Tag Archives: Property Taxes

Legislature Likely to End Tax Hike Loophole

Good. It is about time the legislature ended the abuse of this loophole.

The use of energy efficiency exemptions has spiked in the past three years.

In 2015, the statewide total reached a new high of $347 million, and schools nearly matched that figure in 2016 with $316.3 million. The total for 2017 has already surpassed $300 million.

Unlike traditional referendums, energy efficiency resolutions require only the authorization of a local school board — not voter approval.

If a district approves a resolution exceeding $1 million, a public hearing must be held and voters may request a referendum vote if they can gather the necessary signatures during a 30-day petition period.

Gov. Scott Walker’s biennial budget proposal calls for the elimination of energy efficiency exemptions. The Senate and Assembly budget bills both include language to discontinue the exemptions, but schools have until the effective date of the bill to file a resolution.

Taxing with the Lights On

My column for the Washington County Daily News is online. Here you go:

There are very few things less exciting to write or read about than property tax assessments. It is a subject as dull and boring as the dry dusty parking lot of an abandoned Circuit City. Yet, we must walk through that parking lot because there is a movement going on across the country that seeks to push even more of the property tax burden onto Wisconsin’s homeowners.

At issue is the ominous-sounding “dark store” theory of property tax assessment. It is by this theory that many big box retailers are prevailing on the courts to cut their property tax bills by as much as 70 percent. The dark store theory is, in and of itself, not evil or ominous at all. It is simply an alternative theory of how to place a value on property, and in the abstract, it is quite rational.

There are always two variables in the calculation of a property tax bill. The first variable is the tax rate, which is set by each of the myriad of taxing authorities. The second variable is the value of the property. It is in this second variable where this controversy rests. In a pure economic sense, the fair market value of any property is whatever price a willing buyer is willing to give a willing seller for the property. Unless a property had just been sold, however, the true value of a property is subject to debate. While municipalities employ trained assessors to estimate the value of properties for the purpose of taxation with complicated formulations combining square footage, improvements, comparisons to comparable properties, etc., even the most reasonable assessment is, at best, an informed opinion that is subject to debate.

Recently, some very large retailers like Walgreens,WalMart, Shopko, Menards and others, have beenchallenging their property assessments in court, and winning, under the dark store theory. The retailers are arguing that their properties should not be valued basedon how they are being used today, but by how much they would be worth if they were empty and dark. We have all seen empty big box stores sit vacant and unsold for years because there are very few buyers for properties that were purpose-built for a specific retailer.

The consequences are real and the money is big. West Bend Mayor Kraig Sadownikow recently shared a stark example in his testimony for the Committee on Ways and Means. West Bend’s two Walgreens stores were taxed at a combined value of $14 million. Walgreens sued under the dark store theory and had the combined valuation reduced to $4.8 million — a reduction of nearly 66 percent. This cut their property taxes by about $180,000 per year. That is $180,000 for the city, county, and schools that the rest of the taxpayers of West Bend have to cover.

While the dark store theory of taxation is not entirely irrational in that it is trying to set the property value on the possible selling price that the retailer could actually get for the property is they leave it, it is entirely irrational considering the actual value of that property to a retailer that is using the property to earn profits from local consumers. A better way to value commercial properties is to factor in the actual use of the property. Assembly Bill 386, which is supported by all of Washington County’s elected state representatives, seeks to do just that.

Wisconsin’s property taxes are far too high, but we can all agree that the burden should be shared as fairly as possible. The big retailers can be forgiven for wanting to take advantage of every means the law allows to reduce their property tax burden, but Wisconsin’s lawmakers need to end this particular means by passing AB 386.

Stores with the lights on should be taxed as such.

Legislature Moves on “Dark Store” Theory

Good.

Communities around Wisconsin have expressed frustration to state lawmakers over the 2008 Wisconsin Supreme Court property assessment decision that includes the “dark store” theory. Some large retail chains have been fighting and winning tax reassessment cases that deal with the level of property taxes they pay on properties that formerly housed their businesses which are now “dark” or vacant.

In a news conference Wednesday in Madison, Rep. Rob Brooks (RSaukville), Sen. Roger Roth (R-Appleton) and Sen. Duey Stroebel (R-Cedarburg) unveiled legislation regarding the “dark store theory.” The theory is a tax argument being used by a variety of big-box store chains to argue their stores are over-assessed for tax purposes. Under their argument, the operating business within a building should not factor into assessment; the assessment that decides a store’s property taxes should be determined by recent sales of comparable, vacant properties.

In 2008, a Wisconsin Supreme Court case, Walgreens vs. city of Madison, sided with Walgreens, saying the store’s taxes should be based not on the store’s lease agreement, but on what the landlord could get if the drugstore moved out of the buildings, which are generally developed and built to the store’s particular specifications.

“The court overstepped its bounds and we need to bring it back to where it always was prior to 2008,” Stroebel said. “Our taxation system is based on fair-market value. The Constitution has a uniformity clause which says all property has to be assessed the same and that is by fair-market value. In 2008, the courts hijacked the valuation process or real estate as it pertains to a certain — generally what they call the Walgreens or other similar kinds of stores.

I admit that I waffle with this a bit. On the one hand, I agree with Walgreens and the big box stores to an extent. We base our property taxes on the fair market value of the property. That value is generally what the owner could reasonably sell the property for in the open market and would fluctuate with market conditions. That is how we do it for residential properties. The tax assessors look at a residential property, its neighborhood, its general condition and specifications, and then make an educated guess on what the home would sell for in the current market. We could argue over how accurate those assessments are, but the intent is certainly to peg the value of the home at, or near, what the owner could sell it for. Why should we do it any different for businesses?

On the other hand, businesses are different than residential homes. The buildings are often purpose-built and have a drastically reduced value for any other businesses. This is why we see so many big box locations sit empty for years when the business closes. The value of the business is irreparably conjoined with the value of the property in which it resides. This is not true with all businesses – or even most. But with some, like Walgreens, it is undeniably true. So why shouldn’t those businesses pay taxes based more on what the property is worth to them instead of what it might be worth to somebody else?

In the end, I support the proposed law because wherever one falls in this argument, I don’t think it is a matter for the courts. It is a matter for the local taxing authority. If West Bend wants to assess property taxes based on the “dark store” theory to attract businesses and the residents are willing to pick up the slack in the property tax levy, then so be it. If they don’t, then that’s fine too. The point is that it should be up to the local taxing authority to make that determination. As long as it is fair and uniform, then the courts should not be involved.

2015 Property Taxes

As we get ready to head down to City Hall next week to pay our ridiculously high property taxes, it is worth noting that our bill is $611.03 less than it was in 2010. That’s a 9.4% decrease in 5 years.

Property taxes are still far too high in this state, but thanks to Governor Scott Walker and a Republican legislature, it’s getting better… every so slowly… it’s getting better. In particular for us, a big thanks to the elected leaders in the City of West Bend who have restrained city spending and declined to increase property taxes for over half a decade now.

Just remember every time the liberals roll their eyes and bash Republicans for small tax cuts. They say things like “that wouldn’t even buy a cup of coffee” and pretend that those little savings for hard-working tax payers are not worth the “sacrifices” in government spending that we have to forgo to allow it (pretending for a moment that our government has actually made cuts). But those small tax cuts add up over time just like the small tax increases do.

In this case, that’s $611.03 in reduced taxes that we are going to pay a bill, or buy a product, or enjoy a service, or save, or invest, or all of the above. The point is that our family will directly benefit from the lower property taxes and our community will indirectly benefit from them. And while some liberals may still cluck their tongues at $611.03, that’s still a lot of money to me.

Property Tax Bill Arrived

Did yours? How does it look?

Ours arrived this week. It looks better.

– State property tax is up 0.6%.

– County property tax is down 5.5%.

– City property tax is flat.

– School district property tax is down 6.6%.

– Technical college property tax is down a whopping 56.8%.

– This leads to a total property tax bill decrease of 7.4%.

A few thoughts…

I would have expected for the state to manage a property tax freeze. The county and city property tax decreases are a result of some good decisions and better budgeting. This is the city’s 4th or 5th year of solid budgeting, spending discipline, and a frozen tax levy. Nice job. The election in April will be, in part, a discussion on whether that trend should continue or not.

This is the first year of a substantial change in county taxes in the first year of having a county manager. There’s some good work going on at the county, but they have a lot more work to do. At least it is finally moving in the right direction.

School district property taxes are also a result of some spending discipline and the first year we are seeing some real savings from Act 10. Like the county, it is moving in the right direction but has a long way to go.

The decrease from the tech college is a bit of a fiction. The massive decrease is thanks to a massive injection of state spending into the tech colleges ($178 million, if memory serves). The decrease in property taxes is not because of spending discipline or reform. It’s because of a one-time pile of cash that also came from the taxpayers. It’s a wash. Without the state cash next year, it will likely return to its previous level, which would be a 131% increase for next year. That’ll be fun.

If I assume a flat property tax from the tech college because its decrease is an anomaly, it is an overall decrease in property taxes of 3.22%. Not bad. Thank you to Governor Walker and the Republican majority for moving property taxes in the right direction. They are still way too high, however. For those of you from other states who don’t have a full appreciation of how high property taxes are in Wisconsin, our middle-class home carries a property tax burden of almost $5,000 per year. Ouch.