The impact of ‘dark stores’ on Escanaba and Houghton, what lawmakers are doing to help

UPPER MICHIGAN, Mich. (WLUC) - The city of Escanaba is still feeling the financial burden from a six-year battle with Menard’s.

The company challenged the tax assessment the city made and eventually won the case in February of last year.

The Escanaba City Manager says the long battle cost the city significantly.

“That involved a decade of tax appeals and ultimately of tax refunds that needed to be made,” Escanaba City Manager James McNeil said. “That case, I believe the city spent almost a million dollars of legal fees with that case and when it was all said and done there probably $800,000 of taxes and interest owed back to Menard’s.”

The City of Houghton is facing its own issues with Walmart. The retailer has filed a tax appeal to lower the value of its Houghton store.

The appeal was originally filed in 2018 but has been put on hold due to different events affecting the county. If Walmart wins, its future property taxes would be reduced, and the city would owe the retailer a $1.2 million refund.

The Chair of the Houghton County Board Tom Tikkanen explains what that would mean for you.

“This is greatly going to impact the City of Houghton and the Portage Township schools,” Tikkanen said. “It also affects county services; it effects our ability to provide needed protection and maintenance programs throughout the county.”

Walmart said in a statement to TV6 that: “Walmart is a responsible taxpayer, and we believe our property should be valued just like every other business. Michigan law requires property tax bills for every property owner in the state to reflect the value of the land, brick and mortar and not the value of the business operations, which generate other taxes like sales tax and employment tax. We’ve simply asked that the law be applied to Walmart in the same way as all other businesses.”

Houghton City Manager Eric Waara says Walmart’s decision to continue its lawsuit is counterproductive.

“When you look at who hurts the most, this hurts their customers, this is going to affect their customer base and employees,” Waara said. “Honestly, the fact that this law in its current state exists; it should have been fixed decades ago and other states figured out how to do it. Michigan needs to.”

Tikkanen says it is not just Houghton County residents who should be concerned about this case.

“This serves as notice that this effort could be repeated wherever there are Walmart superstores or locations in Michigan,” Tikkanen said.

While the battle is ongoing for the City of Houghton, state Sen. Ed McBroom introduced legislation to help address the issue. The proposed bills would make tax assessment issues of a certain threshold go before circuit court instead of the tax tribunal.

“We would much be better served on these complicated property tax issues if they were to go before somebody with a lot more experience on judicial matters who can understand those and bring in the right people to testify and weigh those issues more properly,” McBroom said.

The legislation is still in the early phases and would need to be approved by the state Senate and House and signed by the governor before taking effect.

We have also investigated the dark store loophole in Wisconsin. The League of Wisconsin Municipalities has declared the loophole as “dead” in their state. It’s because of a state Supreme Court opinion issued last month. The court unanimously sided with the city of Delavan over Lowe’s.

While the ruling does not stop retailers from filing dark store lawsuits, it’s been seen as encouraging to Wisconsin municipalities.

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