The Michigan Tax Tribunal drew a crowd at a meeting last spring in the Upper Peninsula to address concerns about rulings.

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TAX RULINGS SLAMMED: Bay County Loses $5.8 Million in Past 5 Years

Legislature Considering Bills to End "Dark Stores" Strategies

December 11, 2015
By: Dave Rogers

Who's going to pay for government services???

Since 2013, 41 counties have had to refund at least $47 million in tax appeals to businesses, mostly under the "dark stores" ploy, according to a survey published by the Michigan Association of Counties (MAC).

The Michigan Tax Tribunal (MTT) lately has been obsessed by the "dark stores" concept holding that big box retail buildings like Wal-Mart, Target, Best Buy, etc., are virtually worthless, therefore cutting their taxes by about 50 percent.

The worst part is that governments large and small have to give back the tax money after the MTT rules. So, the cost of government falls increasingly on homes, smaller stores and farms.

The refunds were not all related to big box stores, but it was the dark stores controversy and growing number of appeals that led the organization to release the survey.

In the past five years, Bay County government and other local taxing units (cities, school districts, townships) have lost a total of about $5.8 million.

Largest refunds were $1,274,187 to Motors Liquidation (GM) in 2012, $663,193 to Consumers Energy in 2011, $483,000 to S.C. Johnson Home Storage in 2013, $460,000 to Bay City Mall Partners in 2013, and $360,000 to Northern Michigan Land (Fabiano) in 2014.

Bay County Executive Thomas L. Hickner last month recommended a 2 percent across the board cut in the budget of all county departments "as the result of a decrease in property tax revenue, the uncertainty of revenue sharing money from the state and unfunded mandates for services being required of the county by the state."

"The future projection of revenue income and economic improvement in Bay County and the State of Michigan is not favorable," stated Commissioner Ernie Krygier in a board resolution.

Commenting that the board of commissioners "leads by example," Krygier's resolution provides that commissioners taking office since 2011 will not receive any health care benefits or receive a stipend.

President Jon Campbell of the Michigan Association of Counties (MAC) drew more attention to the growing crisis presented to local government services by the "dark stores" property tax technique:

"This gaming of the system, known in tax circles as the "dark stores" technique, must come to a halt before counties and communities across Michigan are stripped of the resources to operate basic public services."

The Michigan Townships Association(MTA) states: "Big box stores throughout Michigan and the country are having their property taxes unfairly reduced as a result of an assessing theory being upheld by the Michigan Tax Tribunal (MTT)."

Under the "dark store" theory, big box stores are appealing their property tax assessments to the MTT, arguing that the fair market value of their operating store should be based on comparisons to sales of similar properties that are vacant and abandoned, or are now used for a different, less valuable purpose.

The MTT has upheld this theory and cut property tax assessments by as much as 50 percent. As a result, townships and local units are losing millions of dollars, impacting services to their residents.

Additionally, big box stores are putting deed restrictions on their properties that severely limit how the building can be used once it's vacant. This has resulted in buildings being kept empty and adding to the blight problem in Michigan townships. The issue is already spreading to restaurants, apartment complexes, auto part stores and many other businesses. Without action, the problem will only get worse.

MTA strongly supports a legislative fix that addresses three issues:

All properties, including big box stores, must be assessed at their highest and best use. Deed restrictions should not be a factor in determining a property's true cash value. The MTT should be required to consider all three methods of assessing--cost minus depreciation, sales comparison and income--when determining a property's true cash value.

MAC, led by Governmental Affairs Director Deena Bosworth, has been working closely with key legislators, and other government officials to craft a legislative fix to the dark stores problem.

The "fix" includes two bills, House Bill 4909, introduced by Rep. John Kivela, Democrat of Marquette, and Senate Bill 547, introduced by Sen. Tom Casperson, Republican of Escanaba.

House Bill 4909 and Senate Bill 547 would amend Michigan's zoning laws to require big box stores to end "negative use" restrictions and submit a plan for re-lease or redevelopment of the property in the event of a vacancy.

"The Legislature finds that vacant since retail establishments lead to blight," the House bill states. The bill would award a "special land use" to counties, cities and townships to rehabilitate vacant single retail establishments as a public purpose.

A hearing was held last month on the bills but they have not been advanced on the legislative calendar so far.

The problem appears to be deeper than just dark stores, however. The MTT seems to have usurped the role of the legislature and launched a rogue attack on local governments by slashing taxes. At the same time the legislature is derelict in failing to act to rein in the MTT and diverting revenue sharing funds to other uses than local government.

This seems to have created an atmosphere that a right wing anti-tax tea party radical would favor. Local governments are left dangling short of funding by this rogue approach. For the homeowner, unfair taxation is the result.

We suggest any taxpayer concerned about the erosion of the tax base contact your legislator and ask them to get those bills moving quickly.