Milwaukee Biz Blog: Will 2019 deliver ‘dark store’ solutions?


Jeff Hoffman is a principal at Cushman & Wakefield | Boerke and a public member of the Legislative Study committee on Property Tax Assessment Practices. He is also on the Alliance’s policy board, infrastructure committee and board of directors. This blog originally ran in BizTimes Milwaukee. Click here to read it on

Milwaukee Biz Blog: Will 2019 deliver ‘dark store’ solutions?

Proposed fixed could benefit commercial property owners and communities

One of the few public policy ideas across Wisconsin that receives broad-based bipartisan support is to close the “dark store loophole.” Advisory referendums were held during the 2018 fall elections and slightly over 800,000 voters (80 percent) supported legislation intended to eliminate the perceived loophole.

Communities across the state continue to struggle with the implications of the onslaught of lawsuits that have been brought forward by a select group of commercial property owners. Vibrant big box stores are leveraging existing state law to protest the assessed value of their property and when successful, communities can experience significant deterioration of tax revenue from one (or several) of its largest property taxpayers. The problem is even more pronounced in slow/no growth communities who are constrained by property tax revenue caps that are tied to the rate of growth.

On the surface, it is very easy to see why 80 percent of the electorate supported the measure. While there is justifiable concern at the local level, fixes to the dark store problem continue to present challenges that go well beyond legislative solutions that were introduced in 2017.

What is the dark store problem?

The Wisconsin State Constitution enshrines that both residential and commercial properties must be assessed using the same standards which is known as the Uniformity Clause. Valuation standards are guided by the Markarian Approach Hierarchy which encompasses three methods to determine value; 1.) comparing the subject property to like kind properties that have sold or “comparables” 2.) investment income generating capabilities of the property; and 3.) replacement cost of the property to build.

The hierarchy upholds that in the absence of an actual sale of the property, comparables are usually the best evidence of what market value should be. While communities have labeled dark store a “loophole,” the assessment of large commercial properties can be rather difficult as many properties are special use in nature and unique to the current owner. There are limited comparables for an assessor to consider and the comparables usually sell at a much lower price compared to the cost to build. This challenge has lead to the wide gap in valuation opinions between taxpayer and community when a dispute arises.

Why were the 2017 bills not passed?

While the 2017 dark store bills attempted to codify what types of comparables could be used in the valuation process, establishing a market value for real estate is subjective by nature. Real estate professionals often have disagreements when considering what qualifies as a like kind comparable. Additionally, the aforementioned Uniformity Clause creates challenges in establishing comparable guidelines for a specific property class. The focus of the 2017 legislation was addressing the end symptom of the problem, the comparables, and not the root cause, which is the process.

What are proposed solutions?

In mid-2018, the Joint Legislative Council convened a study committee on property tax assessment consisting of 12 members (6 elected representatives and 6 public members) to review the dark store issue and create solutions for both the community and the taxpayer. Following a six-month hearing process and extensive negotiations, the committee’s final recommendations targeted the following three areas of the assessment process:

  • Better information– Assessors will be able to request a much more detailed list of supporting data from the taxpayer who has filed a protest. If the taxpayer does not make a good faith effort to provide the information, the taxpayer may lose their right to protest. The upfront sharing of more complete data will assist in preventing sue and settle cases that are not supported by market-based facts.
  • Get to court faster – Current law allows for a protest to be fought out in the courts for years. This creates uncertainty for both the community and the taxpayer. The recommendations of the committee will greatly reduce the amount of time needed to resolve a protest and can get cases in court within 90 days.
  • More support for communities – Until now, communities have been tasked with defending a challenge by themselves despite a county, school district and technical college that all participate in the stream of tax revenue. Smaller communities in particular can face prolonged litigation in which legal fees erode community budgets. Proposed legislation will now allow for all four stakeholders to immediately join forces to defend their assessment. This mechanism will deliver immediate financial wherewithal to smaller communities that do not have the resources to engage in a prolonged dispute.

There are few traditions that American’s value more than the ability to dispute what fair and equitable property taxation amounts to. We are hopeful that the proposed fixes to the assessment process will deliver much greater certainty to both the taxpayer and the community when legitimate tax disputes arise.

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