Obscene obsolescence tactics


Source: emptykingdom.com

Source: emptykingdom.com

There has been a more or less covert move afoot for the past few years by some big box retailers in Michigan and in Ohio to have their stores declared functionally obsolete by the state tax tribunal in order to have their property taxes reduced on appeal.  The argument that is playing out appears to be the following:

  • Our store is so large and specifically designed for our own needs, that the building is now functionally obsolete because no one else would ever want to move into it and/or renovate it.
Apparently this tactic has been used for old facilities, new facilities, and recently remodeled/renovated facilities. As an urban planner and citizen, all I can say is this is an obscene tactic. Unfortunately, the state tax tribunal is buying this sob story.  As a result, a number of communities and school systems throughout the state have been forced to refund previously paid tax revenues, putting some property tax sensitive entities like Downtown Development Authorities (DDA) and Tax Increment Finance (TIF) Districts in financial peril. Here is a weblink to a story on this trend from Oxford, Michigan. Many additional examples can be found on the internet by searching under a store’s name and tax appeal or tax tribunal.
How a rational mind can consider a new or newly remodeled store functionally obsolete is beyond me. Furthermore, this tactic opens up a whole series of questions for the business and planning communities, such as:
  • If these stores are immediately obsolete, they why should the community approve the construction of them in the first place? Sure seems contrary to the special use permit criteria that the store “will not be detrimental to the economic welfare of surrounding properties or the community” found in most zoning codes.
  • If these stores are so obsolete, then why do so many of them become re-occupied after a store closes or moves?
  • Are these store requiring non-compete clauses when marketing the sites? If so, then it is their own damn fault the stores are not re-occupied quickly.
  • If these stores are so obsolete as soon as they are built, then perhaps retailers should rethink their strategies and company shareholders should question management’s wisdom of opening dysfunctional buildings.
Let’s not beat around the bush here – it is painfully obvious that the whole purpose for this tactic is to increase profits by reducing taxes, not because the stores are truly functionally obsolete. That argument might carry weight for a 20+ year old facility or for an anti-tax zealot, but not for newly opened and renovated sites. That’s just a bunch of hogwash.
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5 Responses to Obscene obsolescence tactics

  1. basil berchekas jr says:

    I would agree…I could conceivably see that stunt played out in other states as well…must be the state and local version of the oil industry subsidies that “Congress” just cannot bring themselves to address (plus the prohibition on government negotiating prices for the “elderly” drug prescription program now a part of Medicare…a “built in” deficit policy…)

    Like

  2. Terry Nobbe says:

    Rick: I’ve read somewhere that attorneys are the types of folks that dream up these types of events. It wouldn’t surprise me at all.

    Like

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