. Rob Brooks, R-Saukville, and Sens. Duey Stroebel, R-Saukville, and Roger Roth, R-Appleton, announced the legislation at a Capitol news conference Wednesday. At least one Democrat, Oshkosh Rep. Gordon Hintz, also supports the measures.

Opponents of the bills fault “activist assessors” for creating the problems the bills are meant to address: the so-called “dark store” strategy.

In recent years, owners of big-box retail stores have used that strategy — stemming from a court ruling about a Madison Walgreens store — to lower their assessments to reflect the value of other stores that are “dark,” or vacant. The ruling was in 2008, when the state Supreme Court found Madison city assessors had overvalued a Walgreens store.

The bills’ opponents, which include Wisconsin Manufacturers and Commerce, the state’s powerful business lobby, say they amount to a tax increase on businesses.

But Roth said the current standard — which owners of huge commercial properties are using to appeal to lower their tax bills — shifts the cost of paying for city services to other property owners.

“We do not want to see that cost shift go to our residential property taxpayers,” Roth said. “That, fundamentally, is why I support this bill.”

One of the bills would overturn the 2008 court ruling, writing in law that “property be assessed at its highest and best use,” according to a summary prepared by the bill’s authors.

It also would clarify that, for property tax purposes, real property includes any leases, rights and privileges pertaining to the property.

The other bill would require assessors to value property based on comparable properties “within the same market segment and similar to the property being assessed with regard to age, condition, use, type of construction, location, design, and economic characteristics,” according to the summary. Vacant stores could not be used as comparable properties for valuing open stores under the bill.

Officials for Wisconsin municipalities said the dark store strategy is causing their municipalities to be bombarded with assessment appeals for big-box stores, which in turn is burdening them with legal costs.

Wauwatosa Mayor Kathy Ehley said her city has seen an increasing number of appeals of its valuations of large retail stores, which is causing the city to spend more on legal bills. Successful appeals “shift the tax burden to small businesses and individuals,” Ehley said.

Madison Ald. Mark Clear said the city refunded almost $500,000 in property taxes to Walgreens after the 2008 court case. Clear said he hopes Dane County lawmakers will support the bill.

“It’s a very nonpartisan issue that affects all cities in the state, and Madison has been hit especially hard by it,” Clear said.

Gov. Scott Walker has not taken a position on the bills, according to a spokesman, Jack Jablonski.


Mark Sommerhauser covers state government and politics for the Wisconsin State Journal.