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Legislation tackles big-box retail valuation issue

February 11, 2015

Sen. Brandt Hershman, R-Buck Creek, is trying to advance legislation that would shore up county assessors' valuations of big-box stores in Indiana.

Hershman's legislation, which could see a committee vote next week, comes as assessors around the state worry that recent Indiana Board of Tax Review decisions in favor of Meijer and Kohl's will force them to slash the value of big-box stores during the upcoming spring assessment cycle.

One study commissioned by county officials estimates that if the tax review board's position on big-box valuation becomes the norm, the value of more than 17,000 commercial properties would drop by $3.5 billion and the property owners would save $120 million. However, those savings would be made up by shifting the tax burden to other types of tax payers. Less revenue would flow to local governments and tax-increment financing districts, according to an analysis by Indianapolis-based Policy Analytics.

"Assessors are going to be overwhelmed with appeals," Allen County Assessor Stacey O'Day said. "This is a good thing that the General Assembly has time to react to these two court cases and do what's best for the taxpayers of Indiana."

Assessors value retail real estate based on the current condition of the business, but major big-box chains are pushing to have their buildings compared to properties that have been vacated and sold. Appraisers across the country refer to the big-box chains’ approach as the “dark store theory.”

In a ruling on Meijer's appeal in Marion County, the tax review board cut the valuation of the Meijer on 96th Street by more than half. The board reached a similar decision on a Kohl's in Howard County.

In the Meijer case, the company’s appraiser compared the store at 8375 E. 96th St. to a former Lowe’s in Anderson and closed Wal-Mart stores in Lafayette, Clarksville and Bloomington.

Hershman's amendment, pending before the Senate Tax and Fiscal Policy Committee, which he chairs, stipulates that the value of certain “special purpose” properties must be based on the cost approach or the income-capitalization approach, whichever is greater, for the first seven assessment dates. Valuation would be based on the income approach after the first seven years.

Hershman wasn't available for comment Wednesday morning.

O'Day acknowledged that the Indiana Chamber of Commerce and Indiana Manufacturers Association have expressed concern about the legislation. She said it would likely lead to fairer valuations because they would be based on values that property owners are already claiming for federal income-tax purposes.

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