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Big-box retailers are slashing their property taxes through a legal loophole
- Paul-ish 8y agoThis is perhaps another argument in favor of a land value tax. The value assessment can still be disputed, but at least it is on the unimproved value of the land.
- joe_the_user 8y agoIt's astounding that you wind-up with stores which seem to intend to give nothing what-so-ever back to their communities. What is the long term plan here?
- tejtm 8y agoStake holder profit this quarter and a sweet holiday bonus for me.
- nerdponx 8y agoIs human short-sightedness and greed really that astounding?
- hedvig 8y agoSubmission. Dystopia.
- zeveb 8y agoWhy would they pay more tax than they are required to? Why would they not argue that their properties are overvalued if they believe them to be? Seems to me that it might be a good idea to issue retroactive tax bills (or refunds!) based on the actual price when a property finally does sell. So if they're honestly right that these properties are worth less, then they'll see for less someday, and they don't need to worry about a retroactive bill. OTOH, if they're wrong — there'd be principal & interest to pay. This might even help keep property prices low, which is (I think) generally a good thing, since there are so many forces acting to keep them high. I dunno — maybe someone can point out the flaws.
- RA_Fisher 8y agoThey help distribute low-priced goods. Lower priced goods broaden accessibility and thus help the poor. If you're not poor or don't interact with the poor much that might be easy to miss.
- joe_the_user 8y agoSure, let's say I'm pretty aware of the habits of the poor. Selling cheap stuff, however, doesn't actually build an area. The poor today in the US are not saving anything. Money for infrastructure and other improvements to an area is not going to come from Wallmart's low prices.
- bilbo0s 8y agoIt is a quandary, I'll concede that. It's a tough problem, and we need to come up with a solution. However, trying to live without the moderating influence that Walmart has on the ravages of inequality is a worse problem than trying to figure out how to get infrastructure paid for.
- joe_the_user 8y agoHowever, trying to live without the moderating influence that Walmart has on the ravages of inequality is a worse problem than trying to figure out how to get infrastructure paid for. The poor living without infrastructure actually keeps them poor (can't commute to work, say). The poor not being to buy at Wallmart leaves them with Amazon and with a corner store that might rip them off a bit but has some relation to their lives. Edit: I mean, I live on a limited income and have plenty of friends as close to absolute poverty as it gets. None depend on Walmart in particular though some depend on Target, an equivalent. You can live even more cheaply buying from thrift stores than Walmart. Moreover, most people who can go to the giant big box stores have working cars which put them on a tier slightly above the very poorest. Sure, broadly, the last thirty years of declining wages for the working class have been softened by the flood of cheap manufactured goods. But that's overall - Walmart is not the only conduit of this flood, though it's helped. And Walmart + other big box stores also benefit from economies of scale and dodging taxes for infrastructure. Of course, it's reasonable to say Walmart isn't a pure evil but touting it as a net good seems equally misguided. The despair of "Walmart-ized" small town American is well documented. For example, It sounds impossible that lots of people today subsist out in the middle nowhere, where the bus services barely exist, without their cars. But this is what happens today and the cuts in infrastructure, no buses and etc, hurt this group a lot.
- prostoalex 8y agoThe foot traffic is an intangible benefit. All else being equal, a franchisee is more likely to open a new Buffalo Wild Wings or SuperCuts in a plaza headlined by Wal-Mart or Costco rather than middle of nowhere.
- anigbrowl 8y agoWoohoo, more strip malls full of corporate chains and franchises, because we don't have enough of those already.
- danielvf 8y agoNow there’s plenty of room to argue that the stores are asking for too much now, but fundamentally the towns have been breaking the law, which is why the stores are winning the court cases. “As of 2017, the city had valued that store at $11 million, a number based on what the property had cost the owner to buy back in 2001, plus the added value of renovations over the years, adjusted at the going rate of depreciation.” However, that’s not the way properties are supposed to be valued by state law - it is supposed to be based on the resale value. And there’s a terrible market for used big box stores.
- cmiles74 8y agoI have to disagree that the town's have been breaking the law. You can criticize their choice of comparable properties but it doesn't strike me as illegal or necessarily dishonest. However it seems like maybe we need an entirely new way to valuate these properties... When a home is assessed we look at similar houses (similar in size, number of bathrooms, garage, etc.) These are features that have teal and tangible value for people in the market for a home. People agree these are valuable things. It sounds like much of the value of these properties isn't really part of the properties themselves. Instead we're seeing the value in the I improvements to the property _around_ the store: what was once empty land now has a four lane road, electric lines and other utilities constructed solely to support these stores. Is it fair to turn around and argue that this value isn't enjoyed by these big box stores? That seems to be their logic: the Home Depot has value, but not much: it's a shoddy square box full of shelves. Yet the municipality spent a lot of money on infrastructure to support this store that they can't afford without these taxes.
- 0xffff2 8y agoSurely the resale value of the property takes into account the level of infrastructure surrounding the property, which would mean that a valuation based on resale value prices in those improvements at their market value.
- cmiles74 8y agoAfter reading the article, the impression I came away with was that they were choosing "comparable properties" that were recently re-sold big box sites. It seems that the municipality's appraisers take the infrastructure around the site into account whereas the appraisers for the big box stores are not.
- milesvp 8y agoThere's a simple solution here. You tell me what you think your property is worth. And I can force you to move out today for that price. This might still be a loss for the county tax assessors, but it will at least keep these stores honest. Maybe we even include all the inventory and fixtures in that deal to keep the companies even more honest, since a competitor can almost turnkey the operation at that point (though the logistics of resupply can't be understated).
- eiaoa 8y ago> There's a simple solution here. You tell me what you think your property is worth. And I can force you to move out today for that price. This might still be a loss for the county tax assessors, but it will at least keep these stores honest. It might not even cost the county tax assessors much, some of these abuses are so blatant that even a private citizen could buy out the building under that policy: https://dailycaller.com/2018/08/14/apple-hq-200-dollars-santa-clara-county/ https://dailycaller.com/2018/08/14/apple-hq-200-dollars-sant... > Apple, history’s first trillion-dollar company, is arguing that a cluster of new buildings at its headquarters is worth only $200 in order to lower its tax burden. > The trillion-dollar tech giant claimed in an appeal the value of the “cluster of properties” is worth $200, not the $1 billion value given by the Santa Clara County’s tax assessor — elected officials who determine property value for tax purposes. I'd call it "disruptive innovation" to buy out Apple's headquarters buildings for the $200 it thinks they're worth, rent them back to Apple at the maximum price the market will bear, and pay Santa Clara County it's fair share in taxes.
- mdasen 8y agohttps://appleinsider.com/articles/18/08/13/apple-appeals-against-santa-clara-county-tax-demands-over-high-property-valuations https://appleinsider.com/articles/18/08/13/apple-appeals-aga... To be fair, another source says it’s unclear if that is $200 or $200M which is a big difference. Apple does pay $56M in property taxes per year in Santa Clara county and is the largest property tax payer in a county that includes Google. If property taxes there are 1%, that would mean $5.6B in assessed value.
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- MikeGale 8y agoIf the stores are hurting and channel that into destroying the communities that support them, something is going to change. Communities vanish, big stores are destroyed, the old smaller outfits come back, Amazon takes over, whatever???
- zanny 8y agoNothing comes back. You are left with a husk where anyone still living there travels dozens of miles to get groceries. Its becoming a legitimate problem across the country, especially when the population that often chooses to stay are retirees who often shouldn't even be driving.
- cperciva 8y agoI wouldn't call this a "loophole"; I'd call it property taxes working exactly the way they're supposed to work. I mean, they're property taxes, not business taxes -- isn't it obvious that they should be based on the value of the property, not based on the success of the business which uses the property.
- SilasX 8y agoYeah, that's not even "slashing", that's "never being related to profit to begin with". Edit: On skimming the article, the taxes are going down, but for the (justifiable) reason that their value is rightly being reassessed in light of the declining market.
- deleted 8y ago[deleted]
- shkkmo 8y agoThe value of the property can be assessed using a number of means: comparable sales, cost or income. In wisconsen, comparable sales is supposed to be the first (but not the only) criteria applied. So, no, it is not obvious that the success of the business that uses the property is an invalid means of assessing value. The loophole is not so much the use of comparable sales, as the imbalance of legal resource between these large corporations and the small municipalities: "Yet dark store theory appeals have been incessant, and small towns feel outgunned. Retailers come back, year after year, insisting on paying less, even after they’ve been granted reductions. For them, every demand brings the opportunity for a lower valuation, and there’s no real financial downside, with outside tax lawyers working for contingency fees. “They’re forcing the hands of municipalities to go to court, and then they keep bargaining it down,” said Krause, the assessor in Wauwatosa. Repeat appeals from Lowe’s, Best Buy, Meijer, and others dating back to 2013 have cost her city $2.4 million in legal fees."
- nkurz 8y agoWhy do you feel that that the "value of the property" should be defined by what another party is willing buy it for after it has closed rather than than the amount the current owner is willing to sell it for while it is open? Both strike me as reasonable positions, and thus a compromise value between the two seems like it might be most fair.
- kevin_b_er 8y agoAnd now big box retailers have moved from being an indirect threat to the city to a direct threat. Treat them as such. They are an enemy to a community and to a city. However, I find it hilarious that a bumper sticker Republican is against it. His party stands for large corporations extracting maximal profit from The People.
- amelius 8y agoAbusing legal loopholes is very much like hacking, and should therefore be just as punishable.
- AnthonyMouse 8y agoI support your policy proposal of repealing the CFAA.
- yonran 8y agoIt sounds like the big box stores themselves are validating the Strong Towns interpretation that towns have invested far too much public infrastructure compared to the property value of the big box stores (https://www.strongtowns.org/journal/2017/11/3/big-box-stores-are-costing-our-cities-far-more-than-we-ever-imagined https://www.strongtowns.org/journal/2017/11/3/big-box-stores...). Perhaps these towns could zone every big box store for subdivision and redevelopment so that the stores will have to pay taxes based on the upzoned value. As an added benefit, the stores will be encouraged to use the land more productively.
- analog31 8y agoIndeed, a possible compromise is that if the property is to be taxed as an empty store with no customers, then it should be supported by the infrastructure needed for an empty store with no customers.
- ars 8y ago> then it should be supported by the infrastructure needed What specifically? The store pays for water and electric. The only thing I can think of that the city supplies is the road network. And restricting the road network would be a very foolish thing for the city to do - they would just be harming themself.
- nickpsecurity 8y agoMaybe toll roads or an extra tax for these types of properties if they're active rather than derelict. Price them so that the companies will choose to pay tax instead.
- xsmasher 8y agoPolice service, for one. https://www.bloomberg.com/features/2016-walmart-crime/ https://www.bloomberg.com/features/2016-walmart-crime/
- AdrianB1 8y agoThis american system of paying for city services via property taxes instead of consumption or equal share is very strange when looking from abroad. If the city needs policemen, firefighters and teachers, as the article describes, then the city should split the bill to the number of citizens and not to how much they can rip off them. The property is not a city investment, so the city does not deserve any revenue from it. If the city did some investment, that is a cost to reimburse, of course, but not milking the property.
- zanny 8y agoIt is incredibly naive to think any major retail center exists without substantial investment by local and state governments. In many places Walmart made money just building their supercenters in many dying towns across the country.
- sokoloff 8y agoIf 8 people live in a 1500 ft^2 house and 1 person lives in a 10,000 ft^2 mansion, is the city really providing 8x the value to the former for police and fire protection?
- ams6110 8y ago8 lives to save in the former, if the house is on fire, vs. one to save in the latter.
- dwild 8y agoIt's not the cloud that'll save theses 8, there's no on demand scaling for the fire department. On both situation, there'll be enough staff there to save at least 8 peoples, thus incurring the same cost. It's probably much quicker too to secure a 1500 ft house than a 10 000 one. I remember once we got a fire alarm at my job once and it took quite a bit of time for them to make sure everything was alright.
- AdrianB1 8y agoI heard that in real estate it is location, location and location. In most cases a bad neighborhood requires more police force and still has a worse value, so the correlation of services provided versus tax raised is inverse. Still does not make sense.
- jtlienwis 8y agoI live hear in Wisconsin. I tend to side with the big box stores. Lots of empty space around that indicates their store properties are not that valuable on the open market. As for the municipalities, they are in way too many things that they should not be into. Like running the electric and gas utilities, water utilities etc. Civic centers and so called industrial parks that turn them into real estate developers. Scores of government employees trying to attract businesses by handing out freebies to companies that would have come to their town anyway. Stick to doing street repair and snowplowing and quit your bitching.