NORTHERN MICHIGAN | General Developments

[Velvet_Highground]

I had never heard of this theory till now and it fits the mold of big box stores modus operandi so well I can can only say I’m impressed how long it’s taken for me to find out about it. My cynical side brings up mental images of Canadian small cities in the region that house & social municipal services in shopping malls. Except with a dark twist let this run unchecked for a couple generations & the idea of cradle to grave “service's” run out of big box stores in small economically left behind communities becomes realistic. A company that is the largest employer in America behind the pentagon & prisons can run a small town how it wants like George Hurst does Deadwood (HBO) style.

This practice is certainly detrimental to communities who often spend money on infrastructure to seal the deal to land the development. Losing millions in property tax revenue certainly hurts a revitalizing mid-sized city like K-Zoo but the effects on small cities can be devastating for local services like schools, fire departments & libraries. Escanaba recently went through litigation with Menards who was able to successfully sue the city arguing that they store was 60% over valued, while the state court of appeals returned money to the city it still lost $2 million. The practice in this case used a company tax assessor to argue that the building’s true value was in line with older structures with deed restrictions.

For a small rural city such as Escanaba already struggling for decades to foster a new model of growth while keeping residents from leaving having to slash millions in municipal services is beyond a gut punch it’s a rusty blade into the belly. Houghton has become somewhat of a model city for the Upper Peninsula it’s growing attracting tourism despite being in BFE & has a small but vibrant tech industry along with its known reputation as a trendy college town. Houghton is squaring up against Walmart in what may be a landmark case that has ramifications for other cities & businesses across the state & perhaps beyond.

The ‘dark store theory’ has cost Michigan cities millions. It’s facing new challenges.

Apr. 09, 2023
Mlive
By Mathew Miller


In the spring of 2004, a vice president from Wal-Mart Real Estate Trust signed a development agreement with Houghton city officials that laid out conditions for the retail giant to expand an existing store on the southeast end of the city into a Walmart Supercenter.

The city would sell Walmart half an acre; give the company $300,000 to offset the costs of wetland mitigation work, including the relocation of Huron Creek; and agree to provide long-term environmental monitoring of the surrounding wetlands and drain systems.

Walmart, for its part, agreed to a $1.95 million increase in the taxable value of the property.

Except that, 13 years later, the retailer decided it was paying too much.

Walmart asked the Michigan Tax Tribunal in 2018 to reduce the store’s taxable value to less than $4 million, a $700,000 decrease that would put the valuation lower than it had been in 2005 when the Walmart Supercenter opened. In 2021, with the case still pending, it filed another petition, asking for a taxable value of just over $3 million.

It offered up a now familiar and tremendously successful argument from big box retailers: that the store was best assessed not as the site of a successful business but as what it would be worth empty.

….

But the Houghton case has a difference from other cases, the signed development agreement that specified a property tax increase, and the case could be a test of the limits of the dark store theory.

The city is not only fighting the reassessment but has filed a lawsuit against Walmart Real Estate Business Trust in federal court, alleging breach of contract.

“You see this time and time again throughout the state, where these communities with these big box stores, they welcome them into the community, they look to them for jobs and shopping experiences and economic development and they build roads, and they put water lines and sewer lines, and they do all these things,” said Houghton City Manager Eric Waara. “And then another arm of that company comes in and says, ‘Well, you know, we’re going to exploit this loophole in Michigan tax law.’”

….

Houghton city officials have made a point of telling the public what they do for Walmart. Among other things, the store accounts for nearly 10 percent of the city’s police calls.

They’ve also made a point of talking about what the city will lose if the reassessment the retailer is asking for goes through.

“If the Michigan Tax Tribunal orders their lowered valuation, we’ve got over a million dollars to pay back retroactively to them, because they’re suing us back to 2018…” Waara said. “The city itself would owe them over $300,000, the school system nearly a half-a-million dollars, our local veterans organization, our senior citizen medical care facility, our public library, our intermediate school district, all have to pay Walmart back.”

Other states have addressed the issue, he said. Maine and New York have both passed laws in recent years laying out alternate means of assessing big commercial properties.

https://www.mlive.com/news/2023/04/t...outputType=amp