A special study committee created to try to curb a practice that has resulted in shifting property taxes from “big box” retailers and pharmacy chains onto homeowners and small businesses may hold its final meeting tomorrow and a measure affecting schools is on its agenda.
The Legislative Council Study Committee on Property Tax Assessment Practices has thus far not to be able to resolve key differences among its members over what to do about these practices that have handcuffed local property assessors and municipalities. The study committee is set to meet at 10:00 a.m. tomorrow (Dec. 11) in Room 412 East, State Capitol.
The gist of the dispute the study committee is tasked to resolve is that so-called “big box” retail chains have been successful in challenging a number of local assessments by arguing that their fully operational stores should be assessed the same as similar vacant (or “dark”) stores. They argue those “dark stores” are the appropriate comparable properties against which their fully operational store properties should be evaluated—leading critics to dub this approach as the “dark store” loophole.
Similarly, nationwide pharmacy chains have argued that extraordinary financing arrangements, such as complex lease-backs, should not be included when valuing drug store properties subject to those arrangements.
Attempts to curb both sets of “loopholes” have stalled, in large part because the study committee’s citizen members are equally split between representatives of business groups who oppose proposals to curb these practices and municipal representatives who strongly support them. Legislation introduced last session and supported by the WASB (see previous post) also stalled.
What does this mean for schools?
One proposal under consideration by study committee members would create a mechanism under which the other underlying taxing jurisdictions (the school district, county, and technical college district) would agree to contribute to the litigation costs municipalities incur when defending against assessment challenges. Under the proposal, a municipal taxation district may convene what the proposal calls a “joint board of assessment” consisting of representatives of the taxation district, as well as the county, school district, and technical college district that have power to levy taxes on a property subject to assessment.
That joint board could, by majority vote, decide to share costs related to the assessment of a property, including costs of hiring expert help to assess the property, as well as costs of defending the assessment before the board of review or in any court action. If the joint board approves a motion for cost-sharing, the costs described in the motion would have to be proportionately charged back and recovered from each taxation jurisdiction in the same manner that refunded taxes are charged back and recovered under current law. The school district would receive a revenue limit adjustment for its share of the costs.
This idea grew out of a discussion among committee members about the tendency of cities, villages, and towns to settle, rather than litigate, assessment appeals by commercial property owners using the “dark store” loophole. Many municipalities argue they lack the expertise, resources, and money necessary to defend assessments in court. Committee members thought that one possible solution to this concern might be to have all taxing jurisdictions share in the cost of defending against assessment challenges.
At the end of the day, if it’s not the big chain retailer or pharmacy paying those taxes, then it’s the other taxpayers in the municipality where the property is located. Whether the municipality’s defense to the assessment challenge succeeds or fails, it does not change what schools collect in property taxes due to revenue limits. However, practices that raise homeowners’ and small business owners’ share of property taxes could affect their willingness to approve school referenda.
Editor’s Note: Speaking of referenda, in a previous post, we noted that voters in all 23 jurisdictions (17 counties and 6 cities and villages) that conducted “dark store” advisory referenda on Nov. 6 approved those referenda. The results of advisory referenda are non-binding but instructive.
According to the League of Wisconsin Municipalities (LWM), of the 1,020,812 voters who voted on a dark store advisory referendum on Nov. 6, a total of 802,870 (79%) voted in support of closing the “dark store” loophole.