ELLSWORTH — Walmart is making a push in communities around the state, including Ellsworth and Bangor, to lower the property valuation of its stores by millions of dollars.
The requests, if granted, could cost host communities hundreds of thousands in one-time retroactive reimbursements and future tax revenue.
In many towns, Walmart is arguing that, despite its thriving business, its stores should be assessed as though they were vacant.
“Essentially they’re saying, ‘We should be assessed based on a shuttered, empty, gargantuan warehouse,’” said Noel Madore, an accountant with a Farmington-based tax firm.
Assessors in some states, including Wisconsin, Texas and Michigan, are buying the argument.
In 2017, Walmart requested tax relief in at least eight of the Maine communities in which it operates, according to data collected by The Ellsworth American.
That year, Walmart attorneys filed requests for more than $41 million in tax abatements around the state, not including millions more in appeals for several of its Sam’s Club locations.
If Walmart were to succeed in all of its appeals, the reductions would result in more than $600,000 in yearly property tax revenue losses to local governments, as well as hundreds of thousands of dollars in one-time payouts.
In many cases, Walmarts are basing their requests on the “dark store” theory of taxation, which asserts in part that big-box retail locations are so specially built that once they leave them, the properties won’t be worth much to anyone else.
“Unlike many other commercial properties, free-standing ‘big-box’ stores … are not constructed for the purpose of thereafter selling or leasing the property in the marketplace,” an assessor hired by Lowe’s argued in a Michigan courtroom in 2014. Basically, the stores are meant to be built and then discarded, not repurposed.
But another reason Walmart may have trouble selling its old locations is that it intentionally limits what the properties can be used for in the future, said Ellsworth Assessor Larry Gardner in an email. If Walmart ever moves out of its Ellsworth location, said Gardner, it “will restrict (with deed covenants) their property from ever being used by any other business that might even remotely compete with them.”
Some former big-box stores do sell for far less than what they were assessed at when in operation, said Gardner. Example: the $3.2-million sale of the former Lowe’s building to The Jackson Laboratory in 2012. But in that case the store was going out of business, not moving, Gardner said.
Walmart is not the only corporation using the dark store approach, said John O’Donnell, whose accounting firm works with 35 towns in Maine, including Farmington.
“It’s coming to your town soon, as they say. Walmart, CVS, Home Depot, Kohls, Walgreens,” O’Donnell said. “The dark store method is being embraced.”
Appealing their valuations has become an annual event for many retailers, O’Donnell said.
“They appeal most, if not all, of their assessments in every town every year. It’s an indication that this is a business strategy more than it is an indication that all of these assessed values are excessive.”
“This is absolutely crippling and crushing these towns and their tax base,” O’Donnell said. “Once they’ve gotten some traction with it, with some court decisions, the favorable decisions have led to a domino effect in them trying to appeal all their stores and huge reductions in taxable value.”
In Ellsworth, Walmart’s lawyers filed an abatement request for the 2017 tax year asking that the property value of the store be cut in half, from $20.1 million to $10 million, which also would have halved its $361,000 yearly tax bill.
Gardner denied the request after Walmart failed to provide more information (such as an appraisal) by an extended deadline. Under Maine law, assessors can deny an abatement if a company fails to provide requested information.
Although Walmart has little legal standing to do so, Gardner said, it has decided for the first time to take the case further, to the State Board of Property Tax Review.
“They’ll take anything,” Gardner said. Getting a town into mediation or a settlement may be enough to get the value lowered by even a small percentage, which could mean thousands of dollars in yearly savings for Walmart.
And abatements are requested after taxes are paid for the year, meaning if the requests are successful towns will not only take a hit in the future but also have to take money out of town coffers to pay the bill.
The fight also can cost towns thousands of dollars in legal fees if they have to hire outside attorneys, as well as extensive staff time.
“When assessors are faced with this type of challenge it’s formidable, it’s daunting,” O’Donnell said. “Their resources are almost always limited. You’ve got the company going after them year after year after year with all its resources.”
That’s what is happening in Scarborough, where the town is fighting a $10-million abatement request filed in 2017 that would cut by roughly 50 percent the value of the $20-million Walmart Supercenter there.
If Walmart prevails, it would result in a loss of roughly $160,000 in yearly tax revenue going forward, as well as one-time payment of the same amount.
“I think there’s a pattern here that they use,” said Scarborough’s Town Assessor David Bouffard. Walmart has not used the dark store defense, simply saying they believe the property is overvalued, without giving much reasoning, Bouffard said.
After he rejected the request and a local Board of Appeals backed him up, Walmart’s lawyers took the case to the Maine State Board of Property Tax Review, which has ordered Scarborough to attend mediation with the Walmart’s lawyers.
That could mean hiring outside legal help, Bouffard said, at the expense of the taxpayers, and may ultimately result in less revenue for the town going forward.
In addition, it could mean reaching into town coffers to pay back what Walmart says it is owed.
Walmart also recently filed another request appealing its 2018 taxes, said Bouffard, requesting a $9.1-million reduction.
“I have not replied yet,” Bouffard said. “But it’s kind of hard to deal with that when the other one is still ongoing.”
The requests come even after several stores around the state — including in Ellsworth — have spent millions on renovations, retrofitting stores for online grocery pickup and other amenities.
“They’ve been quite successful here in Windham, to the point where they’ve been making improvements,” said Town Assessor Elisa Trepanier.
Despite the improvements, Walmart requested to have its Windham location’s valuation lowered from $14 million to $10 million in 2017. Trepanier rejected the request after Walmart refused to provide more information beyond a one-page form. Walmart didn’t pursue it further.
“They did not apply this year, much to my relief,” she said.
Ellsworth Assessor Gardner, who has been in the business for more than 30 years, said he believes Maine’s laws are strong enough to withstand big-box store appeals.
But, he added, Walmart has been “shot gunning appeals” nationwide in recent years, “shooting out appeals to see what sticks.” And that could be enough.
“Just the threat of going to court may intimidate an assessor to lower the value,” Gardner said.
And the dark store approach has still been successful in many areas of the country.
“I’m flabbergasted at how successful they’ve been in the courts,” O’Donnell said. “It makes me really uncomfortable.”