City, state still mired in business tax dispute

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BELOIT - Municipalities across Wisconsin, including Beloit, are still dealing with pending lawsuits over property tax assessment challenges by large companies with no end in sight.

Known as the so-called "dark store loophole," businesses across the state have challenged, sometimes annually, seeking to have their property assessments by municipalities of active properties valued as if they were vacant properties since 2008 following a Wisconsin Supreme Court ruling.

Earlier this week the Beloit City Council approved a settlement with Staples Contract and Commercial, Inc. after Staples challenged the city on its assessment of the warehouse and distribution center at 3140 Colley Road. The Staples settlement isn't the first, and may not be the last with the city settling multiple disputes since 2016, according to court records.

In July of 2017, the city approved refunding Staples $345,000 on taxes paid by the company in 2016. The lawsuit filed by Staples claimed the city's assessed value of the property of $14 million was $2 million higher than the company's independent appraisal.

On Monday, the council approved a settlement that establishes the 2018 and 2019 assessments for Staples at $12.75 million, with the city to issue $35,639 in a refund to the company. The settlement also establishes that if the 2020 assessed value of the property is less than $12.75 million, Staples will not challenge the city's assessed value, avoiding continued litigation for 2020, according to the settlement agreement.

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.

Other companies in Beloit have fielded challenges to property tax assessments, including Janesville-based Woodman's Food Market and Walmart, with both cases ongoing. Woodman's has challenged its assessments from the city from 2017 to 2019 and Walmart's lawsuit was filed in July, according to Rock County Circuit Court records.

The lawsuits come less than a year after Rock County voters supported a non-binding, advisory referendum urging Wisconsin lawmakers to act on closing the loophole. Voters supported the referendum with over 73 percent of votes (47,457) to 26 percent opposed (17,118), according to Rock County election results.

In Walworth County, voters also approved closing the loophole with 31,039 approving the measure compared to 10,620 opposed to the measure. In total, 17 counties have taken up advisory referendums on the issue.

Four bills have been introduced to address the dark store issue, with three of the bills coming out of the Legislative Council Study Committee on Property Tax Assessment Practices.

In May, a bill intended to address the issue failed to come to the Wisconsin Senate floor for a vote despite efforts by Sen. Janis Ringhand, D-Evansville.

At the time, Ringhand said state GOP leaders used a procedural move to block the legislation, just as they did when Ringhand attempted to bring the issue to a vote in 2018.

The latest effort, SB 130, has bipartisan support with 10 members from each party co-sponsoring the bill in the Senate. The bill had also received the support of the Wisconsin League of Municipalities, the Wisconsin Counties Association and the Wisconsin Towns Association.

Ringhand said while the trio of bills to come out of committee could help municipalities in their dispute with businesses, the bills "do not address the fundamental problems that allow the retailers to seek tax assessments that are much lower than a building's appraised value or the value that was paid for the property."

Ringhand said the power of the influential Wisconsin Manufacturers and Commerce (WMC) association, a group that strongly opposes any dark store law changes, should not be underestimated in influencing GOP state leadership's tactics in preventing any bill package from moving forward.

WMC has said any new laws looking to rein in the loophole would pave the way for aggressive increases in property taxes of businesses.

In lieu of a legislative fix, the League of Wisconsin Municipalities (LWM) is urging local governments to continue to defend commercial property assessments and related lawsuits, noting the success of some Wisconsin communities being able to see lawsuits by companies dropped when choosing not to settle, according to an article written by LWM Deputy Executive Director Curt Witynski in the October edition of the LWM magazine.

"While the League's dark store legislation remains stalled with no clear path forward, a recent string of municipal victories in circuit courts against dark store and Walgreens-based assessment challenges may mean a legislative fix is unnecessary," Witynski wrote. "Tax attorneys working for municipalities have found ways to convince judges that the dark store comparables used by thriving big box stores aren't valid and that the actual rent being paid and recent sale prices of leased commercial space are the best evidence of fair market value."

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