Supreme Court considers ‘dark store’ case
LANSING — Escanaba officials who attended a Michigan Supreme Court hearing in Lansing on Thursday are hopeful justices will decide not to hear a “dark store” appeal by Menards to reverse a lower court’s ruling which favors the city.
For more than three years, Escanaba has been in a lengthy and expensive court battle with Menards, which first appealed its property assessment in 2014. Menards claims the store’s value should be based on a closed and empty building — or a dark store.
Since then, Menards has appealed additional annual assessments with the Michigan Tax Tribunal, which ruled in favor of the business and required the city and other local tax entities to refund a portion of taxes paid by Menards, as well as reduce its property assessments.
The city continued to fight the dark store tax loophole as additional property owners filed petitions to have their property assessments lowered. The city is also against deed restrictions which don’t allow buyers to use a building for its original purpose.
This spring, the Michigan Court of Appeals issued a decision favoring the city, ruling the state tax tribunal “committed an error of law” in how it re-assessed the value of the local Menards store which lowered the city’s tax assessment on the property by more than 50 percent.
The appeals court’s reversal of the tax tribunal’s ruling prompted Menards to file a request to have the case heard before the Michigan Supreme Court.
Attorneys representing the city and Menards presented oral arguments to the Michigan Supreme Court on Thursday. Downstate attorney Jack Van Coevering is representing the city.
Also attending the high court hearing were Escanaba City Manager Patrick Jordan, Mayor Marc Tall, Mayor Pro Tem Ron Beauchamp, City Treasurer Bob Valentine, and Assistant City Assessor Kevin Dubord. Juli Kolbe, director of the Delta County Equalization Department, was also at the hearing.
“The seven justices were there to hear our arguments by our attorney,” said Tall in a telephone interview Thursday afternoon during his return trip to Escanaba with Beauchamp, Valentine and Dubord.
“There was no ruling. It was just a hearing.
We’re hopeful that a decision will be rendered soon,” Tall explained, noting the local city officials were there to observe and offer moral support.
Thursday’s hearing was the first time any of them had been in the Michigan Supreme Court, he added.
“I thought it went very well. The Supreme Court justices paid close attention and asked very good questions. That indicated they understood the issue and our goal. We’re hopeful for a swift decision,” said Tall.
Beauchamp said the hearing was very formal and there was high security in the building. Many people were in the courtroom for many cases. The Escanaba hearing lasted about 45 minutes, he said.
Afterwards, the Escanaba officials met with Van Coevering, who said he is hopeful the appeals court decision on the dark store issue will not be heard by the Supreme Court but stand where it’s at — in favor of Escanaba, said Beauchamp.
Beauchamp said Van Coevering also told them he thinks the Supreme Court will decide whether or not the case will be brought before the justices sooner than the six months it can take for a ruling.
After Menards filed its initial petitions with the state tax tribunal, additional local businesses and organizations filed to have the tax tribunal lower their tax assessments based on the dark store theory. Some cases were worked out between the property owners and the city, while several others are pending.
The city has paid more than $200,000 in legal fees to date on the above cases with financial assistance from local tax entities such as the county and Bay College.
State organizations which are backing Escanaba include the Michigan Municipal League, Michigan Townships Association, Michigan Association of School Boards, Michigan School of Business Officials, Michigan Association of Counties, and Michigan Assessors Association.
Escanaba is among several cities in Michigan and other states which are fighting the dark store tax loophole that favors “big box” retail stores, as well as smaller businesses that are also seeking the same reductions in property values.
State legislators have also been working to reform Michigan’s property tax system and do away with the dark store tax loophole, which is reducing property taxes that support colleges, schools and other service organizations.
In June 2016, legislation passed 97-11 in the House to reform the law, which did not reach a conclusion prior to the end of the year.
Similar legislation — House Bill 4397 — was introduced by Rep. Dave Maturen this year with support from Rep. Beau LaFave and several others in the House where the bill is currently in committee.
Sen. Tom Casperson has also been supportive of reforming the state’s property tax system to eliminate the dark store tax loophole.
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Jenny Lancour, (906) 786-2021, ext. 143, firstname.lastname@example.org