Meijer appeal leaves Merrillville officials $2M short, but what about other communities with similar retail stores? If you live in Highland or Schererville you should be asking your local officials for a status report on big box appeals.
The Question: If Meijer leaves, who would buy the building? Retailers argue that empty big box stores are not worth nearly the value assessors place on them and that vacant stores often sit for years before being repurposed.
December 6, 2017-Retailers across the country are appealing property tax assessments which are based largely on a value in use method of assessment. According to Indiana Law, real property is to be assessed on the fair market value of the structure and land. In the case of big box retailers, that value has traditionally been between $50 and $100 per sq ft. of floor space in Lake County. In short, retailers say the sales price of vacant stores should be used to determine valuation rather than the price of a functioning store. The difference has been estimated to be $120M per year in tax revenue in Indiana.
Recently, Meijer in Merrillville successfully appealed their assessment which had been at $16M. Details of the settlement were not readily available, however, a similar appeal in 2015 reduced the assessment from $83 per sq. foot down to $30 per square foot. The Merrillville appeal will result in a tax refund of nearly $2M. But Meijer is just the tip of the iceberg and those in the know have seen this coming for years.
Impossible to Determine Potential Impact
Indiana law requires properties in a Tax Increment Financing District to report appeals which may impact the revenue in the District. In the case of Merrillville, the Meijer Store is in the Merrillville Road Tax Increment Finance District (TIF district). The 2017 TIF Neutralization Worksheet for this TIF district lists -0- in the line for “Estimated Assessed Value Decrease Due to 2017 pay 2018 Appeals Settlements in Allocation Area.” Lake County Auditor John Petalas certified, based on information provided by Policy Analytics, LLC, that there were no pending
appeals which would affect TIF revenues (you can see the form, below). This is crucial because it is not just Meijer that has filed appeals based on the value in use vs. dark box theory. Kohl’s, Home Depot, Target and Lowes are among the many retailers who have filed appeals throughout the country. Home Depot in Hammond, Schererville and Hobart all have pending appeals that are likely to be settled this year or next but were not reported on the required forms.
Property taxes are once piece of the puzzle in the complex matrix of government funding. The increased use, and often misuse, of tax increment financing may leave many communities scrambling to make up lost revenue. One of the most common refrains we hear from local politicians is that the tax caps are constraining local government. Nonetheless, there seems to be an endless supply of corporate welfare to provide to retailers when they are making pie in the sky promise while our schools are forced to go to the voters to be able to provide normal cost of living raises to employees. It is crucial that voters have the proper information to make informed decisions regarding their elected leaders.
Please let us know what you think in the comments. Are you concerned about the use of Tax Increment Financing in your community?