(The Center Square) – Vacant Michigan big box stores become tax breaks for retail businesses statewide when those establishments have property valued at rates sometimes 50% lower than previous rates.

This is called a “black shop” strategy, which often leaves local taxpayers footing the bill.

An S&P report released Thursday revealed that the strategy is being used nationwide.

“In essence, big box stores argued that their in-use stores should be assessed for property tax purposes at levels comparable to vacant stores, known as dark stores,” said Emma Drilias, analyst at S&P Global Ratings, in a press release.

This hits Michigan local governments hard, as devalued properties reap less tax revenue, so either local taxpayers end up footing the bill through property taxes or fees, or statewide taxpayers pay as taxpayers. Lost school tax revenues are offset by the Michigan Treasury.

Either way, there is less money for municipal operations, emergency services and libraries.

The issue is not resolved, said Stephanie Morita, senior counsel for Farmington Hills-based Rosati, Schultz, Joppich and Amtsbuechler in The Center Square in a telephone interview.

“Hypothetically, you can compare a rock to a mansion. But should you? No, ”Morita said.

“Anytime you don’t assess a property against our constitutional requirement in the state of Michigan of true dollar value, you are setting the system up to fail,” Morita said.

When you start inappropriately valuing a category of property, others will claim it as well, Morita said, such as pharmacies and banks that use deed-restricted properties to limit potential buyers and lower selling prices so that the company can use this vacant property as a comparable.

“If you had a drugstore around the corner and they wanted to move across the street, they would deed restrict the property they left to prevent competition from moving in,” Morita said.

Morita said she has dealt with cases where owners have attempted to use deed-restricted properties as comparable for at least 10 years.

Large Michigan retailers have already valued an average of $ 55 per square foot. Grand Rapids lawyer Jack Van Coevering gave the following examples in testimony. But now:

• Michigan’s Lowe’s stores are valued at $ 22.10 per square foot. In the home state of Lowe, North Carolina, the same stores are valued at $ 79.08 per square foot
• Menards and Target stores in Michigan are valued at $ 24.97 per square foot. In Menards home state, Wisconsin, its stores are valued at $ 61.23 per square foot

Amy Drumm, vice president of government affairs for the Michigan Retailers Association, said: “[p]Property is valued in Michigan based on the price the next buyer is willing to pay.

Since many commercial buildings are purpose-built, they would require drastic modifications for proper use by another buyer, Drumm said.

“These commercial properties have been overvalued by local government appraisers who attempt to apply a value-in-use standard rather than a trade-in value standard as required by Michigan law,” Drumm wrote in a E-mail.

Drumm said retailers have appealed the property taxes and the courts have adjusted the appropriate tax rate.

“Retailers are good members who support the communities they serve,” said Drumm. “They employ hundreds of residents and collect and pay millions of dollars in taxes each year. They are happy to pay the appropriate rate based on the correct valuation of their property, but can exercise their legal right to appeal if they believe the valuation is incorrect.

Senator Ed McBroom, R-Vulcan, told The Center Square that “dark stores” hit rural areas hard with smaller tax bases. Big box stores require more government spending than smaller ones, but require a much lower standard tax rate, he said.

Fighting fires is more difficult in a 150,000 square foot Costco facility than in a small party store.

A mining journal report said total state tax court rulings for businesses in Marquette Township alone fell $ 2.8 million for all tax entities from 2009 to 2019.

“It erodes the functionality of our communities and our ability to provide vital infrastructure not only to these businesses, but to all others,” said McBroom. “And then the impact is also very real on the citizens themselves.”

McBroom questioned why the policy would favor department stores with benefits including economies of scale, lots of money, and “huge” tax relief on family businesses.

“We really want to address this issue for the future viability of our small towns,” McBroom said.

Homeowners, small retailers and other businesses can’t get the same deal.

McBroom said those who support “dark stores” oppose it as supporting a tax increase, which he says is not the case since those stores should have been paying higher taxes all the time.

McBroom offered three possible solutions: the Tax Court changes its mind, the state adopts a strict legislative policy otherwise, or the Michiganders change the Constitution.

There could be a court ruling in a year or two.