June 29 Hearing Set for “Dark Store” and “Walgreens Reversal” Bills

The Assembly Ways and Means Committee will hold a public hearing on two bills aimed at curbing corporate strategies that could erode the property tax base of school districts and communities throughout the state.

The hearing on Assembly Bill 386 (the so-called “Dark Store” bill) and Assembly Bill 387 (reversing the 2008 Walgreens v. City of Madison decision) is scheduled for 10:00AM on Thursday, June 29, in room 328 Northwest, State Capitol.  The WASB supports both bills.

The “Dark Store” bill, authored by state Rep. Rob Brooks (R-Saukville) and sponsored by state Sen. Roger Roth (R-Appleton), aims to curtail a strategy certain big box retail chains are using to successfully challenge their property tax assessments and shift the property tax burden to homeowners and other property owners.  These retailers argue their operating stores should be taxed as if they were vacant (i.e., dark stores) and point to nearby defunct business properties as “comparables” for assessment purposes. Big box retail chains have used  this strategy to cut their property tax bills in half in Michigan and other states. The bill aims to prevent this strategy from taking hold in Wisconsin.  If this bill is not enacted and the dark store strategy wins in Wisconsin courts, the result will be a significant tax shift from commercial to residential property taxpayers. Homeowners already bear a 68 percent share of the property tax burden.

The “Walgreen’s reversal” bill, also authored by Rep. Rob Brooks and sponsored by state Sen. Duey Stroebel (R-Saukville), addresses a similar problem.  Walgreens and CVS drugstores use a different, but related strategy, to argue that the assessed value of their properties should be less than half of actual sale prices on the open market. The two have already sued more than 100 Wisconsin communities, claiming the rent they pay for their newly-constructed, highly visible corner locations doesn’t accurately reflect its fair market value for property tax purposes. These properties are developed to the retailer’s specifications and then leased to them with no landlord responsibility other than collecting rent. More than 80 percent of Walgreens stores and 95 percent of CVS stores operate under lease arrangements.

Walgreens and CVS argue that the actual sale prices of these properties don’t represent market value and the underlying leases are the wrong tool for determining the property’s value for property tax purposes. Instead, they argue the assessments should hinge on the amount the landlord could get if the drugstore moved out and a different retailer moved in to these specially designed properties. Walgreens and CVS have won dramatic assessment reductions since a 2008 Wisconsin Supreme Court decision, Walgreens v. City of Madison, upheld this tax strategy. The “Walgreen’s reversal” bill would legislatively overturn that court decision and its impact on homeowners and other property taxpayers.

For more information on these bills from the League of Wisconsin Municipalities, see the dark store web page and Walgreens reversal page.

If you are from a community that has been battling against assessment challenges brought by big box retail and Walgreens or CVS stores, please consider testifying at next week’s hearing and telling your community’s story.  We need to educate committee members about the tax shift that is occurring as result of the tax reduction strategies and loopholes being used by certain commercial retail chains.

Read More:  Sheboygan Press article