Without Dissent, Wisconsin Supreme Court Strikes Blow to ‘Dark Store’ Tax Theory

The Wisconsin Supreme Court sided with the City of Delavan on Thursday, deciding that its property tax assessments of a Lowe’s Home Improvement store were correct after the store had sued in an attempt to get a lower assessment, and therefore pay less property tax.

In Lowe’s v. Delavan, the hardware store was challenging city assessments of its property in 2016 and 2017. The store, located in a “thriving retail area,” according to the city, was assessed at $8,922,300 in both years by Delavan’s assessor. The outside assessor Lowe’s hired valued the property at $4,600,000, nearly 50% less than the city’s value. An outside assessor hired by the city valued the property even higher than the city’s original assessment at $9,200,000.

The store appealed the assessment at the local board of review and then filed a lawsuit in Walworth County Circuit Court. The circuit court sided with the city, so Lowe’s appealed the decision. The appeals court also sided with the city, so Lowe’s appealed to the Wisconsin Supreme Court.

At issue in the lawsuit were the stores used by each assessor to come up with the market value. When a store hasn’t been sold recently, which in this case hadn’t happened because the property had operated as a Lowe’s since it was constructed in 2005, assessors find comparable stores in the area to come up with a value.

The assessor hired by Lowe’s had almost entirely used stores that were “dark,” vacant or considered distressed.

Three of the stores had once been locations of the now-defunct American TV and Appliance and had been sold after the business closed through a receivership, meaning they were forced sales to cover the business’ debts and therefore the circuit court considered them not comparable to the Lowe’s. Another of the properties was a closed former K-Mart that had been vacant for four years prior to its sale, classifying it officially as a dark store. The K-Mart was also not in a busy retail area like the Delavan location. The assessor also used a Walmart in Brown Deer that had initially been a Lowe’s but closed after just five years in that location and sat vacant for two years before the purchase by Walmart. The final store used was a shuttered Target in Kenosha that had gone dark after sitting vacant for four years.

The city’s outside expert, on the other hand, used comparison properties that had all been sold while still occupied.

In a majority decision written by Justice Ann Walsh Bradley and joined by Justices Rebecca Dallet, Brian Hagedorn, Jill Karofsky, Patience Roggensack and Annette Ziegler, the court decided that both the circuit court and appeals court were correct when they decided that the Lowe’s assessor’s comparison properties weren’t adequate for assessing the property’s value. Justice Rebecca Bradley wrote a concurring opinion that Roggensack joined.

“Generally, a site that can sustain a business is more valuable than one that cannot,” Walsh Bradley wrote in the majority opinion. “The highest and best use of a store in an area that is conducive to business (and is in fact operating as a business) is different from the highest and best use of a property that contains a failed big-box store. Lowe’s’ argument treats these different things alike, which is not [an] “apples to apples” comparison …”