Ruling on Meijer tax assessment could have sweeping impact
INDIANAPOLIS (AP) - A ruling in an Indianapolis dispute involving a big-box retailer could have sweeping consequences for Indiana communities already strapped for cash because of declining tax revenue.
The Indiana Board of Tax Review ruled in December that an Indianapolis Meijer store should have been assessed in 2012 at the equivalent of $30 per square foot, not the $83 per square foot assigned by Marion County.
The decision could leave Marion County on the hook for a $2.4 million refund to Meijer and could set the stage for other retailers to make similar challenges to their tax assessments, the Indianapolis Business Journal reported (http://bit.ly/1Cgu3XA ).
"Every large manufacturing facility will be valued as a flea market" if the ruling stands, said Mark GiaQuinta of Haller & Colvin LLP in Fort Wayne, which represents the Allen County Assessor's Office.
The value of retail real estate is based on the current condition of the business, but the case raises questions about what effect, if any, the sales that occur there should have on the value. Big-box chains are pushing to have their buildings compared to others that have been vacated and sold, an approach known as the "dark store theory."
In the Meijer case, the Michigan-based company's appraiser compared the store on Indianapolis' northeast side to a former Lowe's in Anderson and closed Wal-Mart stores in Lafayette, Clarksville and Bloomington.
"Sure, the fully functional store's worth more than the empty store, but the additional worth is in the business being conducted there. It's not from the real estate," said Stephen Paul, a partner at Faegre Baker Daniels who represented Meijer before the state review board.
Terry McAbee, director of commercial and industrial assessments for Hamilton County, said he's seen other retail businesses make similar arguments and even use vacant buildings as comparable values on new construction.
"Their logic is, a brand-new building is automatically obsolete as soon as they build it," McAbee said.
McAbee said most appraisers don't adhere to that thinking.
"If they went in to refinance a loan, I really doubt they're going to use the dark-box theory to value that property," McAbee said.
GiaQuinta said he hopes counties will pool their resources and take the Marion County case or a similar one involving a Kohl's in Howard County to the Indiana Supreme Court.
"The impact is serious," GiaQuinta said. "There should be very little delay in getting this matter resolved once and for all."
If the tax board's ruling stands, Meijer will save more than $400,000 a year on its tax bill.
Marion County Assessor Joseph O'Connor said he hasn't decided yet whether to appeal to the Indiana Tax Court.
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Information from: Indianapolis Business Journal, http://www.ibj.com