Carolyn Fath
If Walmart’s lawsuit succeeds, its Monona store property tax will drop by $433,000.
Monona resident Peter McKeever wasn’t sure how many people would show up at the community meeting he co-organized to raise awareness about the so-called “dark store” tax loophole and the lawsuit that Walmart has filed against the city of Monona.
“These are the kinds of lawsuits that go in and out of the court system but don’t get attention,” McKeever, an attorney and former alder, tells Isthmus. “It’s a complicated tax assessment issue that’s difficult to explain and understand.”
The ominous-sounding “dark store theory” stems in part from a 2008 state Supreme Court case in which Walgreens successfully sued the city of Madison over how the city conducts its tax assessment for a leased retail property. Walgreens opts to rent space for the majority of its stores as opposed to owning property, but its lease agreements at some properties require it to pay property taxes.
In the Supreme Court case, Walgreens argued that the assessment of its stores should be based on “market rents,” rather than on estimates of income it generates at its stores. In other words, the company wanted its stores to pay property tax based on the rental rates paid by similar properties, including big box buildings that are vacant. The decision opened what critics say is a tax loophole allowing an economically thriving store to be assessed based on the value of an arguably less valuable vacant store. Over the last decade, big box stores have used the decision to successfully sue municipalities and slash their tax bills in Wisconsin and across the country.
“When we talk about these tax strategies, it’s hard to avoid dipping into the weeds,” says Curt Witynski, assistant director of the Wisconsin League of Municipalities. The organization, which represents the interests of local governments, is lobbying in favor of a pair of bills that would close the loophole the 2008 decision created. “We’re worried about this because what will happen if the commercial property tax base is reduced by these strategies, other property owners will have to pick up the slack,” Witynski says.
In July, Walmart filed its lawsuit against Monona seeking to reduce its tax assessment from $24.5 million to $9 million, which would slash its tax bill by $433,000. City officials have estimated that to maintain the current level of city services, property taxes for the average homeowner would increase $113. The average commercial property would pay $660 more. Monona Ald. Andrew Kitslaar wrote an opinion piece sounding the alarm and urging the passage of the bills that would close the loophole. But McKeever says citizens need to put more pressure on lawmakers. “We want to see if we can spark a citizen pushback, a taxpayer pushback,” he says. “These businesses are part of our communities — they get fire protection, police protection, their streets are maintained and plowed. I think they ought to pay their fair share.”
The Nov. 16 meeting at the Monona Community Center drew dozens of concerned citizens. State Sen. Mark Miller (D-Monona) and state Rep. Jimmy Anderson (D-Fitchburg) shared insights about the “dark store” legislation, which has widespread bipartisan support but has not yet been scheduled for a vote by Senate Majority Leader Scott Fitzgerald (R-Juneau), who has a policy of only bringing forward bills if he has unanimous approval from his caucus. Among the sticking points, they said, are opposition from Sens. Steve Nass (R-Whitewater) and Alberta Darling (R-River Hills). The state’s powerful business lobby, Wisconsin Manufacturers and Commerce, is also pressuring lawmakers to oppose the bills. “This could dramatically increase the cost to do business in Wisconsin, but it could also have unintended consequences for all property owners,” WMC wrote in a memo to lawmakers.
Miller urged his constituents to reach out to friends and family over the Thanksgiving holiday and share information about the loophole, lawsuit and legislation. He emphasized the importance of citizen involvement, but said it would be more effective if the activism came from outside of Dane County. Rural and small-town residents are disproportionately affected by “dark store” tax bill reductions, since big box stores account for a greater proportion of the overall property base compared to a bigger city with more businesses.
“It would be hard for anyone to vote against this unless they’re a hard case or something,” Miller told the gathering, prompting laughter. From the crowd, someone responded: “Sounds like Steve Nass.”
