• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Boxed In, Dark Store Documentary About Tax Appeals

Status
Not open for further replies.

Michigan CG

Moderator
Staff member
Moderator
Joined
Nov 1, 2006
Professional Status
Certified General Appraiser
State
Michigan

Big box store tax appeals were very common for a few years and devastated communities.
 

Bill S

Junior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Illinois
Very interesting. Thanks for posting
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
The tax side of the business has always been challenging because of varying rules which often seem illogical from the outside. Without knowing the language the Tax Tribunal is required to follow, it's hard to know if they are doing their jobs properly. As this appears to be relatively recent (last six years), it seems likely it was a change in interpretation, which has now evolved into a series of precedents.
 

Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
Legislatures can always step in and tell us what is "fair." Farm and forest land is treated in a special way. And of course, does anybody talk about "tax exempt" organizations getting a free property tax ride, which has lots of questionable exemptions. Property taxes and their valuation is a riddle, always has been.
 

Michael S

Senior Member
Joined
Mar 18, 2009
Professional Status
Certified General Appraiser
State
New Mexico

Big box store tax appeals were very common for a few years and devastated communities.

I haven't watched this yet but my understanding, at least here in New Mexico, is the city/county/state creates their budget and then the actual millage rate for property taxes is calculated based on the total taxable value of property in the county. So if a few big box stores got their assessed values lowered dramatically it would end up just raising the property tax rate slightly higher for everyone. I just looked up some counties in New Mexico and even one of the mid-sized ones has a total assessed value of almost $4 billion for all of the real estate in the county, so a difference of a few million here and a few million there wouldn't change the millage rate by more than a small fraction.
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
Legislatures can always step in and tell us what is "fair." Farm and forest land is treated in a special way. And of course, does anybody talk about "tax exempt" organizations getting a free property tax ride, which has lots of questionable exemptions. Property taxes and their valuation is a riddle, always has been.
IIRC, in IL, non-profits pay RE taxes on the for-profit portion of their facilities, i.e., the Art Institute pays RE tax on their store. For a while I was reading about efforts to have hospitals identify the amount of charity care they were providing in order to keep their exemptions.

Corporate welfare is a huge, unseen problem caused by the now discredited trickle down theory of economics. Tax incentives, whether explicitly granted or when granted by a wink and a nod, primarily serve corporations, with minimal benefit actually making it to the communities.
 

PL1957

Senior Member
Joined
Jul 19, 2004
Professional Status
Certified General Appraiser
State
Illinois
I haven't watched this yet but my understanding, at least here in New Mexico, is the city/county/state creates their budget and then the actual millage rate for property taxes is calculated based on the total taxable value of property in the county. So if a few big box stores got their assessed values lowered dramatically it would end up just raising the property tax rate slightly higher for everyone. I just looked up some counties in New Mexico and even one of the mid-sized ones has a total assessed value of almost $4 billion for all of the real estate in the county, so a difference of a few million here and a few million there wouldn't change the millage rate by more than a small fraction.
If a property owner wins a tax appeal, they are entitled to a refund for they years in question. This can quickly add up to hundreds of thousands of dollars coming from the taxing bodies. Since they can't go back and retroactively add the few mills to everyone else for past years, it results in a shortfall in current balances. You end up with fewer cops, teachers, firemen and street repairs, as well as higher taxes.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
The tax side of the business has always been challenging because of varying rules which often seem illogical from the outside. Without knowing the language the Tax Tribunal is required to follow, it's hard to know if they are doing their jobs properly. As this appears to be relatively recent (last six years), it seems likely it was a change in interpretation, which has now evolved into a series of precedents.
I don't know what the interpretation is in Illinois for this type of property, but I always remember AI saying in one of the early classes that ad valorem valuations reflect fee simple at stabilized occupancy. That creates a challenge for these properties because they simply aren't going to sell after vacation at "stabilized occupancy". However, there is obviously a highest and best use issue in that moving forward. Most of the re-uses I've seen are farm stores, warehouses, medical offices, and churches, but demolition is always a factor.
The above comes with the disclaimer that I didn't watch the video.

I haven't watched this yet but my understanding, at least here in New Mexico, is the city/county/state creates their budget and then the actual millage rate for property taxes is calculated based on the total taxable value of property in the county. So if a few big box stores got their assessed values lowered dramatically it would end up just raising the property tax rate slightly higher for everyone. I just looked up some counties in New Mexico and even one of the mid-sized ones has a total assessed value of almost $4 billion for all of the real estate in the county, so a difference of a few million here and a few million there wouldn't change the millage rate by more than a small fraction.
There are tax attorneys that make their money based on savings from assessments, so some have the mentality of throw enough **** on the wall and maybe some of it will stick. That is not to criticize all tax attorneys - I've worked with some that are very reasonable and pragmatic. But you have some cases where underassessed properties get re-assessed even lower, so there is a ripple effect in these cases. With that said, there are some properties that have a genuine case for re-assessment.
Corporate welfare is a huge, unseen problem caused by the now discredited trickle down theory of economics. Tax incentives, whether explicitly granted or when granted by a wink and a nod, primarily serve corporations, with minimal benefit actually making it to the communities.
You are welcome to offer your two cents in the thread I started on professional sports in the general economic portion of the forum :)
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Check any state constitution. REAL ESTATE Taxes are based upon REAL ESTATE. These "dark stores" are valued based upon their REAL PROPERTY - the land and the building. What is being valued by the assessor more often than not is the BUSINESS ENTERPRISE VALUE. Business value in most states is NOT TAXABLE. The premise of the city fathers in the film is stupid. They are the very bunch of prix that campaigned for the business to move there, and maybe even offered tax breaks to see it happen. Then they try to milk the cash cow and are shocked with these stores either fight back or close to be filled by a much less valuable enterprise.
ad valorem valuations reflect fee simple at stabilized occupancy.
It is the same problem as with Hotels and Motels. What is the allocation to the REAL ESTATE when you have an on-going concern? And when you have an on-going concern when does the real estate sell? It doesn't except as a 'dark' building. So can we tell accurately the difference in value of an "orderly disposal" of real estate v. that of a liquidation?

When I served on the board of equalization locally, I did a study of all the industrial sales in the previous three years in a small town (15,000 pop.) and every single one was valued in the $3 million to $5 million range. Two were closed and has sold near $1 million. One plant producing auto parts had became a warehouse for storing greeting cards. Valued 5x its sale price...valued because of its on-going enterprise value? Phone system valued at $15,000 when, in fact, there was no need or use of the phone system? It was converted. The highest sale price of any industrial in that town was less than $2 million.

Then the city fathers - who benefit from the jobs and income from the people working there anyway - are shocked that these stores cannot compete with Amazon who is going to have a limited number of large facilities and in doing so, almost certainly will drive a lot of big box stores to the wall. How much longer will a store last that is not having to pay $50,000 - $250,000 in property taxes?
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
It is the same problem as with Hotels and Motels. What is the allocation to the REAL ESTATE when you have an on-going concern? And when you have an on-going concern when does the real estate sell? It doesn't except as a 'dark' building. So can we tell accurately the difference in value of an "orderly disposal" of real estate v. that of a liquidation?
I would respectfully disagree. I would not argue that an occupied retail store is necessarily a going concern in itself, though I agree that the assessment shouldn't be propped up when a first generation tenant occupies it until the end of its viable life (for their purposes).
Regarding hotels, I am a huge advocate for the priority of payments model. If it is vacant, you will have to assemble the workforce, go through the costs of compliance with the franchise under which it is flagged, and gain market acceptance. If a property cost $10,000,000 to build (real estate/ personal property costs) and it is producing $1,200,000 in NOI (ie based on typical management), if the overall cap rates are less than 10%, the real property value would likely be underweight if indicated at less than its depreciated cost, due to an analysis as vacant. That reminds me of that TAJ article advocating for valuing hotels without franchise flags to determine the real property value - the franchise flag is baked into the feasibility analysis and insisting that it operates as an independent property when seldom anything of those characteristics operate without a franchise flag could suggest that the property is not feasible for development when it is.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks