ESCANABA — The Escanaba City Council threw the city’s support behind two state senate bills that aims to curtail the impact of so-called “dark store tax theory” on Michigan communities Thursday.

“For those that have been following the news, of course the city has had dark store battles itself, Houghton continues to today, and I believe Marquette Township continues to be pretty involved and also passed these resolutions,” City Manager Jim McNeil told the council Thursday.

Dark store theory, which is generally applied to big box stores, relies on the idea that properties should be assessed based on the sale price of the properties if the businesses inside them were “dark,” ie. closed and not producing revenue. While this theoretically keeps the assessment focused on the property itself and not the business within, box stores are also typically subject to deed restrictions, rules included on a deed that prohibit the next owner from using a property in a specific way.

Generally, the deed restrictions on big box stores prevent competitors from moving into vacated stores — keeping a Lowe’s from moving into a Home Depot or a Target from moving into a Walmart, for example. However, big box stores are purpose-built, meaning there are relatively few buyers for vacant big box stores that don’t intend to open big box stores of their own. This not only has the potential to artificially reduce the sale price of a property, but lower the value of comparable properties used by assessors to determine taxable value.

Escanaba has been at the forefront of the fight for closing the tax loopholes created by dark store theory. Its legal fight with Menards — which challenged its assessments for 2012, 2013 and 2014 under the theory — became a proxy fight for many communities, with both the Michigan Municipal League and the Michigan Township Association signing on to appeals of the Michigan Tax Tribunal’s decision favoring Menards.

There were multiple legal challenges involved in the dispute, which ultimately came to an end in February of 2022 when the Michigan Court of Appeals ruled on the issue. While significantly more than the $3.5 million valuation initially determined by the Michigan Tax Tribunal in 2014, the $5 million valuation affirmed by the appeals court last year was far less than the $8 million originally assessed by the city.

The two Senate bills supported through resolutions by the council Thursday are largely re-introductions of bills introduced by Sen. Ed McBroom that failed to garner support during the 2021-2022 legislative session. However, the new bills, S.B. 19 and S.B. 20, have amended language that would create a localized assessment review process through the creation of county boards of revision.

“Among other things, the bill’s new amended language states that the tribunal does not have jurisdiction over any property tax matter that comes within the exclusive jurisdiction of a county board of revision. So these two resolutions, although separate items, do work together. One amends the Tax Tribunal Act to put the authority with the county and the other will amend the General Property Tax Act to enable county boards of revision to exist,” said McNeil.

According to McNeil, properties assessed over $600,000 would be subject to the local review process through these newly created boards. Decisions from the board of revision would be appealable in local circuit courts instead of by political appointments to the Michigan Tax Tribunal.

In other business, the council voted to allow the public works department to purchase a new wood chipper to replace the prior chipper, which was manufactured in 1989 and suffered a major failure last month. The new chipper, a Bandit 15XP, will cost the city an estimated $50,420 plus a freight delivery fee of $100.

The council also went into executive session to discuss a written legal opinion with their attorney.