A state board has dismissed Walmart’s bid to dodge hundreds of thousands of dollars in property taxes for its Thomaston store, in a case that tested an argument by big-box chains that claim the value of their stores should be treated as a building for sale, not an active business.
The Maine Board of Property Tax Review case covered Walmart’s appeals regarding the 2017 and 2018 valuations of its Thomaston store. Many other similar appeals – for Walmart and other chains, as well as stores in Thomaston and other cities – are still in the council’s long queue.
Maine Monitor report in February found that major retail chains have used the so-called “black store” theory to try to reduce their tax liabilities by about $16 million statewide since 2015.
In the 2017-18 case, as in those that have remained pending every year since, Walmart challenged Thomaston’s assessment that its Supercenter was worth about $15.8 million for property tax purposes. The company’s own appraisal put the store’s value at over $7.4 million.
If upheld by the state, the lower assessment would have required Thomaston to repay Walmart about $170,000 in taxes for each year affected, or about 2% of the city’s total property tax revenue, according to its financial records. The retail giant’s total revenue in fiscal year 2022 was $572 billion.
“Walmart is a responsible taxpayer, and our property should be valued like everyone else’s,” Marci Burks, director of general affairs at Walmart, said in an email. “When we receive a property tax bill, it should reflect the value of the land, brick and mortar rather than the value of our business operations. We disagree with the decision and are considering our options, including an appeal.
the tax review board includes lawyers, engineers, appraisers, real estate agents and members of the public; one of each joins a panel to hear each case. Walmart’s calls were one of the first cases they’ve heard since the pandemic; New staff members who started at the end of this year, funded by the latest state budget, are responsible for accelerating the council’s work.
Board members declined to comment on Walmart’s decision, with a written order still pending.
Value as a building or business
Hearings lasted over three days beginning in August and continuing this week. Brandishing financial charts on billboards comparing various area Walmarts, attorneys for the company and the city of Thomaston sifted through thousands of pages of documents, interviewed consultants on different versions of the valuation of the store and haggled over acceptable valuation methods.
Walmart’s lawyers have tried to downplay the relevance in the case of the “black store theory,” which they say is also sometimes referred to as the “second-generation theory.”
“It reads that what we’re asking the board to do today is assume that Walmart has decided to close its store, and what is the value of that property after that,” the attorney said. of Walmart, James Ryan, in August. “That’s a sweeping generalization.”
Thomaston’s attorney, Paul Gibbons, called Walmart’s methods of valuing the store illegal and unconstitutional. “They might not call it the ‘black store theory,'” he said in August, “but I’m going to show what they’re doing is just plain wrong.”
Ryan argued that the valuation of the Thomaston store should be based solely on the property’s potential or lack thereof to sell to a similar new occupant, such as BJ’s or Target. It was irrelevant, he said, whether the building currently housed a “thriving business”.
“This is not a case where we should be finding use value,” Ryan said Thursday. “It should be assessed in (in terms of) what concerns players in the real estate market.”
Asked by the board about the deed restrictions Walmart often puts in place to prevent its properties from being used by similar chains, Walmart evaluator Greg Curtis said these are usually enforced. when the building is sold, and therefore are not in place now, and were not part of his analysis.
Ryan drew skepticism from the board, saying Thomaston had a seasonal economy and other drawbacks that made it unattractive to other big-box chains. He argued that this inflicted “functional obsolescence” on the Thomaston Walmart, reducing its value almost as soon as it was built.
This is a fundamental principle of the “black store theory”. Gibbons dismissed it as totally unreasonable.
“They say when they built this building, they lost $10 million three years later because the revenue wouldn’t be enough to support it. It’s an incredible thing to accept,” Gibbons said Thursday. “Reasonable people wouldn’t accept on their face that a company as sophisticated as Walmart would build something and lose $10 million three years later.”
“I just think it’s crazy”
In relatively brief deliberations on Thursday, board members determined that Walmart had failed to meet its burden of proof to show that Thomaston’s valuation of the store was “patently wrong,” which is the legal standard. in cases like this.
“If you’re building a store and it’s for your business practices, that doesn’t mean you don’t owe money on the things you’ve built,” said Amy Saxton, board member, agent Harpswell Estate, during deliberations. “I was really bothered by the functional obsolescence (idea) too because I just think it’s crazy. The fact that you can do retail here is because of its location, which isn’t a saturated market, which isn’t full of closed places – it’s a vibrant community area.
Board member Kerry Leichtman, the Camden and Rockport assessor, did not find Walmart’s argument credible in part because it misrepresented Thomaston, both in calling the town of Knox County, part of northern Maine, and comparing it to the Bangor metropolitan area.
“It sets the stage for a depressed economic environment that doesn’t exist in the Thomaston area,” Leichtman said. “I think of everything we’ve heard…that if Walmart were to leave this building, we’d probably have a target in Thomaston in a few months and they’d be happy to pay.”
Other board members agreed that the extent to which Walmart claimed the store’s value had fallen – a reduction of almost 60% – was “hard to swallow”, as the audience member put it. Stan Pieuch.
The group voted unanimously to dismiss Walmart’s 2017 and 2018 appeals. A written order is pending. But so are many cases almost identical to this one, or based on similar concepts, which now face an uncertain fate in light of the potential precedent created this week.
Thomaston evaluator Dave Martucci said the move is just one step in a long ongoing fight.
“The impact is that we (the city) haven’t had to pay back tax money since 2017. We still have 2019, 2020, 2021, 2022 – and most likely by then it will be 2023 and 2024 – to face Martucci said after the hearing, “I guess if they (Walmart) want to move forward they’ll have to do some new valuations, but I don’t know.”
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