West Bend officials discuss closing dark store loophole

By Brianna Stubler

May 26, 2019

WEST BEND — The West Bend Chamber of Commerce held its annual spring breakfast to discuss a pressing issue that members feel demand a solution — known as the dark store loophole.

Chamber of Commerce Executive Director Craig Farrell said the chamber hosts two breakfasts each year for members in business and manufacturing. Speakers have delved into topics including energy saving methods and human resources.

Farrell said Wisconsin is facing a serious dark store problem, which was made apparent during a Government Relations Committee meeting with Mayor Kraig Sadownikow and the city administrator.

“I became convinced that this issue is having a corrosive impact on our state and that my chamber could not sit idly by,” he said. “The damage to our community tax base is a real danger. Without corrective action, reduced taxes will affect our members and residents.”

The dark store loophole is a legal argument big-box retail chains like Walmart, Target and Menards use to drastically reduce their property taxes by assessing active stores as if they were vacant. The practice has resulted in the loss of millions of dollars in taxable value to communities in Wisconsin and other Midwestern state.

 Residents and businesses alike, Farrell said, must understand the consequences if there is no corrective action.

“Members of our community need to know what will happen to their tax rates if large companies are allowed to significantly reduce their taxes and get refunds on previous years paid taxes,” Farrell said. “The city, county and school district have already used those tax dollars — where will they get the money to pay back these dark store beneficiaries?”

He invited Mayor Sadownikow, state Senator Duey Stroebel and Representative Rick Gundrum to share their perspective.

Stroebel, from the state level, discussed the bill he cosponsored to close the loophole. Gundrum, from the district and county level, said he believes the loophole in property taxes can be closed in the proposed legislation, 2019 Senate Bill 130 and Assembly Bill 146. They were introduced by Stroebel and Representative Rob Brooks and he signed onto them as a lead co-sponsor.

“Every time a tax refund is issued, a larger share of the property tax burden is shifted to homeowners and small businesses,” Gundrum said. “These smaller commercial and residential taxpayers do not rely on nearly the same volume of public services compared to large, national chain retailers.”

This issue is really about tax fairness, he said, and every property owner paying their fair share.

Sadownikow attended as well and explained the effect it has on West Bend and the ensuing lawsuits in which they are currently engaged. Specifically, Walmart and Menards are both claiming in court that the city overassessed their property taxes, based on the dark store loophole.

Sadownikow said hundreds of lawsuits have been filed across the state, which has different laws than many others that have not allowed for dark stores. Several attorneys discovered this loophole about five years ago, he said, which challenges the methods employed by state assessors for close to 100 years.

“Closing the loophole will not be a tax increase on anyone or any entity,” Sadownikow said. “Not closing the loophole has resulted in a shift of tax burden away from big box to small businesses and homeowners.”

This burdens municipal services, infrastructure maintenance and education, he said. “We'd like to see Wisconsin pass comparable legislation and close the loophole.”

Every county that included a dark store referendum question on their spring ballot garnered support for such legislation to close the loophole, Sadownikow said. Now is the time to act, he said.