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State board ruling on 'dark-store theory' could cost counties millions

Walmart dark store theory
Posted at 10:01 PM, Jul 02, 2019

OVERLAND PARK, Kan. — Johnson County is winless in five tries when it comes to arguing that it has accurately valued big box store properties as far back at 2016.

The Kansas Board of Tax Appeals sided with Walmart, agreeing that the county overvalued its properties by $60 million over two years.

Ed Eilert, chair of the Johnson County Board of Commissioners, has been sounding the alarm about what that means for entities that rely on property tax.

“The dark store theory began as 'my property should be valued as though I have no customers and it’s just a building, an empty building,'” he said.

The net result has been a sharp decrease in property-value assessments from the state board and, ultimately, could leave counties on the hook for millions in tax-revenue refunds.

Johnson County Community College is preparing for the worst.

“There’s a lot to unpack with this," JCCC Executive Vice President of Finance and Administrative Services Barbara Larson said. 'We know that this recent ruling was one step in a much longer process.”

The state board also has sided with CVS, Walgreen's, Bass Pro Shops and Target in Johnson County.

Eilert said they are appealing those decisions.

Wyandotte County is going through a similar dispute with Hollywood Casino.

County assessors valued the property at $157 million, but the state board ruled that it's worth $102 million.

That means the county would have to refund $10 million to the casino for taxes paid from 2016 to 2018.

The Bonner Springs School District. which the casino helps support, could be forced to repay the $600,000 to the casino.

Wyandotte County has appealed the case to the Kansas Supreme Court.

"The recent decisions by the Kansas Board of Tax Appeals are undermining the entire tax base," Mike Taylor of the Unified Government of Wyandotte County said in a statement. "While no one likes paying taxes, everyone likes good police and fire protection, good streets and well-funded schools. BOTA's use of the dark store theory threatens all of those basic services."

Both counties expressed frustration with the state board and the methodology it's using to make these rulings, adding that the tax burden likely will be shifted to homeowners and small-business owners if their appeals are not successful.