How Big-Box Retailers Weaponize Old Stores

Tucked away on the northern edge of Michigan’s rugged Upper Peninsula, Sault Ste. Marie is bracing for the battle of its life. The tourist town is heading to court in early 2017 to fight Walmart Stores, which seeks to cut $286,000 off its annual property tax bill on a local store. Using what critics call the “dark store loophole,” Walmart is following in the footsteps of big-box merchants including Lowe’s and Target by arguing that its bustling store should be assigned about the same value for tax purposes as one that’s been vacant for years, hundreds of miles away. The financially strapped town of 14,000 faces legal bills of about $100,000 to take on the retailing giant. The cost of the battle that started in 2014 already has forced local authorities to slash budgets for everything from senior meals and the local animal shelter to police and fire pensions. Now its leaders have decided they’ve been pushed around long enough. “It is like David and Goliath,” says Jim German, the county administrator in Chippewa County, which includes Sault Ste. Marie. “We are going to give it our best shot, because it isn’t fair.” The city has tried for years to keep the dispute out of court to avoid the legal fees, agreeing with Walmart in 2014 and 2015 to lower the store’s local taxes by a total of $103,000. This year, Walmart has gone too far, German says. It wants its store, currently assessed at $63 a square foot, to be valued at $16 a square foot based on sales of similar-size vacant properties across the state—less than what some local small businesses pay. Chippewa County is hedging its bets in case of a loss, freezing salaries for all nonunion employees. Read more at Bloomberg.