The practice of challenging big box retail property values on "Dark Store" assessment methodology has been a hot topic in many states, including Michigan, Indiana, Florida, North Carolina and Alabama. Now courts in Texas are being asked to rule on the merits of valuing the buildings for property taxes, as if they are vacant.
Retailers who protest their valuation based on the Dark Store strategy argue that large buildings, which are often 100,000+ square feet are worth much less than the construction cost because they are built for a specific purpose and user. They contend these types of stores should be valued based on comparable sales of dark stores of similar size and utility.
A lawsuit was filed by a national big box retailer against the Harris County Appraisal District in Houston. The company is seeking value reductions on five stores based on the Dark Store theory.
A separate action pending in San Antonio using the Dark Store argument is still in arbitration. The same retailer is challenging property values for ten stores in Bexar County. The stores are currently valued at $82 per square foot and the company is asking for a value reduction to $20 per square foot.
Officials in Hunt County settled with a national retailer over the 2014 valuation of a store in Greenville. "They used the Dark Store strategy, but we didn't go to trial," said Brent South, Hunt County's chief appraiser. The legal costs associated with taking the case to court would have been too high, South explained. Hunt County settled for a valuation that reduced the company's property taxes by about $23,000.
South, who is past president of the Texas Association of Appraisal Districts, said he believes Texas counties are working at a disadvantage in these cases. That's because if the county loses in court, they must pay the retailer's attorney fees plus 9.5% interest on the refunded taxes.
Appraisal officials in Taylor County (Abilene) also settled with a national company on two Dark Stores challenges, rather than going to court. "We're watching Harris and Bexar counties,” Taylor County chief appraiser Gary Earnest told The Dallas Morning News. "If other big box retailers adopt this, it will create a waterfall of events."