Meijer Appeal Raises Concerns for Other Communities, Questions Regarding TIF Reporting

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.

    What This Means for You

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?

Comments

  1. D Sir Reply

    You nailed it,Ken. If we appealed our property tax assessment,I’ll bet we wouldn’t even come close to the reduction these retailers are getting. And don’t forget the tax incentives our brilliant politicians gave away to lure them to their cities.

  2. richb Reply

    Taxing bodies need to learn to live on less. It really is simple economics. A corporation (of any size, not just the big ones) never actually pays taxes, it gets passed through to consumers every time. When you tax businesses, you are in sense taxing yourself. They will never pay them out of the goodness of their hearts. They are in business to earn a profit. They other wise do not exist. And with the way retail is today, companies will be looking for ways to spend less. And they will continue to win these appeals because their buildings are overvalued by tax bodies.

    That’s why big companies should also never get incentives to come in the first place. If the business climate is so terrible in your community you have to give away the store to get the store, it’s time for some soul searching. A small business never gets these incentives so why do we give them to big ones? Make your community business friendly enough so they come on their own and pay their own freight. No handouts.

    An operating store brings in sales tax as well. A closed box brings in nothing in sales tax. So its a double whammy when you drive a operating store out.

    Also the pool of buyers for empty dark boxes are tiny and getting smaller. Many times the actual building has no value to anyone but the company that originally built it. Sometimes a building is subtracting value from the land (like that old closed Kmart in St. John). Most can’t be anything else but a retail store due to zoning, so if there are no new retailers interested in your community, it will remain vacant.

    Public officials and employees have to come to terms that taxpayers cannot afford the level of government we currently have. Blaming the “rich” won’t solve anything either. Most have the ability to take their toys and play elsewhere.

  3. Jessie E. Reply

    This argument just doesn’t fly in Hammond, just ask Tom. Hammond residents are an endless source of income to fund projects for some of Tom’s friends.

    Someone should look into the freebies given a convenience store adjacent to the new city garage.

    TIF’s steal money from the community, limit funding for basic city services.

  4. Reggie Knight Reply

    MANY years ago I (stupidly) agreed with giving substantial tax breaks to large corporations as I (foolishly) believed that the jobs and commerce they generated would more than offset the diminished tax revenue. I very quickly learned that that was not the case. RICHB put it as succinctly, or more so, than I can. If you have to cut your own throat to lure a company to locate in your municipality, than the soul-searching he mentions should commence. Municipal employees and elected officials need to quit talking only to each other and realize that the private sector cannot perpetually fund their increasing appetites for raises and benefits.

    NWI politicians, public employees, and consultants need to disabuse themselves of the notion that “proximity to Chicago and Lake Michigan” are sufficient reasons to keep raising taxes and fees on the guy on the street. Desirability of location may sell in San Diego, Miami, Austin, and San Francisco but it is not a big factor in the Chicagoland area. What will bring businesses to NWI will be the weeding out of corruption, inefficiency, and theft. Add predictably and consistently low taxes–yes–a bike path or three may have to go by the wayside–and gradually, perhaps very gradually, the local economy will grow from the bottom up. No need for a gathering of the Times Board of Economists at some politician’s restaurant to stroke their beards and proclaim that the steel industry is not the economic driver that it once was. Focus more on keeping taxes and fees low and less on six figure public salaries and multi-million dollar high school athletic complexes.

  5. Georgianne Lakatos Reply

    Probably why our property taxes keep going up. Why is it that when you own your home free and clear, no mortgage, you still have to pay taxes on it? If they’re not paid you can be homeless.
    You never truly own your home. Once it’s paid off you shouldn’t have to keep paying taxes on it.

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