Concerned taxpayers and local units of government alike have been waiting for Meijer’s filing deadline earlier this month to pass, with hopes they would not appeal their “dark box” case against Boone County to the Indiana Supreme Court. Indeed, the deadline came and went this month, and they did not appeal. The Indiana Tax Court’s ruling stands, and the “dark box theory” is determined to be an unacceptable methodology for property appraisals.
“This is a big win for all taxpayers in helping to end an unfair property tax burden shift from large retailers to other business, home and landowners,” Boone County Commissioner Jeff Wolfe said.
The ruling has become an active deterrent in Boone County from other big box retailers appealing massive amounts of their assessed value. The “dark box” argument used in their appeals propagates that a new and fully operational store in a growing area may be compared in value to an older, empty (dark) store often in an economically depressed location. Retailers have been flooding county assessors’ offices with appeals based on this premise. To avoid costly legal battles, often counties have settled with retailers for significant discounts to their property values. While some counties have fought this legal battle over the years, they have many times lost due to being sorely underfunded for the representation needed to present their defense.
However, the tide has been turning on the “dark box theory” as recent legal victories from Lake and Monroe Counties have chipped away at its efficacy. But the case that all have been waiting for to set a major precedent against the flawed appraisal method would come out of Boone County. Their involvement with this issue goes back to 2014 when Meijer started construction on a new store in Whitestown, one of the fastest growing communities in Indiana. The Boone County Assessor’s Office worked with the retailer for several years to negotiate an acceptable assessed value amount, but the gap was too wide as Meijer initially proposed a $4.9 million value compared to the county’s assessment of $11.9 million.
In 2018, Boone County officials were advised by state-level leaders that they were in a strong position to bring down the dark store methodology with their brand-new Meijer store at a prime retail location.
“We have a solid set of circumstances where we could win if we hire experienced legal representation and bring in expert witnesses,” Boone County Assessor, Lisa Garoffolo said to the Boone County Council.
After deliberating, the council responded by voting to appropriate an initial $250,000 out of their Rainy-Day Fund.
Three years and two legal rulings later, Boone County secured a victory for taxpayers and local units of government that has the potential to go statewide. What helped secure the win for Boone County was that the Indiana Board of Tax Review forced Meijer to submit their construction cost data. Meijer and many other big box retailers have been withholding this information from county assessors. In turn, the IBTR and Tax Court’s rulings not only struck down Meijer’s deeply discounted appraisal but determined an assessed value for the property that is $1 million more than Boone County’s assessment.
Now Boone County and a coalition of statewide associations representing schools, cities and towns, retired citizens, farmers, and public safety professionals have come together to push for legislation at the Statehouse following up on Boone County’s win in a concerted effort to see that the legal rulings are codified into law.
David Bottorff, Executive Director of the Association of Indiana Counties, agrees with the need for consistency saying, “Appellants should not be able to withhold critical evidence from the county or the state, such as actual construction cost, as a way to prevent an accurate assessment. Homeowners are not allowed to hide information from the county or the state, so these types of properties should not be able to do so either.”
Senate Bill 307 was authored by Senators Brian Buchanan, Sen. Philip Boots, Sen. Eric Bassler. Senators Ed Charbonneau, Sen. James Buck, Sen. J.D. Ford co-authored the bill.
Certainly, that is the hope of Boone County and many Indiana counties as there are 162 “dark box” petitions before the Indiana Board of Tax Review coming from stores in 21 counties. Other counties display the need for immediate legislative action as they have proactively settled with retailers on decreased assessed values due to warnings of high-cost legal battles. However, these agreements that counties are making with retailers have not stopped them and their attorneys from continuing to appeal for further reductions.
For a clear picture of the effects of just one big box retail appeal and lawsuit, here are the assessed values (AV) and the corresponding yearly property tax revenues from the Meijer/Boone County case:
◦ $4.9M (Meijer’s original offer for AV rejected by county) = $120,000/year
◦ $7.3M (Meijer’s submitted AV per an appraisal to the courts) = $207,000/year
◦ $11.9M (Boone County’s determined AV for Meijer) = $338,000/year
◦ $12.8M (Court determined AV for Meijer based on building and land cost) = $385,000/year
Therefore, due to the court’s determined assessed value for Meijer, $7.9 million of assessed value was preserved and up to $265,000 of their yearly tax liability will not be shifted and absorbed by other taxpayers or become lost revenue for local units of government due to tax caps.
These numbers give context to what has been at stake through just one big box appeal, and the number of other big box retailers in the state must be considered including Lowe’s, Kohl’s, Wal-mart, Costco, Menard’s, Target, Office Depot, Walgreens, CVS, and more.
“This is why, we made the difficult decision to spend a total of $746,000 of taxpayer funds to defend our taxpayers and the county,” said Boone County Councilwoman, Elise Nieshalla. “But we cannot afford to do this again. We, along with all 92 counties, need clarity in the tax code to put an end to the ‘dark box theory.’”
David Bottorff concurs saying, “These appeals, filed by less than 1% of property owners, collectively costs all taxpayers millions of dollars to defend. To make the appeal system more efficient and less costly, the General Assembly should enact the proposed legislation.”
Boone County’s legal victories are gaining national attention as local units of government in other states like Wisconsin, Michigan, Alabama, and Texas are also dealing with negative ramifications from the proliferation of the “dark box theory.” With the strength of the Tax Court’s ruling, Indiana has set a precedent that other counties, even those in other states, can look to for leverage in their own defense. Now with Indiana’s General Assembly in session, counties are waiting and hoping again, this time for a legislative fix that will stop the “dark box theory” as well as the corresponding tax burden shift and onerous legal defense costs.