County looks to back townships in big box tax battle

MARQUETTE – The Marquette County Board is expected to contribute to the combined legal defense of Marquette and Breitung townships in their state appellate court battle to preserve hundreds of thousands of dollars in tax revenue derived annually from “big box” retailers including Lowe’s Home Improvement Warehouse and Home Depot.

At issue is how Michigan Tax Tribunal decisions have allowed the big retailers to assess the true cash value of their stores. Tribunal decisions in favor of the companies have cost communities lost tax revenue across Michigan.

Bills were recently introduced in the state Legislature by Rep. John Kivela, D-Marquette, and Sen. Tom Casperson, R-Escanaba to try to address the issue going forward. The townships’ case before the Michigan Court of Appeals is expected to be decided over the next few months.

Meanwhile, the county board voted unanimously Tuesday to have county administrative staff explore how much financial aid the county might contribute to the townships’ cause. The panel will revisit the issue at its meeting at 6 p.m. next Tuesday.

Marquette Township Supervisor Dennis Liimatta asked the board to consider helping the 4,000-resident township fund more than $200,000 the community has paid so far in required appraisal and legal fees over the past two years. A similar request was expected to be made of the Dickinson County Board by Breitung Township.

“I think it’s an important issue for Marquette County and the other 82 (Michigan) counties and we ought to be looking to have our administrator and staff review this request and try to get involved in helping them out,” said Marquette County Board Chairman Gerald Corkin.

The county board has previously supported the townships with a resolution and will write letters backing the legislation. The panel has previously provided $1,000 to other townships defending challenges before the Michigan Tax Tribunal.

“This is extreme circumstances I think above and beyond what we’ve dealt with in the past,” Commissioner Deborah Pellow said.

Last year, Lowe’s Home Improvement Warehouse in Marquette Township, appealed its property tax assessments for 2010, 2011 and 2012 to the tax tribunal. A hearing was held in November with tribunal Judge Victoria L. Enyart ruling in favor of Lowe’s. The decision dropped the 2012 true cash value for the Lowe’s store from $10.4 million to $3.5 million.

Enyart ordered Marquette Township to refund to Lowe’s from schools, libraries and other local taxing units $138,409 in property tax revenue for 2010 and $146,832 for 2011 -in addition to $8,933 in interest- and taxes and interest totaling $152,902 for 2012.

Marquette Township petitioned its case to the Michigan Court of Appeals in January. The township’s case was consolidated with another from Breitung Township, which had a similar ruling filed against it involving a Home Depot store.

The tax tribunal has decided in those two cases -and several others involving other big box retailers across the state- that the operating stores must be valued as though they are vacant and for sale or so-called “dark stores,” which have been converted to some other use.

That idea was based on examples from southeast Michigan provided by appraisers indicating that when big box stores are sold they are converted to another use, demolished or investors will spend considerable money reconfiguring the space.

Township attorneys argued the stores should be valued considering existing use, present economic income and the land and structures at the time of tax assessment.

“When you look at a store that’s built, that cost over $9 million to build between the lot and the physical structure, and then we’re supposed to take and value that at $3 million immediately and moving forward, it’s ludicrous,” Liimatta said. “I think from a commonsense approach, it doesn’t pass the smell test. It stinks. Nobody could argue that case. I think we’ll have a great chance or we wouldn’t have pursued it. But in the meantime, it’s been very costly.”

Since the Lowe’s ruling, several other retailers in Marquette Township including Wal-Mart, Gander Mountain, Best Buy, Target, Menards, Pier1/Michaels, Kohls, Probuild, GFS and 41 Lumber have all filed similar appeals to the tribunal.

If the township loses its court case, and assessed values of the other stores are also dropped to $25 per square foot, a total of $641,579 in tax revenue would be lost. Of that amount, $109,520 goes to Marquette County operations, transit and special programs. Marquette Township would lose $71,470 in operating revenue and another $36,427 for fire protection.

Liimatta said many other communities across the state have stipulated to the lower assessments, rather than fight the tribunal decisions at the appellate level. Liimatta said if the townships lose their case it will be cost prohibitive to try to appeal to the state Supreme Court.

Commissioner Steven Pence said he thinks if the townships’ prevail, the big box retailers will likely try to appeal to the higher court. Pence asked if any other governmental units locally or statewide would likely contribute funds to the townships’ legal defense.

“I’m an optimist so I would say you know that would be great, but the reality of it is, I don’t feel very positive about that to be very honest with you,” Liimatta said.

Legal briefs supporting the townships’ position have been submitted to the appellate court by the Michigan Association of Counties, Michigan Townships Association and the Michigan Municipal League. The Michigan Chamber of Commerce and Michigan Retailers Association oppose the pending legislation. If the bills are passed, it is unclear whether any retroactive compensation for prior tax tribunal decisions could be reimbursed.

Commissioner Paul Arsenault asked whether the two townships considered new legal counsel, having lost their cases before the tax tribunal using the same attorneys. Liimatta said numerous cases across the state, regardless of the law firm, were unsuccessful before the tax tribunal on the big box issue.

Corkin asked about potential school district contributions.

“From our initial presentation to the schools about what this could mean to them, they have the feeling that if they don’t get it (tax revenue) through the local areas that it will just be made up for out of general fund revenues from the state of Michigan,” Liimatta said.

Liimatta said that viewpoint is “shortsighted” because the issue faces communities statewide.

“Where will the funds come from? Eventually, it’s going to dry up,” Liimatta said. “So at this point, they’re not interested in participating financially, but I don’t think they really realize what we’re facing here.”

John Pepin can be reached at 906-228-2500, ext. 206.