West Bend refunds retailer’s taxes after settlement
Shopko among several stores that sued city over property value assessments

By RALPH CHAPOCO - Daily News

Oct. 19, 2017

The exterior of Shopko is seen Wednesday morning as shoppers walk
around the parking lot in West Bend.
John Ehlke/Daily News

After settling a lawsuit with one of the larger retailers in the area, West Bend representatives officially started the process for returning payments to fulfill their obligation.

Common Council members voted to approve a resolution during Monday’s meeting that authorizes a correction of taxes to Shopko Stores Operating Co. in the amount of $37,092.05. The refund was part of a settlement agreement from a lawsuit filed in August by company representatives to lower their property tax payment.

“This is in relation to the agreement that you entered into with Shopko,” Administrator Jay Shambeau said. “This returns the funds to them and then we collect the funds back from the other taxing entities.”

City officials will not recoup the entire amount of the loss because they forfeit their share of the refund. Others will refund the city their respective portions of taxes they must refund.

During Aug. 22, some of the largest retailers in West Bend — including Menards, Shopko and Walmart — filed lawsuits to have their property taxes reduced, claiming their property value assessments were higher than they should have been.

City staff valued Shopko’s property at almost $7 million, but company representatives believed it was only worth about $4 million. Walmart’s location was valued at $12.5 million, but representatives believe it should be valued at $10.2 million. Menard’s was at $10 million, but challengers wanted the property valued at $5.6 million.

The lawsuits were nearly identical, except for the value of the assessments. During a closed-door session during the Sept. 11 Common Council meeting, members learned of the settlement and voted to approve to approve it during open session. The details were not disclosed to the public at that time.

Sadownikow alluded to the agreement during the Oct. 11 Common Sense Citizens of Washington County meeting.

“We had a lawsuit with Shopko,” Sadownikow said. “I just signed that paperwork just a week or two weeks ago. We settled with them. They had an appraisal. We had an appraisal. They decided to settle on our appraised number, which seems strange to me.”

Robert Hill, an attorney who represents the retailers concurred with Sadownikow that the settlements favored West Bend, but disagreed with his reasoning.

“He is correct, but it is not correct to say there is a struggle between the average sale price and some other price because we are really settling these, using as our measuring stick, as the social cost of these buildings because they do sit vacant and available for long periods of time, and the city does have to deal with the consequences of that,” he said.

The lawsuits with Walmart and Menard’s will continue.

“We are hopeful that we can mediation on all these and settle them along the lines that we were talking about,” Hill said. “We are never going to settle for anything close to the actual sales prices. We know that, but we do feel that a reduction is — when they are selling for $20 per square foot and they are assessed at $80, $50 becomes a really Solomonic number.”

Sadownikow said city officials also reached an agreement with the valuation of the Meijer location. The two parties were $3 million apart regarding the property’s assessment, eventually agreeing to $17 million for a store that is almost 200,000 square feet.

There is legislation under consideration by the state Senate and Assembly giving assessors the authority to value commercial properties as if the buildings are still in use.

“If it doesn’t pass, going forward, before we approved a building, before we approved more development, we would probably have to have a specific developer’s agreement with each individual developer,” Sadownikow said.

Before the developer can connect to any utility, be it electricity or water, Sadownikow said they would have to agree their properties are valued at a specified number.

The dark store tax theory has been a concern among municipal representatives who have watched larger retailers file lawsuits challenging their assessments. Should the retail officials win their cases, that could mean thousands of dollars in lost tax revenue.

At the heart of the dispute is how to appropriately value commercial properties — as vacant or in operation.

“They are saying you can only use properties of dark stores, properties that are sitting vacant,” said Robert Lorier during an earlier interview, West Bend’s commercial consultant. “Those are the ones they want to use. Our argument there is a reason they left. The location isn’t as good. It is not desirable. There is a reason it is vacant. It is not the same as it is now.”

Retail locations that are vacant will be assessed at a lower value because they are not as valuable as those that are in use. If a homeowner occupies a property, they will work to care for the location, mow the lawn and paint the house, but that same owner can leave the home in disrepair if the individual doesn’t live there. The person is not living at the location anymore, so what does that person care? In that case, the value of the property will decline because it is not as well managed as one that is occupied.

Retailers want their properties assessed in the latter situation. This becomes significant because the taxes cities collect decline given the reduced assessments.

However, city staff must still service the location. When there is an emergency, law enforcement and first responders must travel to the scene. Municipal crews must still maintain the infrastructure.

Municipal officials must generate revenue from elsewhere to offset their operating cost, and many are concerned that burden will shift to commercial properties. There also doesn’t seem to be an end to it. If one retailer can successfully make the claim, then what is stopping others?

If an individual homeowner wants to lower his property assessment, then will so will everyone else. Sadownikow and others worry the process will not end the cycle for reducing revenues continue.

However, Hill and his colleagues view the situation differently. Michael Wedl, an assessor who sides with Hill, displayed a graphic that displayed variations in how retail locations are assessed per square foot. One location in Milwaukee was valued at $20 per square foot while another was at $120.

“Right there we have got an issue,” Wedl said. “Even if it is an old Target and a new Walmart, why is there a $100 per square foot between them?”

Hill also argued that the assessment should only reflect the materials that comprise the location, the brick, cement and other supplies that make up the store. The income generating portion of the business should not be part of the property assessment and should not be taxed.

If an entrepreneur operates a business within a home, then the property tax should reflect the value of the property, not whether there is a business that generates income on the premises.

“What the major retailers are saying is that, ‘We are already subsidizing everybody else, because we are already paying taxes on assessments that are three and four times what we could sell these buildings for,’” Hill said. “But, we also have a duty to our shareholders, the public, the owners and, quite frankly to other taxpayers, not to just say, ‘assessors are free to pick whatever number they choose,’ they have to stay in line with sales prices because that is the only thing that keeps the system honest.”

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