Johnson County officials are justifiably frightened to death there is a plague descending on the county, and probably on all of Kansas as well. Its impact could be devastating, they say. And they don’t know how to stop it.
The problem is complicated. Suddenly, out of the blue, the county’s appraised values of its seven Target stores were overturned by the Kansas Board of Tax Appeals. Also within the past few days, two drugstore chains located in Johnson County — CVS and Walgreens — received hefty reductions.
County officials have run the numbers of their worst-case scenario if this plague continues. Approximately $100 million in property tax revenue generated by these large retailers and other businesses would be slashed. Half of that lost revenue would directly impact Johnson County public schools.
Longtime appraisers say the new method of appraising these stores is total nonsense. But, so far, the newly adjusted appraisals, based on radically different appraisal methods, have resulted in a 30 percent reduction in property values. And that means a reduction in the property taxes those Johnson County stores pay.
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Surely, other Johnson County businesses will line up for the same discounts. Why wouldn’t they? It’s a gravy train. Businesses throughout Kansas will also jump on, given the Johnson County precedent.
County officials are rightly panicky. They expect this appraisal trend could infect the entire local commercial appraisal system, thereby discounting the property taxes of most of the local commercial buildings.
That would shift that tax burden to —guess who — homeowners, of course.
The newly-hatched theories presented by the appraisers hired by these large retailers are not often found in textbooks. They are not accepted theories within the appraisal industry. I would call them “let’s pretend” theories.
The arguments supporting them ask for a belief in fantasy assumptions. The appraiser hired by Target convinced the Kansas tax board that a brand-new method — the “hypothetical leased fee theory” — should be accepted as the valid way to appraise a store. That theory suggests that, rather than appraising as if Target were a thriving store, the appraiser should assume that Target has closed, and something like a thrift store has taken its place. With that thrift store’s much smaller revenue, the value of the building would go down substantially.
That argument, believe it or not, recently won at the Board of Tax Appeals.
Or how about the “dark store theory,” which calls for a different assumption? Assume the Target building is totally vacant for an extended period of time. That would make the facility worth much less. Businesses in other states are pushing that theory hard, and it is being watched closely here as the next possible shoe to drop.
Appraisers in Johnson County who have spent decades appraising based on what is called the “highest and best use” of a commercial building now find themselves in never-never land. Market values don’t seem to apply anymore. What does apply is whatever theory some privately hired appraiser sells successfully to the tax appeals board.
Why would the three expert members of the board accept these ridiculous theories? My guess is these three — James (Jay) Cooper, Ronald C. Mason and Devin D. Sprecker, all appointed by former Kansas Gov. Sam Brownback — have an extreme bias in favor of giving tax breaks to businesses. So they approve silly arguments, no matter what, in order to lower the values of these commercial buildings, and thus reduce the property tax load.
I can’t prove that any more than these absurd discounted appraised values can be proven. It’s just my theory.
Some conservative Kansas legislators are seeking to make these wild theories actual law. What Johnson County leaders can do is try to stop such legislation and also appeal to a higher court. And county officials say they will try both.
One would think logic and rational thinking would prevail over these crazy theories. But in this hyper-political world today, you never know what will win the day. It is very appropriate to be very afraid.