Beloit and municipalities across Wisconsin are losing an ongoing fight with big box stores over property assessments, with large stores arguing for and winning lower tax rates by having active store properties valued the same as vacant stores.
City and county leaders say the so-called "dark store loophole" will place a larger tax burden on residents, and the Rock County Board of Supervisors recently approved placing an advisory referendum on the Nov. 6 ballot asking whether state lawmakers should pass legislation to prevent commercial retailers from significantly reducing assessed values and related property taxes. A similar advisory referendum was also approved by the Walworth County Board.
The reoccurring issue was prompted following a 2008 Wisconsin Supreme Court decision to allow a Madison Walgreens change that green-lit retailers to reduce their property tax burden based on assessments of vacant properties.
The issue has caused multiple groups representing cities, towns and villages across the state to urge Wisconsin lawmakers to act - so far to no avail - with the most recent effort to rein in the issue failing earlier this year. A Democratic amendment was rejected as the State Senate adopted tax code changes. A bipartisan push to close the loophole was introduced in June of 2017 but the influential, Madison-based Wisconsin Manufacturers and Commerce association didn't support the legislation, and a vote was never taken.
Senator Janis Ringhand, D-Evansville, a sponsor of the failed bill, said she's been assigned to a work study group that will go over the legislation and the "ramifications of the change."
The first work study meeting was held Tuesday in Madison.
"I am glad counties are putting this issue to a referendum, even though it will be advisory, to raise awareness of the results," Ringhand said.
Representative Mark Spreitzer, D-Beloit, said the time to study the issue was over.
"My concern is that we don't need to study this issue further, we need to do something about it," Spreitzer said. "We already have the legislation, but we need leaders with the willpower to bring it to a vote, or we need more legislators willing to force a vote."
Representative Amy Loudenbeck, R-Clinton, said she thought the issue "needs to be addressed," but said there were "a lot of complications" surrounding the closure of the perceived loophole "because of the uniformity clause in the Wisconsin Constitution."
Loudenbeck said she was confident the study committee would "be able to find some creative and constitutional solutions."
"If the Legislative Council Study Committee is able to craft a policy solution that would be able to stand up to constitutional challenges and was acceptable to all stakeholders, I would certainly support it...It is too soon to say what, if any, recommendations will be coming out of the committee, but I am hopeful we will have some quality proposals to consider in the next legislative session," Loudenbeck said.
A study commissioned by the League of Wisconsin Municipalities estimated some local governments may need to raise taxes from 4 to 17 percent to absorb future property tax losses from big box retailers. The report showed of the 11 municipalities studied, valued losses could range from 4 to 14 percent - resulting in a $187 million shift to other taxpayers.
In Beloit, multiple businesses have disputed their property tax assessments, including the Staples Distribution Center, Menards and Woodmans.
In July of 2017, the city approved refunding Staples $345,000 on taxes paid by the company in 2016. On June 27, Staples Contract & Commercial LLC filed a lawsuit against the city in an attempt to recover property taxes paid by Staples from the January 2018 assessment period, claiming the assessment was "in excess of fair market values," according to the lawsuit. According to Staples, the assessment of $14 million was nearly $4 million over market value, lawsuit documents show.
The city also reached a settlement with Menards in August of 2017 to lower its property assessment to $8.7 million in 2017 and $8.5 million in 2016 from $9.5 million respectively. The company was refunded $21,269 as part of the settlement and the retailer paid $256,784 in 2016 property taxes compared to $246,059 last year, according to the Rock County Tax Database.
In July of 2017 and July of 2018, Woodman's Food Market Inc. also filed lawsuits against the city seeking property taxes paid relating to its 2017 and 2018 assessments. In total for both lawsuits, Woodmans is seeking over $7 million, court records show.
According to Finance Director Eric Miller, any property valuation reduction would impact the city's overall budget, not just the city's revenues. Area school districts and the county could also have to adjust the overall tax rates for large stores fighting property assessments.
"This does shift the burden to all other taxpayers in the community," Miller said.
Miller stressed the city would support of any state law changes to "close the dark store loophole in order to protect all taxpayers."