The discrepancies between city assessments and private appraisals of big-box retail properties can be staggering.
In 2017, Janesville assessed the Walmart store on Deerfield Drive at $18.4 million, according to a city memo. The retail chain obtained a private appraisal of $5.6 million—70 percent less—for the same property.
That same year, Walmart’s sister company Sam’s Club obtained a private appraisal 62 percent less than the city’s $12.8 million appraisal of its Janesville store.
Both companies filed dark-store lawsuits against Janesville seeking lower assessments. The city settled with both, which often happens in dark-store cases because municipalities don’t have the resources to fight litigation.
The city council will consider Monday whether to refund Walmart property tax payments of more than $250,000 and Sam’s Club $170,000 to finalize the settlements.
At its Feb. 11 meeting, the council returned $90,000 to Woodman’s to finalize another similar lawsuit.
Dark-store lawsuits occur when companies compare the value of their functioning businesses to the value of a vacant building of similar size.
Municipalities across Wisconsin have grumbled about dark-store lawsuits over the past year. They say companies obtain their own unfairly low appraisals, use them to convince municipalities to lower their assessments and reduce their property taxes, forcing residents to make up the difference. A slew of successful November advisory referendums encouraged the state Legislature to ban the legal strategy.
Gov. Tony Evers has said he wants to outlaw dark-store lawsuits in his first state budget.
City Assessor Michelle Laube said Janesville has not changed how it assesses properties despite its involvement in dark-store lawsuits. All assessments must be “uniform and equitable.”
State statutes govern the assessment process, and the city’s assessment techniques are based on practices used in private appraisals. Janesville typically assesses commercial properties based on their income potential because such properties often are marketed for sale at prices that account for their potential to generate income from rent, she said.
The city assesses properties at their “highest and best use,” which is usually how the building is currently being used. Private assessments do not, Laube said.
Vacant buildings often are sold at a lesser value because they need renovations to make them viable for a new use, she said.
Dark-store lawsuits do not account for that renovation cost, only the sale price, accounting for some of the difference between municipal assessments and dark-store appraisals, she said.
Janesville is trying to get on a biennial revaluation cycle for its commercial and residential properties. This would help keep property values in line with their market worth, Laube said.
The city is currently undergoing a full revaluation, the first since 2011. If revaluations continue every two years, Laube hopes regular assessments would maintain fair property values and lead to fewer property tax appeals.