News 8 Investigates: Failed Retail: The Price we Pay

UPDATE:

In an earlier version of this story, News 8 said there had not been any bills drafted to address the Dark Store Loophole within the last year. There is a bill in the Wisconsin State Senate and Assembly that were introduced, but they have not received a public hearing. Legislators wanted to include a provision to close the loophole in Governor Evers’ state budget, but it was not included because of a party-line vote, with Republicans voting against it.

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City of La Crosse Assessor Pat Burns has been battling with retail chains that are trying to lower the property taxes they pay.

“They have expenses, and they need to reduce their expenses in some fashion and sometimes they use the tax part of it to do so.”

Burns assesses how much money a store will pay per year.

“We feel we’ve done our research and our values are appropriate.”

But companies are using empty stores to fight the amount that Burns has calculated to lower the taxes they pay the city, In what’s called the ‘Dark Store Loophole.’

Retail spaces are taxed, in part, by how much they make. Bigger stores that make more money will pay higher taxes than smaller stores that don’t make as many sales.

So if a big box store builds brand-new building in La Crosse, the city could say that the company will have to pay 10 million dollars in taxes after investigating how much revenue the property will make.

But the company can point to an empty building, that has no revenue and is taxed at 100,000 dollars and argue that their new store should be taxed lower, because a building of the same size and structure isn’t taxed as high.

“I’ve had tax reps give me sales from where they tore the building down.”

Burns estimates that in the last five years the city of La Crosse has missed out on $1 million in revenue from companies adjusting how much they pay.

He says that in some cases it’s justified, like at the Valley View Mall when it loses a store and is seeing less revenue.

“It depends on the property.”

But it’s not just empty properties costing the city revenue. Walgreens are creating a statewide issue.

“I don’t think those are fair.”

In what’s called the ‘Walgreens Loophole’. Stores that lease their land can say that their buildings shouldn’t be taxed based on sales revenue, but instead just at their building’s value.

For example a Walgreens in town makes enough revenue to be taxed at $5 million after the city does it’s investigation.

But the store can argue that their building isn’t big enough to be taxed at 5 million, and that the physical building is only worth 2 million in taxes.

“Reduce their expenses to create more profitability for the shareholders. Pretty much what it downs to.”

Burns estimates that the city misses out on 75,000 dollars per year on each local Walgreens store with this loophole. With four stores in La Crosse, that adds up to 300,000 dollars a year in tax revenue.

“This shifts the burden on the tax payers.”

City Planner Jason Gilman says that when the city loses on these tax disputes, the residents pay the price.

“When you have to spread that burden out, a large majority of people who have to pay that burden are tax payers.”

Cities expect a certain amount of revenue to set their budgets. When that revenue goes away from a store lowering their taxes, residents in part will have to cover that deficit.

“This is the city’s actual operation costs that are footed by the actual tax payers.”

That’s money that could be spent on parts of the city that are in high demand.

“The need for social services, decaying road repair, we know people won’t put up with potholes.”

So until someone buys them, or they’re demolished, these reminders of failed retail are here to stay, and their impact on the city isn’t going anywhere either.

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