'Dark stores' use legal loophole at cost of taxpayers - WNEM TV 5

'Dark stores' use legal loophole at cost of taxpayers

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You probably shop at one of these stores. They're called big box retailers and they boast lower prices for the consumer.

Some critics, including supporters of big business, argue these multi-million dollar outfits aren't paying their fair share in local taxes. It's becoming much easier because of something called dark stores.

"For me it just seems to be common sense, this isn't right and we've got to level the playing field," said Sen. Tom Casperson.

Casperson has been a long-time supporter of big business, but not this time.

He's leading the charge against big box retailers trying to stop them from taking advantage of a loop hole in the way the state assesses the taxable value of such stores.

"Just because he says it's legal, in my opinion, doesn't make it right and it certainly doesn't make it fair," Casperson said.

It's complicated, but it helps to understand what exactly a dark store is.

Simply put, it's a vacant building once occupied by a big box retailer, like the old Kmart on Miller Road in Flint.

Casperson said the value of that old Kmart in Flint, nearly 400 miles away from his district, was cited when a Menards in Escanaba challenged its property taxes and won.

"They say they're unique because of their facial appearances. I would argue that you can change that facial really quick and turn a Home Depot into a Menards very quick. I could turn a Lowes into a Home Depot really," Casperson said.

There's another problem making matters worse. There are dark stores all over Michigan, bringing down the values of other businesses, just like a foreclosure would next to your home. 

Casperson insists there's another dark reason why they sit empty. They often have legal restrictions blocking a new tenant from coming in. 

"You just devalued the building because you just limited who can by it," Casperson said.

What Casperson is saying is, in some cases, big box retailers have left a location, but prohibited local governments from selling or leasing the building to someone else.

For that reason he feels the state should not use those buildings referred to as dark stores to determine a property's taxes. 

"And if this starts spreading, as I believe it's started to already, we're going to end up with a problem. Unfortunately, usually the way this works is the citizens is the one that's going to get hit over this," Casperson said.

Unfortunately for this state, it has spread but in more ways than one.

According to the Michigan Tax Tribunal, the state agency that handles disputes, in the past few years nearly 200 big box stores have challenged their taxes and won.

That puts local governments across the state out of more than $50 million in property tax revenue.

One of the hardest hit areas was Saginaw County.

County Treasurer Tim Novak said revenue from property taxes is typically part of the general fund. Novak said public safety, like police and fire, is also paid for by the general fund.

"We don't think it's fair," Novak said.

Not only do local governments lose property tax revenue when big box stores win these tax disputes, Novak said, unfortunately, they're also on the hook to retroactively pay big box retailers the difference they were overcharged since the stores took possession of the property.

"We've spent $3 million in the past few years, that's money refunded," Novak said.

However, not everyone fears the dark stores.

As acting-Saginaw Township and Kochville Township assessor, David Kern wants to remind everyone, the big box retailers are lowering their taxes legally.

Kern said he's sat through a number of trials at the Michigan Tax Tribunal and heard both sides. He said the big box stores have a strong case and that's why they've won.

But at the same time, he does have a suggestion on how to eliminate these so called dark stores for good.

"Should a big box store retailer leave the community, and leave the site, they either have to market that property within a certain period of time or else they would have to demolish the property," Kern said.

As for Casperson and other critics, they're hoping a bill introduced in the Michigan Senate addresses the financial fallout of big box retailers lowering their property taxes.

Casperson said, as it stands, those big stores are holding communities hostage when they move in and long after they move out.

"I think you're going to see more and more communities get hit by this and there's no talking me off of this, we need to fix it," Casperson said.

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