"Dark Story Theory" and Why We Should Care
Why should we care about the "Dark Store Theory" and what our local governments are doing to prepare? In short the county has adopted a practice of including the success of the business into the value of their property. As the article eludes to, this would be the equivalent of the county appraising your property more because you are a wealthy celebrity. Simply put, since you already pay income taxes and businesses pay sales tax on that success many believe this is an inappropriate method of valuation as well as double taxation. For this reason, the big box stores have been successful in their appeals to this point. Why should we care? If they continue to be successful Overland Park can expect to have revenue cut by more than 30% and this is not including the possibility of having to refund the millions of dollars collected as double taxation in the last 3 years. As Overland Park City Manager Bill Ebel stated in a meeting with the city council, this would be "catastrophic".
This comes as Overland Park is already having to reach into its reserves just to fund basic services. This also comes at a time where one more year with the current economy and it will be the longest period without a recession. Overland Park has not taken any steps through 2020 to prepare for either events.
"Dark Store Theory" was the first topic of discussion at the primary Shawnee Mission Post Candidate Forum. The incumbent from Ward 1 Terry Happer Scheier stated that this news Monday night "came as a bit of a surprise". A bit of a shocking fact from someone who has the experience with city government she has.
The Ward 2 Incumbent Paul Lyons stated "I guess I don't share the pessimism that I have been hearing". He believes "it's probably years away before we know the outcome". Many voters including myself would like him to share that same optimism concerning the overuse of tax incentives. At some point this council will need to start believing in the city, the schools, and the people as a reason to attract and retain business.
In a contrasting economic opinion, the in tune Ward 5 Incumbent Dr. Faris Farassati believes that "the fact that the City of Overland Park needs to put its hands in the cash reservoir in the next five years in order to stabilize the budget is equivalent to you guys needing to take money out of your saving account to pay for day to day expenditures of your home. That's a sign of warning."
Unfortunately this practice of out spending our revenues is a broken campaign promise of Rick Collins, Councilman of Ward 6. He has stated in his previous election and this election the following "I am committed to living within our means; we have to balance our checkbook. Like you, we need to build up reserves to help us get through difficult times." Clearly, this is a statement to please the residents while special interests still control his spending.
It is also clear that the leadership that has put the future of Overland Park in such great risk will not, and should not, be the leaders that turn it around. Issues such as this make this election the most critical election in Overland Park history. Hence the reason every ward has a challenger for one of the first times in city election history. It is past time to put lobbyists aside and put Overland Park and our residents first!
Below is a portion of an article by Danedri Herbert in The Sentinel earlier this month. The entire article can be read HERE.
You can see from the chart below just how much of an increase in value these properties took when they changed the valuation process. This should give you a rough estimate just how much money Overland Park could be on the hook for when it comes to refunding the over taxation. On top of that, the city has already spent all the additional revenue generated by these artificial appraisals AND more. With a budget currently in the red Bill Ebel is spot on when he states that refunding these dollars and the 30% revenue cut due to reversing the valuations could be "catastrophic" to the future of Overland Park.
"‘Dark Store Theory’ is a phrase coined by government officials, referring to setting commercial property values based on the building and land. Ironically, that’s the way big-box retailers have been valued all along. Now the county also wants to tax intangible value attributable to a lease in place and business value. In other words, Johnson County officials applied an ominous-sounding label to generally accepted appraisal practices to provide cover for what they were doing. They want residents to believe retailers are asking for special treatment with ‘tax reductions;’ in reality, those retailers are trying to hold county appraisers to existing law and appealing what they believe to be large, improper tax increases.
Johnson County Commission Chair Ed Eilert opposes the approach to commercial property valuation that only considers the structure and land. He told the Shawnee Mission School Board in 2018 that that only values the walls and ceiling of a commercial building.
“Even though the property has thousands of people going in and out of the store every day, and they’re doing tens of millions or maybe a hundred million dollars in sales every year. The theory that’s been advanced is that the value of that property is that it’s empty,” Eilert said.
Terrill (Wal-Mart Real Estate Attorney) refutes Eilert’s characterization, and apparently, the Board of Tax Appeals does as well.
Terrill likens Eilert’s argument to setting residential values based on a homeowner’s income. She recently told the Kansas City Star, “If you win the lottery on Monday, your house isn’t suddenly worth more on Tuesday,” Terrill said. “And if you file bankruptcy on Wednesday, your house is still worth exactly the same thing.”
This issue and many others potentially make this the most critical election in Overland Park history. Even if you don't usually vote in local elections I encourage that every resident participate in this election Nov 5th. It is even as simple as filling out this basic application to advance vote by mail. Click HERE and fill out this short form.