A recent article in Education Week has caught the attention of many local educators. The article, available here, discusses a national trend in property tax assessment appeals that can have devastating effects on school district budgets.

The issue is a recent development in appraisal practice and assessment appeals known as the “dark store theory.” Briefly, many national retailers are seeking aggressive reductions in their property tax bills by arguing that their heavily visited stores should be valued as if they were vacant. This theory posits that big box stores are difficult to sell because they are designed for a specific use and the market for such properties is severely constrained. Interestingly, one factor that they often fail to mention is the common practice of inserting deed restrictions on these properties that prevent competitors who need a similar type of property from operating a business at that location.

Michigan, Indiana and Wisconsin have seen the largest number of these cases. For many smaller school districts, several big box retail properties can represent a significant portion of the tax base. And, as the Education Week article points out, when they seek to lower their assessments by as much as one half and obtain refunds of taxes already paid, these districts can face both budget shortfalls and a tax burden shift onto homeowners.

A few PTAB appeals based on the dark store theory have been filed recently in northeastern Illinois. As we monitor these appeals, school districts should be especially vigilant for new notices from the Board of Review, especially if they involve retail stores seeking large property tax refunds.