Marquette County faced with possible property tax hemorrhage

Feb 27, 2015

MARQUETTE, MI--   Randy Girard is frustrated.  

Over the past three years Marquette Township’s manager has fought the outpouring of property taxes—first a stream, now a potential deluge—from the Township’s coffers back to large retailers who say their property is worth a fraction of what the state declares. 

Big box stores like Wal-Mart, Target and Home Depot are latching onto a 2008 Tax Tribunal case out of Southeastern Michigan.  The defendants said they were forced out of business; the building would not be reused for the same purpose and had no value, so they should be taxed as though the property were shuttered and dark.

The “dark store” theory was true for that area, Girard says, but Tribunal Chief Judge Kimbal Smith decided to apply it in every case statewide, even in areas like Marquette Township, which is experiencing between 7 percent and 10 percent growth each year. 

The Township Lowe’s successfully appealed its tax bill to the Tribunal using the dark store theory.  Court appeals exhausted and hundreds of thousands of dollars later, the Township was ordered to pay three years’ worth of back taxes totaling more than $524,000. 

“That store was three years old at the time,” Girard says.  “It was $10 million when it was built; it was still occupied by Lowe’s; it was still functioning as a Lowe’s; it was still profitable as a Lowe’s.  But we had to tax it as though it was dark, obsolete and vacant.”

Lowe’s taxable value plummeted 60 percent, from $64 to $25 a square foot. 

Now 12 other big box stores in Marquette County have filed an appeal with the Tax Tribunal in an effort to lower their own taxes.  If the Tribunal rules in their favor—which looks likely—Marquette County millage-funded entities could have to repay an estimated $1.9 million through the 2015 tax year.  Those entities include 911, Search and Rescue, the Valenti Medical Care Facility, senior services, mental health services, and AMCAB, along with school districts, the Intermediate School District, and Marq-Tran. 

“The impact of this trickles down,” Girard says.  “People don’t realize that.  They look at it and say, ‘Okay, big deal.  The Township and the County are losing some taxes.’  Here’s what that means: what that means is that the County may not be able to continue to provide those services without additional millage from the residents because the businesses aren’t paying it.”

The County may not be able to continue to provide those services without additional millage from the residents because the businesses aren't paying it.

This month the Peter White Public Library announced it was cutting Sunday hours to save money.  It was ordered to pay nearly $31,000 in a tax refund to Duke Life Point, which appealed its tax assessment from 2013 and 2014. 

Marquette County Treasurer Anne Giroux says Marquette County’s potential payback share could be $100,000 a year, nullifying voters’ requests for services in specific sectors, like the new veterans millage that recently passed.

“They’re millages that the voters have approved and services that the voters feel strongly that they support, and those programs are going to be impacted by this, as well,” she says.

“This could spread like wildfire,” says 109th District State Representative John Kivela, who has been addressing the issue since he took office.  “And who’s left paying the tab?  Because at the end of the day we need police services, fire services, roads to be plowed.  We need those basic government services, and if these groups aren’t paying their share then it passes on to the residents, and I just find that simply unfair.”    

Kivela introduced legislation that closes the loophole in how assessed values are calculated in the last session but couldn’t get it through.  He says he’s since tweaked the bill and could introduce it as early as next week.  Would the legislation rectify the entire issue?  Probably not all at once.

“I think we have a good chance of getting some changes done, in what I would say [would be] about a 70 percent fix.” 

Girard says such legislation is critically needed because once Michigan property taxes are lowered and municipalities lose that money, they can’t get it back. 

“Proposal A does not allow for local governments to recoup any of this going forward,” he says, “because once that taxable value is reduced—as, for instance, Lowe’s at $25 a square foot will forever be $25 a square foot until the rate of inflation brings that back up.  So that’s never going to happen.”

One could argue businesses are just that: business.  They exist to make money and have an obligation to provide revenue for their stockholders.  Kivela admits that’s true, but says there’s another side to the coin.

Don't they have a responsibility to the community that they serve, to pay their fair share?

“Don’t they have a responsibility to the community that they serve, to pay their fair share?” he asks.  “Is that really the image that they want, that ‘Hey, we’re in your community.  We built this $12 million store but we found a way to get out of paying our taxes to your library, to your schools, to your Iron Ore Heritage Trail, to the Senior Center, to all those things, and so we exploited our opportunity.’ I just don’t buy into that.”

Girard says states like Indiana, Wisconsin, Tennessee and Alabama are beginning to see their own business entities take advantage of such tax loopholes, and while some legislators in Lansing believe the issue doesn’t affect them now, it will.  He believes it will steadily chip away at the revenue streams of local governments across Michigan. 

Anne Giroux says county-wide, big box and other large businesses are running to the Tax Tribunal for rebates, creating not only frustration, but alarm.

“The big fear is, how many others will follow suit?”