Michael Amezquita Chief Appraiser Bexar Appraisal District

Transcription

1 Michael Amezquita Chief Appraiser Bexar Appraisal District

2 Dark Store theory assumes that big box stores are built-to-suit for a specific user and are not meant to be sold or leased to others. The owners assert that there is no value for the building to anyone other than the current owner of the property. Thus, comparable properties used for valuation on the appraisal roll are only those which were vacant at the time of sale.

3

4 Lowe s and other retailers think so.

5 Dark Store valuation methodology began to take hold in the early 2000s during the economic downturn in states like Michigan and Indiana where stores were closed due to economic conditions. Appraisal experts contended that the true value of the property can only be achieved if a store is considered vacant as they are specially built for a specific purpose to a specific user. Retailers typically restrict properties against competitive uses when they do sell effectively changing the Highest and Best Use of the property. Courts began accepting the arguments of retailers in litigation since 2010 in Michigan. Aggressive appeals were undertaken in other states to proliferate the arguments of the retailers in other states.

6 Retailers have begun filing appeals citing the dark store methodology as reasons for over-appraisal by central appraisal districts. Many retail property owners filed lawsuits challenging Appraisal Review Board hearing results based on dark store methodology. Many CADs have settled due to the immense cost of litigation. Bexar AD has arbitrated two year s worth of Lowe s litigation through appellant requested non-binding arbitration. The arbitrators overwhelmingly ruled in the CAD s favor yet Lowe s has chosen to continue their lawsuit.

7 A matter of fairness it is important to recognize the appraisal principle of Highest and Best Use and we believe that one must consider the HBU when it is consistent with the current use when valuing commercial property. Equal and Uniform Appraisal provisions within the Texas Property Tax Code enable a significant shift in property tax burden from commercial property owners to homeowners under current law.

8 Tax Code Sections 41.43(b-3) and (a-3) provide that the ARB and court will grant relief if the property value exceeds the MEDIAN VALUE of comparable properties appropriately adjusted. (although there is no legal definition of appropriate adjustment ) Those who pursue litigation often create a downward spiral in value as the median value decreases due to Equal and Uniform appeals. This shifts the tax burden disproportionately to other property types and ultimately homeowners.

9 If appellants are successful in their appeal and lower their values significantly using the dark store theory, other properties in the same category can use the reduced value of those comparables in their Equal and Uniform appeal. This results in eroding the appraisal roll. Not just retail properties are affected by dark store methodology as apartment complexes and offices have also tried similar appeals tactics in other jurisdictions.

10 School District Value and Tax Dollar Loss Scenario The proliferation of the Dark Store theory and Equal and Uniform appeal provisions could create a significant loss in value and ultimately tax revenue for school districts over time. Equal and Uniform appeal provisions will extend the effect of dark store appeals beyond retail and could easily affect all commercial properties. If allowed to proliferate, it could mean that schools locally could potentially lose as much as $33.5 billion in taxable value and $420 million in tax revenue in Bexar County alone. Bexar County school district levy is roughly 10% of the total school district levy in Texas which could mean that the Dark Store theory could cost the state of Texas nearly $4.2 billion each year or $8.4 billion for a biennial budget.

11 School District Tax Dollar Losses The following considers a 60% value reduction due to appeal at $1.25 school tax rate assuming a 5% growth in market value:

12 Community College Districts Will Not Be Immune to Value and Tax Dollar Losses The following example demonstrates the impact to the Alamo Community College District if the same 60% value reduction is experienced due to appeal at $0.15 Community College District tax rate assuming 5% annual growth in market value: The ACCD could lose over $33.5 Billion in taxable value and $50 million in tax revenue if Dark Store Theory proliferates to all commercial property.

13 HB 27 was filed in the 85th regular session of the legislature on behalf of the Comptroller to cut off dark store appeals but special interests watered it down and effectively killed the bill. The Lowe s case in Bexar County is expected to be scheduled for March It is likely that the litigation will go through the appeals process, so a resolution is not seen as imminent. If the legal precedent is set that allows for the use of dark store methodology and subsequent Equal and Uniform appeal tactics are successful, there will be an unprecedented erosion of the tax base and shift of the property tax burden to homeowners and further restricting access to revenue by local governments.

14 Watch Boxed In A documentary produced by Dwight Brady and students at Northern Michigan University: