INDIANAPOLIS — County assessors, some spending hundreds of thousands of taxpayer dollars in defending their appraisals of big box stores, are being targeted by appeals from Meijer and Walgreens among others.
The legal challenges and different versions in determining commercial retail property values has led to Senate Bill 623 which would require one method, known as the cost approach, to be used by assessors when looking at an original owner’s property.
“Certain cases I know are upward of $700,000 to $800,000 invested in an appeal,” State Sen. Brian Buchanan, R-Lebanon, said. “The heart of this issue is really that the cost to defend an appeal is very great.”
Approximately 400 big-box appeals are pending with the Indiana Board of Tax Review, said Buchanan, one of the bill’s authors.
Previous appeals have been settled with a reduction of 35 percent to 40 percent of the original assessment, Buchanan told the Senate Tax and Fiscal Policy Committee. In turn, assessors say those reductions lower estimated revenues from property taxes.
Buchanan’s bill passed through the committee, 13-1, about two weeks after the Indiana Board of Tax Review ruled in favor of a Meijer store in Jeffersonville.
Generally, there are three approaches used in commercial property assessments. One version, the cost approach, estimates the value of land as being vacant and then adds the depreciated cost of improvements to set a total value. That approach would be mandated under Buchanan’s bill.
But in early February, the Indiana Board of Tax Review deemed a Clark County assessor’s cost approach to be unreliable and ruled in favor of Meijer, which offered other versions to the board. The ruling led to a property assessment reduction from $12 million to $7 million.
Opponents of the legislation say it discriminates against big box stores compared to other retail and commercial properties.
“Specifying a method of assessment uniquely to a specific group or type of property is not fair,” said Bill Waltz, Vice President of Taxation and Public Finance for the Indiana Chamber of Commerce.
In Buchanan’s Senate district, the Boone County assessor is awaiting a tax board decision concerning the appeal of a Meijer store. The county’s bill in defending the assessor is currently between $450,000 and $500,000, said Don Lamb, a member of the Boone County Council.
“Thankfully we’ve got a rainy day fund, but this is not something we can continue to do,” Lamb said.
Many appeals pursue the “dark store” theory in which big box owners say their buildings should be assessed not on current use but on what the site would be worth if it was vacant and up for sale to a secondary user.
“The valuation should be based on the ongoing use of the property, not what the future use of that building might be,” Allen County Assessor Stacey O’Day said.
In one Allen County appeal, the assessor’s office settled on a 20 percent reduction, costing $111,000 to defend, officials said.
Buchanan’s bill is the third in five years attempting to clarify valuations and is supported by AARP of Indiana, Indiana Farm Bureau and the Association of Indiana Counties.