WEST BEND, WI—Kraig Sadownikow doesn’t look like an anti-corporate crusader. The mayor of West Bend, Wisconsin, stickers his pickup with a “Don’t Tread on Me” snake on the back window, a GOP elephant on the hitch, and the stars-and-stripes logo of his construction company across the bumper.

His fiscal conservatism is equally well billboarded: In the two hours we spent at City Hall and cruising West Bend in his plush truck, Sadownikow twice mentioned the 6 percent he has shaved off the Wisconsin city’s operating budget since becoming mayor in 2011, and stressed its efforts to bring more business to town.

So you might be surprised to learn that Sadownikow (he instructed me to pronounce his name like sat-on-a-cow) is personally boycotting two of the biggest big-box retailers in his town, Walmart and Menards, the Midwestern home improvement chain. He’s avoiding shopping at these companies’ stores until they cease what he sees as a flagrant exploitation of West Bend’s property tax system: repeat tax appeals that, added up, could undermine the town’s hard-won fiscal health.

Sadownikow is one of many unlikely combatants who have lined up against “dark store theory.” That’s the ominous-sounding term that administrators have given to a head-spinning legal argument taking cities across the U.S. by storm. Big-box retailers such as Walmart, Target, Meijer, Menards, and others are trimming their expenses in a forum where few residents are looking: the property tax assessment process. With one property tax appeal after another, they are compelling small-town assessors and high-court judges to accept the novel argument that their bustling big boxes should be valued like vacant “dark” stores—i.e., the near-worthless properties now peppering America’s shopping plazas.

To hear it from opponents, this emerging legal phenomenon essentially weaponizes an already grim retail landscape. But it’s not always clear who’s right and wrong—dark store theory is a battlefield muddied in the cryptic laws and upside-down logic of commercial property valuation. The potential slam to vulnerable tax bases is tangible, however. If the stores prevail in West Bend, for example, it would reduce property values by millions of dollars, force the city to refund hundreds of thousands of dollars in back taxes, and set back payments on the public infrastructure that the town built to lure these retailers in the first place. That could result in higher taxes for residents, fewer police officers, firefighters, and teachers, and potentially, a mess of public debt.

“They are holding the communities for ransom,” said Shannon Krause, the assessor in Wauwatosa, Wisconsin, where Lowe’s, Nordstrom, Best Buy, Meijer, and others have also appealed their valuations, year after year after year. “It’s a bleeding out.”

Wauwatosa and West Bend are two of the countless communities around the U.S. confronted with dark store appeals that cities worry could be ruinous. A survey conducted by CityLab of the International Association of Assessing Officers, a society for property valuation and tax policy professionals, found that these types of appeals have been filed in at least 21 U.S. states over the past 10 years. The appeals likely number in the thousands, based on CityLab’s review of legal databases and dozens of interviews with property tax experts.

In Wisconsin, at least 230 cases have been filed across 34 counties since 2015, many of them repeat appeals for the same properties, by the top three attorneys representing retailers. In Michigan, more than $75 million in tax value was lost from the rolls from related appeals between 2013 and 2015. In Indiana, an estimated $3.5 billion in property value is on the line. Texas stands to lose $2.6 billion per year if successful appeals become widespread, according to the Republican state comptroller Glenn Hegar. “No one likes paying taxes, including me,” Hegar wrote in the Austin American-Statesman in 2017. “But I have a significant problem when large corporations and their lobbyists try to manipulate the tax system to lower their property taxes … Dark store theory is corporate welfare of a particularly ugly kind.”

Born of the post-recession retail apocalypse and spread by a cottage industry of “no-win, no-fee” tax consultants, dark store theory could foreshadow an even larger threat to local finances—a weakening of the basic social contract underpinning the property-tax apparatus that keeps cities and towns afloat. And here’s the rub: The ruthless logic helping these brick-and-mortar giants dodge their taxes might make a lot of sense.


Jason Williams, the assessor for the city of West Allis, Wisconsin, pressed flat a stack of PowerPoint print-outs against the trunk of his black Impala. We were standing in the giant moat of parking surrounding a Walmart Supercenter in the neighboring community of Greenfield. It stands next to a smaller big-box store, now subdivided into a non-denominational church and a thrift shop. This second property used to be the Walmart in town, before it became one of many empty shells the discount giant has sloughed off in the past decade as it has upgraded to its preferred, more gigantic model.

Williams chose this spot because this reptilian skin-shedding of big-box chain retailers helps frame dark store theory. It’s about the second lives of these oversize retail spaces, and about how much their outer casings are worth—when they’re vacant, and when they’re occupied. In other words, it’s about what counts as market value.

In the biting Wisconsin wind, Williams showed me a photo of the Sam’s Club in West Allis that he battled last year, and which he is now fighting again. (He didn’t want to visit this store in person with me because of the legal dispute.) As of 2017, the city had valued that store at $11 million, a number based on what the property had cost the owner to buy back in 2001, plus the added value of renovations over the years, adjusted at the going rate of depreciation. These are the methods he uses for every type of property, Williams told me, following those rules in his handbooks. “I’m not saying my numbers are necessarily the best ones out there,” Williams told me. “But they’re what I get when I run the math.”

But a tax agent from Chicago filed an appeal on behalf of Sam’s Club, arguing that the store was worth just $7.2 million, based on the low sales costs of a handful of second-generation big-box locations scattered around the state. The comparables that the agent provided included three former locations of the now-defunct electronics retailer American TV, an old Lowe’s, a former Target, and a former Walmart (actually, the same property in Greenfield Williams and I were standing in front of now). All of them sold for between $2 million and $4.5 million between 2012 and 2014: much lower sales prices than what their original owners had purchased them for years before. Some had second-generation occupants; some were bank-owned.

Big-box defenders argue that the “sales approach” (what someone recently paid for a similar property) is the best way to determine a building’s value. And in many states, including Wisconsin, sales are supposed to be the first variable in the valuation equation, whenever possible. Therefore, retailers’ lawyers say, a Sam’s Club valued at $11 million is overvalued, because its neighbors are selling for a third of that amount. In a real estate market that’s oversaturated with retail closures, bankruptcies, and vacancies galore, they insist, no one wants a big box store anymore. If you just look at the sales prices, they are often not wrong.

But assessors say that this misses what gives a functional property its value. Location is everything in real estate—there may be a good reasons why some of those stores went dark. Besides, the market for big boxes is too small to rely solely on sales; construction costs and property incomes also have to be taken into account. And many of these vacant and depreciated properties would need major repairs to achieve a state of “highest and best use,” which would be a more appropriate comparison for an open and fully updated store.

Besides, there’s something plainly illogical about the argument. “Do you want me to value your house as if it’s closed and boarded up?” said Krause.

So, case closed? Not quite. The vast majority of dark store appeals brought by big boxes—many of which ask for write-downs of 50 percent—are being settled for a lower valuation, probably in the ballpark of 85 percent, Thomas Hamilton, a professor of real estate at Roosevelt University, told me. Many assessors strive to be conservative in their estimates, so they usually try to find a happy medium when taxpayers protest. Plus, it’s costly to litigate.

Yet dark store theory appeals have been incessant, and small towns feel outgunned. Retailers come back, year after year, insisting on paying less, even after they’ve been granted reductions. For them, every demand brings the opportunity for a lower valuation, and there’s no real financial downside, with outside tax lawyers working for contingency fees. “They’re forcing the hands of municipalities to go to court, and then they keep bargaining it down,” said Krause, the assessor in Wauwatosa. Repeat appeals from Lowe’s, Best Buy, Meijer, and others dating back to 2013 have cost her city $2.4 million in legal fees.

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