Officials concerned about ‘dark store’ tax challenges

TOWN OF ULSTER, N.Y. >> Town Board members have added their voice of support for proposed state legislation that would restrict the ability of courts to reduce property assessments for new retail buildings.

Specifically, the law would bar the argument that property value can only be determined after the initial tenant — for whom a particular property has been built — leaves.

The request to block use of what some call the “Dark Store Theory” was made during a Town Board meeting on Thursday.

Supervisor James Quigley said the town could be susceptible to the significant reductions if local retailers were to seek such tax reductions.

“The Dark Store Theory is a theory of appraisal that applies to chain stores (such as) Home Depot, CVS, and the like where the appraisers go in and argue during a tax certiorari against the town that value of the property is basically (determined by) the second or third user,” he said. “Since these buildings have been custom built for Home Depot or CVS, the values are dramatically different, much, much lower.”

Officials wrote that the Dark Store Theory relies on the “use of shuttered, deed-restricted and abandoned properties that are in no way similar to lighted stores as comparable.”

Town Board members note that state assessors are required to use building costs, the amount of income generated and sales of similar buildings as the basis for determining value.

“The town has been the victim of frequent tax certiorari actions by the likes of Home Depot, Lowe’s and WalMart, and they have asked for values that are clearly off the ... bottom of the charts,” Quigley said.

Following the meeting, Quigley noted that example of buildings that were customized for former occupants are the former Central Hudson property off state Route 28 and the former IBM building at 901 Grant Avenue.

“(Commercial property owners) are trying to argue that the valuation basis is a shuttered state and not an active operating state as a Lowe’s or a Home Depot,” Quigley said.

“In other words, Home Depot goes out and the building goes dark,” he said. “The building becomes a cold, dark shell worth $20 a square foot, not the $100 a square foot that they’re paying on it.”

Officials in the resolution wrote they are seeking to avoid the same widespread property assessment reductions that have been experienced in Michigan, Indiana and Texas.