32 Colorado Counties To Reduce Tax Bill
by Robert Davis
Walmart Stores, Inc., the parent company of retail behemoth Walmart, is suing half the counties in Colorado to lower its property tax bills based on a shady legal idea known simply as the “Dark Store Theory.”
The theory says that the property value of a closed down big-box retailer store should be tied to the traditional real estate sales approach, where valuation is determined by the stores surrounding it. Under this theory, a Walmart store that is listed for sale for $11 million while a Hobby Lobby nearby is on the market for $5 million would be overvalued.
But assessors argue that this theory completely misconstrues what gives a property its value: location. Walmart has a long history of opening stores in areas that are strategically important to the company, whether it provides logistical efficiency or a larger labor pool. This strategy makes the company’s property more valuable because of the web-like network that comes with it.
Walmart contends that its business practices should not weigh into the valuation of its stores, and that argument has gained little traction recently. In July, Colorado’s Board of Equalization (BOE), the agency that sets property tax values across the state, denied Walmart’s property tax complaint. This rejection prompted the retailer to issue its lawsuits in county courts.
In August, a judge in Pulaski County, Arkansas, rebuked Walmart’s argument that the company should pay fewer property taxes because their stores are retrofitted to the company’s specific needs and, therefore, cannot fetch a fair price on the open market.
The case in Pulaski County concerned a 2017 tax assessment of $145 million between Walmart, Sam’s Club, and Neighborhood Market. Walmart tried to reduce the total assessed property value to $93.8 million, and then slashed the value to $74.3 million, a 48 percent drop.
Opponents argue that if Walmart prevails in this argument, then the value of an empty store would be set by a vacant lot in a different state.
Walmart’s Littleton-based attorney Brian Huebsch tried to find a way around this impasse by arguing that Colorado county assessors did not account for the store’s 24-hour operability into their valuations. This causes the company to replace items such as cash registers and furniture used in daily operations more frequently than other businesses.
Huebsch declined requests to comment on this story, saying that he doesn’t comment on open cases.
The lawsuit also argues that Walmart is experiencing difficulty reselling these items because other retailers are closing, thereby reducing demand and value of the goods.
La Plata County’s assessor Carrie Woodson told The Durango Herald that she and her staff have not seen evidence of Walmart reselling its property, despite monitoring the company’s operations for several years. In fact, Woodson asserts, she believes Walmart is actually just throwing away their damaged products, making them fully exposed to being taxed.
Over $4.5 million in school district funding was at stake in the Pulaski case while only $20,000 is at stake in La Plata.
In Arapahoe County, Walmart sought to recoup nearly $29 million in property taxes on eight stores located in Aurora, Centennial, and Englewood. The company argued that “economic depression” of its furniture and point of sale systems (POS) warranted a 25 percent reduction in its tax value. Arapahoe County ended up settling the case with Walmart for a 12.8 percent reduction in its tax assessment, essentially handing the company $14 million.
Other assessors, both in and out of Colorado, are saying that this tactic is a symptom of a larger disease spreading throughout corporate America. Namely, that megacorporations are attempting to use their financial might to beat small counties into submission in order to lower their property taxes.
One study by CityLab found that over 230 similar property tax claims have been filed across the U.S. since 2015, most of which ask for a 50 percent reduction in tax assessments. However, a majority of the claims were settled for 15 percent reductions because counties simply cannot afford the cost of litigating the claims for as long as corporations can.
Smaller counties typically feel the brunt of this argument because of their fiscal constraints. However, all 32 Colorado counties currently have plans to defend each other when the lawsuits are brought before a judge.
Walmart brought in over $514 billion in total revenue, and employed over 2.2 million people across the country in 2019. The company earned a gross profit of $126 billion from its revenue. This represents a two-percent increase in profit from 2018. Walmart’s gross profits have increased every year since 1995.