The Johnson County Appraiser’s Office and Johnson County Commission Chair Ed Eilert are pitting homeowners against big box retailers. Local media, so far, is only printing some of the related facts.
The Shawnee Mission Post reports that Johnson County officials are sounding “the alarm,” and The Kansas City Star writes homeowners “lose” if retailers win appeals on their property tax valuations. Both publications leave a lot on the cutting room floor in their lopsided tales about dark store theory.
The publications suggest retailers like Target and Walmart are asking for special treatment, when in reality, they’re using the existing property tax appeals process seeking to have their properties evaluated according to Kansas law. According to Linda Terrill, a tax attorney, nearly every big box store in Johnson County is appealing its 2016 assessment.
Assessed values for the 57 Johnson County big box stores larger than 40,000-square-feet increased from more than $400 million in 2015 to more than $742 million in 2016, an 85 percent increase in a single year. For example, the 10 Johnson County Walmart stores saw their valuations increase from $10 million to $22 million in a single year.
Appealing their property tax valuations is the legal right of all property owners, including retailers. The Kansas Board of Tax Appeals has already sided with Target stores in Sedgwick County, and BOTA ruled Targets in Johnson County 2016 were also over-assessed in 2016.
As if the county is entitled to tax dollars regardless of how fairly or lawfully the properties were assessed, Eilert rang alarm bells during a Shawnee Mission School Board meeting last week, the Star and Post report. Both leave the suspicious timing of the valuation spikes on the cutting room floor. Big box retailers saw massive assessment increases just as a state law, known as the property tax lid, was phased into effect. The lid created a ceiling for some property taxation. Schools and some functions of local government are exempt, but the lid limits how much local government can increase property taxes without seeking a ballot initiative. Local authorities were given an advance notice on when the lid would take effect. Increasing property valuations in the lead up to the lid raised the ceiling.
“I see a giant increase in value on big boxes right before the lid,” Terrill told a Senate committee during a hearing on Wednesday. “It could very well be unrelated. The facts seem to indicate that the push was the year prior to the lid.”
It begs the question: How was Johnson County government funding itself before instituting a change in the way big box retailers were valued? It appears neither the Star nor the Post bothered to ask.
Paul Welcome, the Johnson County Appraiser, told the Kansas City daily the jump in assessed valuations was the result of a 2015 study that examined rents on big box properties. Those rents were then applied to 2016 tax assessments. What prompted the study? The Star doesn’t say.
Now Eilert is attempting to pit homeowners against retailers, warning that if the county is forced to value big box retailers at the rate at which the building and real estate could be sold, homeowners will have to make up the difference with jacked up tax rates.
The Star and Post seem happy to parrot his scare tactics without including the rest of the story. Eilert told the Shawnee Mission School Board that if big box stores are successful in their appeals, the effect could ripple to all commercial properties slashing commercial valuations by 30 percent in the county.
“That’s a lot of money that’s not collected,” Eilert said. “And if it’s not collected from that class of property, who pays? All of us that are left, and that means primarily residential properties.”
The Star and Post don’t offer anything to indicate why a Mom and Pop ice cream store or other small Johnson County businesses would see 30 percent dips in their commercial property valuations. They also don’t mention that local governments aren’t entitled to that money if the businesses are overvalued.
Instead, they fear monger without mentioning that excessive property tax valuations are already baked into the price of every purchase consumers make in big box stores in Johnson County. Consumers already pay sales taxes on everything they buy in a big box store as well, and commercial businesses are already taxed on their earnings. Basing their property valuations on the success of the business inside a store effectively allows the county to take a bite of a business’s earnings through property taxes.
Though the debate over “dark store theory” appraisals is raging in other parts of the country, Johnson County may be ground zero. Terrill, who successfully represented those Target stores in Sedgwick County lives in Johnson County. Welcome, Johnson County’s appraiser, spearheaded an International Association of Assessment Officer‘s task force on valuing big box retailers.
A senior director at Walmart told a Kansas Senate committee on Wednesday that the property valuation hikes at the 10 Walmarts in Johnson County are unusual.
“We haven’t seen those types of increases anywhere else in Kansas or in the rest of the country,” he said.
Now that the other side of the story is available, media and city and school officials will have to decide whether they’ll be duped about dark store theory or report both sides.