Big-box retailers’ new tactic to slash their taxes is the latest example of why cities are better off saying no to the boxes and cultivating Main Streets instead.
In February, the library in Marquette, Mich., announced that it was cutting its hours.
It wasn’t that its Sunday programming was any less popular, or that it had gotten the short end of the stick in next year’s budget planning. Instead, thanks to a new method that big-box stores are using to game the tax system, Marquette Township owed a $755,828.71 tax refund to the home improvement chain Lowe’s. Essential services like the library, the school district, and the fire department were on the hook to pay for it.
The Peter White Public Library would now be closed on Sundays.
Marquette has been hit hard by a tactic that the country’s biggest retailers are using to slash their property taxes. Known as the “dark store” method, it exemplifies the systematic way that these chains extract money from local governments. It’s also the latest example of the way that, even as local governments across the country continue to bend over backwards to attract and accommodate big-box development, these stores are consistently a terrible deal for the towns and cities where they locate.
Marquette is one of the countless places that has bought into big-box economic development. Over the years, the township in the Upper Peninsula of Michigan spent millions extending water mains, law enforcement, and other infrastructure and services to its big-box commercial corridor along U.S. 41. When the Lowe’s opened there in 2008, local officials including the mayor turned out for a “board-cutting” ceremony—the home improvement center version of a ribbon-cutting.
Then, less than two years later, Lowe’s flipped the script. The mega-retailer, which reports annual net sales of about $50 billion, went to tax court to appeal its property tax assessment. Marquette had pegged the taxable value of the store, which had just been built for $10 million, at $5.2 million. In front of the Michigan Tax Tribunal, an administrative court whose members are appointed by the state governor, Lowe’s won assessments that were, instead, $2.4 million in 2010, $2 million in 2011, and $1.5 million in 2012.
“We honestly thought there had been a mistake,” says Dulcee Atherton, the assessor for Marquette Township. “We had the building permits that said it was worth $10 million. We couldn’t believe the audacity, really.”
What was worse was the methodology that Lowe’s, and the tax tribunal, had used to arrive at the lower figures. Continue reading