What the state Supreme Court ruling on 'dark stores' means for Superior

Shelley Nelson, Superior Telegram, Wis.
·2 min read
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Feb. 23—SUPERIOR — Twice since 2020, city officials have reduced the property valuation for the Walmart store on Tower Avenue to settle lawsuits filed by Walmart Real Estate Business Trust.

The lawsuits claimed the store's assessed values are excessive because the city's assessment doesn't consider similar vacant properties, so-called dark stores. The dark store theory is a tax avoidance strategy used by national big-box retail chains to argue their thriving businesses should be assessed for tax purposes as though they were a vacant or distressed property.

The Wisconsin Supreme Court rejected that theory in an opinion filed Feb. 16, giving local officials hope that similar lawsuits won't be forthcoming from Walmart.

Since 2018, Walmart Real Estate Business Trust has filed five separate lawsuits against Superior for the property valuation of its Superior store.

On Feb. 16, the high court found that Lowe's Home Centers LLC had not provided significant, contrary evidence to show the city of Delavan's assessment was excessive. Justice Ann Walsh Bradley delivered the majority opinion that the circuit court had rightfully concluded that Lowe's expert overused "dark" or "distressed" stores, contrary to the principals of the Property Assessment Manual, to determine comparable values for an operational store for which the company was challenging the assessment.

Superior City Attorney Frog Prell said he hopes the high court's decision sends the message that the dark store theory is not popular in Wisconsin and will reduce the number of lawsuits filed against the city in the future.

In November, the city settled the most recent lawsuits, filed in 2021 and 2022. The real estate arm of the retail giant was seeking a $5 million reduction of its $12.1 million valuation. The city agreed to reduce the assessment to $11,555,200 million, a reduction of $548,600, Prell said.

The $12.1 million valuation was the result of 2020 settlement when Walmart challenged its assessments for the years 2017, 2018 and 2019. Then, the retailer was assessed at just over $13 million, and the city agreed to reduce Walmart's assessment by $750,000 and refund about $6,000 in property taxes for each of those years.

The Wisconsin League of Wisconsin Municipalities, which participated in the case, said the decision is a victory for Wisconsin municipalities, as well as homeowners and small businesses that end up picking up the tab for the unfair tax breaks big box retailers get.

"We are very pleased with the court's decision in this case," said Claire Silverman, legal counsel for the league. "Large commercial retailers have engaged in concerted efforts, statewide and nationally, to challenge tax assessments using novel and aggressive theories such as the dark store theory ... It's incredibly expensive to litigate these cases and owners of big box commercial properties who assert these theories unsupported by the law, like dark store, are trying to pressure local governments to reduce their tax assessments."