Escanaba continues ‘dark store’ fight
ESCANABA — Escanaba will be heading back downstate to the state tax tribunal later this year to once again argue against the “dark store” assessment method, which Menards and other “big box” stores favor to determine their property values.
Escanaba and the local Menards have been battling over the issue since 2014 when the retailer won a Michigan Tax Tribunal appeal that significantly reduced its property value and in turn lowered tax revenues for government entities including municipalities, schools, colleges and others had receive tax funding.
When Menards claimed the store’s value should be based on a closed and empty building, or “dark store,” the tax tribunal granted the appeal, spurring more local retailers to appeal their property assessments, too.
As a result of the tax tribunal ruling, Escanaba had to adjust Menards’ 2012 property value for its 166,196-square-foot building on 18 acres from $48.43 to $20 a square foot, the 2013 value from $49.54 to $21 a square foot, and the 2014 value from $50.88 to $22 a square foot.
While the city, county, Bay College, public schools, and other agencies were forced to reimburse property taxes previously paid by Menards, Escanaba continued to file appeals despite high legal costs.
Bay College and Delta County are among those helping to pay for Escanaba’s legal expenses. Many more entities across the state are also contributing funds after Escanaba City Manager Patrick Jordan sent out a letter requesting financial assistance from municipalities and other units of government in March.
“This is a fight for all,” Jordan said, explaining money is being sought to “help fight the fight” that will set the stage for similar tax appeals in the future statewide.
Escanaba is among several cities in Michigan, as well as other states, fighting the “dark store” tax theory that favors “big box” retail stores, as well as smaller businesses and some organizations which are seeking the same reductions in their property values.
“Ours is going to be the precedent-setting case,” Jordan said, also noting, “Money is coming in.”
Regarding the most recent court action, in October the Michigan Supreme Court refused to hear an appeal from Menards which was requesting the justices reverse a Michigan Court of Appeals ruling that favored the city earlier last year.
The appeals court had ruled the state tax tribunal “committed an error of law” when it re-assessed the value of the local Menards store and reduced the city’s tax assessment on the property by more than 56 percent for three years.
Following the Michigan Supreme Court’s denial to take on the Menards appeal, the Michigan Court of Appeals remanded the case back to the state tax tribunal to allow the two parties to present more testimony on the Escanaba Menards’ property value.
The Court of Appeals ordered the tribunal to hear more evidence on deed restrictions which limit what buyers can use vacant stores for and hear more evidence regarding the cost-less-depreciation-approach which is one method used to determine property value.
The Court of Appeals ruled that after additional testimony is presented, the tax tribunal “shall make an independent determination of the property’s true cash value using correct legal principles.”
Since October, Jack Van Coevering — a downstate attorney representing the city in the tax tribunal cases — continued to communicate with Menards’ attorneys on a consensus. In December, at the recommendation of Van Coevering, Escanaba City Council rejected an offer from Menards, setting the stage for the two parties to once again battle things out in the tax tribunal court.
The Menards’ case is expected to be presented again at the tax tribunal sometime in December or January when a three-judge panel will listen to arguments from both sides including expert testimony from assessors and economists, explained Jordan.
Jordan predicts Escanaba will win and the process will result in a standard methodology that will be used to address appeals seeking to lower tax assessments based on the “dark store” concept or deed restrictions. He’s hopeful future property assessments will be calculated on the valuation of “cost minus depreciation” and not sales, dark stores or deed restrictions.
Jordan noted, development of a standard assessment method will save money in legal expenses for the city and other municipalities facing similar property tax appeals in Michigan as well as other states which are keeping an eye on Escanaba’s court case.
He also mentioned the Menards appeal is the only pending local “dark store” case. Other property owners who filed similar appeals have reached agreements with the city, he said.
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Jenny Lancour, (906) 786-2021, ext. 143, email@example.com