‘Dark Store’ loophole costing UP communities millions

UPPER MICHIGAN, Mich. (WLUC) - Many Upper Michigan communities are rural and lack some of the resources enjoyed by larger, more urban areas. That’s where big box stores can help; providing goods small shops may be unable to offer. But lately, these stores may be the reason your taxes are increasing or your local services are decreasing.

“We lost $88 million worth of value that we can’t tax anymore and every year that increases,” Marquette Township Supervisor Lyn Durant said.

$88,740,000. That’s how much the Michigan tax tribunal granted big box stores in Marquette Township in taxable value reductions and refunds on their properties between 2009 and 2021.

It’s called the ‘dark store’ property tax loophole. Marquette County Administrator Scott Erbisch explains how it works.

“What they’ve done is found a loophole at the tax tribunal that has allowed them to significantly reduce their property taxes,” Erbisch said. “They say that it’s a brick-and-mortar building and it should not fall under the current methodologies for assessing a value to those properties.”

As a result, Marquette Township’s supervisor says many of its operating funds lost significant money in 2021 alone.

“The school losses locally were $1.6 million, and township lost almost $700,000,” Durant said. “The library lost $71,000 and the Iron Ore Heritage Trail had to give back $14,000.”

Included in the township’s nearly $700,000 loss in 2021: $386,200 for its operating fund, $212,700 for its fire department and $90,500 for its roads. All that money went back to big box stores like Lowes, Menard’s, Kohl’s and Meijer, cutting property taxes for some by up to two-thirds.

Durant says this is something that is actively raising township resident’s taxes.

“For any of the services that the township provides, now the homeowners have to pay more to get those services,” Durant said. “They don’t have the help of the big box stores.”

Some municipalities like Escanaba and Houghton spend hundreds of thousands fighting the stores.

Durant says while these lawsuits are helpful in raising awareness, the solution lays somewhere else.

“It really needs to be solved legislatively; it has got to be solved in Lansing. Because we feel that the tribunal is usurping the tax laws something must change in the tax laws or tribunals makeup,” Durant said.

In response to the financial loss dark stores have caused U.P. communities, state Senator Ed McBroom has introduced a set of bills that would change who oversees tax dispute cases.

“Senator McBroom is proposing two bills right now, SB19 and SB20, that would move a lot of the reviews on the request for the reduce in taxes to the local courts,” Erbisch said.

Both Erbisch and Durant say that until a legislative solution is found, U.P. communities like Marquette Township, Escanaba and now Houghton will continue to lose hundreds of thousands to big box stores.

Copyright 2023 WLUC. All rights reserved.