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Members,
Welcome back to another Weekly Insider.
This week will bring you news from the Capitol and around Wisconsin, your weekly poll responses, and an all new Weekly Member Poll.
We hope you find this weekly report to be interesting and informative. If there are ever any issues that you would like to see included, or if you ever have any questions or comments, please reach out to us at info@wptonline.org.
Have a great week,
WPT, Inc.
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The Milwaukee Journal Sentinel last week featured an exposé: A Northwoods Wisconsin school board member started asking questions. Then things got ugly.
The story shines light on Christina Reinert, who joined the Mercer School Board in 2016, and raising red flags about salaries, contracts, and finances. For example, Reinert inquired about a local "community recreation fund," which served the school district of about 151 students. The fund went from around $3,000 per year, to $200,000 over the past seven years.
According to the article, things got so ugly that the school board threatened legal action against anybody who forwarded an e-mail that was critical of the school district.
Thanks to Reinert sounding the alarm to the Department of Public Instruction, that agency found last month that the Mercer School District inappropriately spent $175,000 from the aforementioned fund, and issued a revenue limit adjustment in the same amount. That meant that the district needed to slash its spending by $175,000 to balance their budget.
The type of cronyism and blatant impropriety outlined in the article is startling. And what's worse is that a duly-elected school board member was stopped at every turn when trying to speak out for the interests of students and local taxpayers.
If you ever suspect scenarios like this are becoming reality in your local community, we urge you to reach out to us. You certainly will not be alone in your efforts to oppose this type of misbehavior.
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Last week, WPT featured a guest column regarding Dark Stores, authored by Corydon Fish, Director of Tax, Transportation and Legal Affairs at Wisconsin Manufacturers & Commerce.
This week, we will hear from Deputy Executive Director of the League of Wisconsin Municipalities, Curt Witynski, and learn more about his organization's views.
The opinions expressed within guest columns do not necessarily reflect the views of WPT, Inc., as our organization continues to evaluate various proposals related to "dark stores."
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DARK STORE AND WALGREENS TAX LOOPHOLES
Less Taxes for some mean more for Homeowners
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By Curt Witynski, Deputy Director, League of Wisconsin Municipalities
A growing number of commercial and manufacturing properties are using property tax avoidance strategies known as the Dark Store and
Walgreens loopholes to push their fair share of property taxes onto homeowners and small businesses.
Any property owner not using these loopholes, which includes all homeowners, will pay more in property taxes to make up for the tax reductions obtained by the commercial and manufacturing properties using them.
Local governments in Wisconsin rely on property taxes to fund essential services like police, fire, roads and libraries. Local officials statewide are concerned about more of the property tax burden being shifted onto homeowners. Homeowners should not and cannot bear more of the cost of local services.
The Dark Store Loophole Explained
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Tax attorneys for big box stores like Target, Walmart, Meijer, Menards, and Lowes, use the dark store loophole to argue that the value of a new store in a busy commercial district should be based on the value of former retail properties in unpopular areas that are now closed and vacant. While courts in Wisconsin have not yet endorsed the dark store theory, that has not stopped tax attorneys for big box stores from using the argument before assessors in Wisconsin.
A real example
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A
Lowe's store in Wauwatosa is assessed for taxes at $13.6 million. Lowe's claims the property is only worth $7.1 million even though it spent over $16 million to acquire the land and build the structure. Lowe's argues that the land alone was devalued from $9 million to $3 million once the big box store was constructed and insists that only vacant dark stores can be used as comparable properties.
Police Calls to Big Box Stores.
Big box retail stores demand more police service than any other commercial properties and certainly way more than residential properties. Municipal police are frequently called to respond to thefts and other issues at big box stores. As big box stores fight to avoid paying their fair share of taxes, they use more of the services for which property taxes pay. Meanwhile, more of the burden of paying for police services gets shifted to homeowners, the class of property using such services the least.
The Walgreens Loophole Explained
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Assessors are required to assess property for property tax purposes at its fair market value. The best evidence of fair market value is usually a recent arms-length sale price of that property. The Wisconsin Supreme Court created an odd exception to this rule for certain leased commercial and manufacturing properties in a 2008 decision involving a Walgreens store. The exception requires assessors to value property that is tied up in a long term lease to a single business at half of the recent sale price of that property. For example, Walgreens and CVS typically lease their store space. The buildings leased by Walgreens and CVS are popular investment properties and typically sell for $4 million or more depending on their location. Yet, these properties are required to be assessed for property tax purposes at $2 million.
A real example:
The Court of Appeals found that a CVS property in Appleton should be valued at $1.8 million, much less than the City's $4.4 million assessment, even though the higher value was based on an actual recent sale price of the property.
No other taxpayers receive similar special treatment. A homeowner, for example, could not claim that the assessed value of his or her home should be half the amount for which it was purchased. Courts in other states have rejected Walgreens low value argument, concluding instead that a recent sale price is the best indicator of value.
Walgreens and CVS consistently use the
recent sale price of the property as the value of the real estate for all other purposes, including federal income tax forms. They claim the lower value only for property tax purposes.
Other commercial and manufacturing businesses that lease their space are beginning to use the same arguments to lower their property tax bills.
The Tax Shift to residential
. The dark store loophole and Walgreen's decision shift more of the burden of paying for essential local services from commercial and manufacturing to residential taxpayers. By any measure, homeowners already bear a disproportionate share of the statewide property tax burden in Wisconsin. Homeowners pay 68% of property taxes in Wisconsin. This is much higher than in most other states. Homeowners in Minnesota, for example, pay only 50% of the property tax levy. In 1970, homeowners in Wisconsin also paid only 50% of the tax levy.
The League of Wisconsin Municipalities analyzed the potential impact on residential property owners in twelve communities if the dark store and Walgreens tax loopholes were fully implemented and resulted in a 50% reduction in the value of certain commercial and manufacturing properties. We found that homeowners in those twelve communities would on average see their property taxes increase by 8%.
Legislative Fix Needed
. The Wisconsin Legislature can close the loopholes - fix the problem - and stop the tax shift to homeowners by passing legislation in 2019. The Legislature had an opportunity to close the loopholes in 2018, but failed to do so. The dark store and Walgreens reversal bills had remarkably broad support among legislators of both parties. The dark store bill had 84 co-sponsors (63% of the Legislature). The Walgreen's bill had 61 co-sponsors (46% of the Legislature). If the bills had been scheduled for votes, they would have passed both houses by huge margins.
Unfortunately, the Wisconsin Manufacturers & Commerce Association (WMC) and businesses using the loopholes convinced legislative leaders to kill the legislation.
WMC claims that cities and villages promote legislation closing the dark store and Walgreens tax loopholes so they can collect more property taxes. WMC contends local officials "have a self-interest in assessing property higher because it means they can collect more taxes."
This statement reveals a fundamental misunderstanding about property taxes in Wisconsin. Higher assessments do not equate to more tax revenue. Assessments determine who pays what portion of the tax levy, not the size of the levy. State law strictly limits a community's ability to increase property tax collections. Even if the assessed value of a property were increased, the total amount of taxes collected by the community stays nearly frozen form one year to the next under state law. A community will collect the same amount of taxes regardless of whether the dark store and Walgreens loopholes are closed, unless it significantly cuts spending on essential services, like police and fire or street maintenance.
Closing the loopholes avoids shifting even more of the property tax burden from commercial and manufacturing property to homeowners and small businesses. Local officials are fighting for a fair and equitable property tax system, not more tax dollars.
The League of Wisconsin Municipalities will work with legislators again next session to try to restore common sense and fairness to the property tax assessment process. Maybe next year homeowners will win.
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NEWS FROM THE CAPITOL
AND AROUND WISCONSIN
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WORKER'S COMP RATE DECLINES FOR THIRD CONSECUTIVE YEAR
The Wisconsin Commissioner of Insurance on Monday gave the green light for an overall 6.03% rate decrease for Worker's Compensation premiums for businesses, effective on October 1st of this year. This is the third straight year that the rates have dropped, following an 8.46% decline in 2017, and a 3.19% decline in 2016. This year's reduction is expected to net around $134 million in savings for employers statewide.
"This is just another indicator that Wisconsin's investments in its employees' occupational safety is paying off," Governor Walker said. "Not only are employers seeing reduced premiums, but efforts to reduce workplace injuries to help achieve a healthy labor force, resulting in a decline in rates for the third consecutive year."
Worker's Compensation rates are adjusted yearly by a committee of actuaries from the Wisconsin Compensation Rating Bureau. The committee studies the prior losses (claims) of hundreds of categories and professions throughout the state's employment pool and submits a rate recommendation to the Office of the Commissioner of Insurance, which has final approval over the rates.
GOV. WALKER ANNOUNCES PAYMENTS TO LOCAL GOVERNMENTS
Governor Walker last week announced that local governments have received their quarterly payments totaling $145,978,567 for General Transportation Aids, Connecting Highway Aids, and Expressway Policing Aids from the Wisconsin Department of Transportation. In 2018, local governments will receive $40 million more than last year in General Transportation Aids.
July payments to Wisconsin's 1,925 local units of government include: $142,706,717 in General Transportation Aids; $3,015,875 to 117 municipalities entitled to receive Connecting Highway Grants; and $255,975 to Milwaukee County for Expressway Policing Aids.
General Transportation Aids are used to help defray costs of constructing, maintaining, and operating roads and streets under local jurisdiction. Connecting Highway Aids reimburse municipalities for maintenance and traffic control of certain highways within municipalities. Expressway Policing Aids to Milwaukee County Sheriff Department is used to patrol Milwaukee Expressways.
Communities also receive state transportation fund revenues for public transit, elderly and disabled transportation, and airport and harbor development. Local communities may also receive state and federal funds for specific highway and bridge construction projects.
Find out how much your local government received by clicking
here.
FOXCONN ANNOUNCES HUB IN EAU CLAIRE
Foxconn announced its plans today to buy an office building in downtown Eau Claire and create a "technology hub" that will bring about 150 jobs to the region. Last month, the plan also announced that it will be opening a similar hub in downtown Green Bay, as well as the purchase of a large office building in downtown Milwaukee which will serve as the company's North American headquarters.
The company has agreed to purchase a property in downtown Eau Claire known as "The Grand," which is a six-story commercial office space, nearing 90-years-old. Additionally, Foxconn has purchased 15,000 square feet of space in the Haymarket Landing development in downtown Eay Claire.
EMBATTLED UW-OSHKOSH FOUNDATION WANTS STATE TO PICK UP TAB ON LOANS AND LEGAL FEES
After filing bankruptcy in 2016, and currently involved in a pro-longed lawsuit over financial impropriety, the UW-Oshkosh Foundation is asking a federal court to decide whether Wisconsin taxpayers should pick up the $18.5 million tab for their debts and legal fees.
The debts are from biodigesters, a new Alumni Welcome and Conference Center, and the building of the Best Western Premier Waterfront Hotel and Convention Center.
The Wisconsin Department of Justice has also filed felony charges against former UW-Oshkosh Chancellor Richard Wells, and former Vice Chancellor Tom Sonnleitner, who both signed "comfort letter," which promised that banks would cover defaulted loans by the foundation, and illegally transferring $11 million dollars from the University to the foundation.
WI REVENUE SECRETARY: ONLINE SALES TAX TO BEGIN OCTOBER 1ST
If you buy things on the internet, beginning on October 1st, everything you purchase will be subject to sales tax, according to Department of Revenue Secretary Richard Chandler.
Chandler told WJFW News 12 last week that he thinks implementing the new tax is important for small businesses, "merchants who have been frustrated for a number of years that out-of-state companies have been selling here without collecting sales tax."
A ruling by the U.S. Supreme Court last month allowed for states to begin charging sales tax on items purchased online, even if the company has no physical presence in the state. The expected revenues for Wisconsin are $187 million per year, which Gov. Walker has said will be offset by tax cuts elsewhere.
AMAZON CELEBRATES MORE THAN 4,000 FULL-TIME EMPLOYEES IN WISCONSIN
According to a news release from Amazon, the company this year will surpass the milestone of 4,000 full-time employees in Wisconsin, with all skill levels, from human resources, engineers, facility technicians, and entry-level positions and on-the-job training.
"Since our first day at the Kenosha facility, we've received amazing support from the community and we couldn't be prouder to be part of the Wisconsin family," said Mark Stewart, Amazon's Vice President of North America Customer Fulfillment. "We're honored that our team of more than 4,000 in the Badger State have picked Amazon as their employer of choice and innovate on behalf of the customer, raise the bar on our operational excellence, and provide outstanding customer experiences- every day."
Not only does Amazon operate a 1-million-square-foot fulfillment center in Kenosha, which employs 1,000 full-time individuals, but they have also opened a Prime Now hub, an Amazon Fresh site, a sortation center, and delivery station. The company said that the average hourly wage for their employers is $14.50 before overtime.
ABSENTEE VOTING FOR AUG. 14TH PRIMARY HAS BEGUN
Absentee ballots are available and voting is underway for the August 14th partisan primary election in the State of Wisconsin, with many municipalities offering in-person absentee voting during regular business hours, according to the Wisconsin Elections Commission.
"Voters who wish to cash an absentee ballot in person should contact their municipal clerk's office for information about what days and hours they are open for voting," said Meagan Wolfe, the commission's interim administrator. "If you're municipal clerk doesn't have regular hours scheduled, you can make an appointment to vote absentee."
You may also visit myvote.wi.gov to request an absentee ballot by mail. Wisconsin does not set a specific start date for in-person absentee voting, so clerk's have a large amount of discretion in deciding where and when to offer the service.
The August 14th primary will chose the major party candidates for the November election, including Governor, Lieutenant Governor, Secretary of State, State Treasurer, U.S. Senator, U.S. Representatives, State Senators, and State Representatives. Some counties are also holding elections for various offices.
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WEEKLY MEMBER POLL RESULTS
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After reading the guest column from Wisconsin Manufacturers & Commerce, do you agree or disagree with what was stated?
can politicians get any lower
Makes it sound like our representatives are corrupt. Let's get their names so we can vote them out of office.
When is it going to stop that local governments and cities use tax payers for lobbyists. Cities have a spending problem,they think money grows on trees, so always looking to raise your property taxes
I would love to have a discussion with the author to learn more. .
It was shameful the WPT allowed this massively biased column to be printed in their newsletter.
The nonpartisan Legislative Fiscal Bureau said that the revenues from the new internet sales tax could mean a $52 reduction in income taxes for the average Wisconsin earner.
Given the two options; if you were a lawmaker, would you vote to:
Its about time we fix our roads and bridges, because the longer we delay repairs the more it will cost
Make sure this is well announced. And do it for a year or two. $52 isn't much for the average earner... in a year....
use concrete taxes rec'd toward roads, not an estimate the may not be even close to what's received
Schools are dying on the vine.
Wisconsin's 25 largest cities alone have $2.25 billion in unfunded liabilities, in the form of health insurance for retirees. Is this a problem in your community?
it is easy for politicians to spend the futures money not yet generated
Reduce these unbelievable benefits for government employees-they should be treated like employees in the private sector
Our local governments should show more fiscal responsibility in planning for the retirement of its workers. Looking to how to finance it and how to save money on it. Some municipalities have been successful, others should copy their solutions.
The retirement for government employees is too liberal.
Its about time that employees pay their share.
They should not have health insurance for retirees.. and I think its time that the retirement age should change to 62 for everyone. Not this 50 years.
Not in my city but in a neighboring city.
You made the commitment. Now explain why you have to take care of it.
phase out the retiree benefits - worked for LaCrosse
Sen. Tammy Baldwin has introduced a "Made in America" bill, which would require the government to use only American-made steel and iron for infrastructure projects. After reading the article: Good bill or bad bill?
If you happened upon a $50 bill on the sidewalk today, and there was nobody around to claim it, what would you do with the money? Save it? Buy something? Leave it there? Pass it on?
Donate it to a non profit that pays their board/ execs ZERO salary. Such as neurofibromatosis first (nffirst [dot] org)
I'd like to think if I picked it up I'd put it in the plate at church
I'd probably pick it up and give it to local charity like a food pantry or something similar
buy
This has happened to me in the past and I clipped it on the closest car windshield or put it in the closest door. Usually it belongs to whoever s home or car is close by.
I don't think I'd leave it, I'd drop it off at the Food Pantry.
Donate it to a good charity.
Ask the adjacent property owner if anyone reported losing some money.
Pass it on to a charity or a first responders is a good one. Or even give it to someone who is having a hard time paying their bills.
Take my wife out to dinner
Buy something or donate to the food pantry.
I'd see if I could find the owner. If it goes unclaimed, I'd give it to a charity.
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It is the policy of WPT, Inc. to publish all comments that are submitted by members each week, often including broad differences of opinion within the weekly responses. Our organization enjoys our responsibility for fostering dialogue within our membership, but does not take responsibility for the individual views and opinions expressed herein.
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