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February 27, 2019 · OPINION

Walmart’s tax lawsuit cause for a “vigorous defense”

File Photo/Lawrence Emerson
The Warrenton Walmart sells more groceries than any other store in Fauquier County.
By Chris Miller
Piedmont Environmental Council

As we read in last week’s article, a lawsuit has been filed with the Fauquier County Circuit Court, challenging the county assessment of the Walmart on James Madison Highway in Warrenton. While the county has yet to be served the suit, if Walmart is successful, the precedent could start a troubling trend that will dramatically affect the county’s ability to provide basic services to its residents. We would urge the board of supervisors to prepare a vigorous defense and prepare for challenges from similar businesses. And, it would be wise of the board to view projected revenues of future applicants for big box retail store with more skepticism.

For each of the past four years, the Walmart in Warrenton has been assessed at around $15.5 million. Overall, real estate assessment values in Warrenton and Fauquier have increased during that same period. During that time, the economy in the area has been strong, with low unemployment and increasing retail sales, as reflected by sales tax revenues collected by the Town of Warrenton.

In a suit filed this December, the company claiming the total value for both is $6.9 million. They want the court to force the county to refund the difference, plus interest. That would mean Fauquier would have over $350,000 less to spend on teachers, public safety and other government services. And this does not include sunk costs from any defense against the claim.

Walmart contends the assessment should have taken into account the age of the building as well as the declining demand for “big-box” stores. This tactic, known as the “dark store theory,” is based on the notion that the fair market value of the land can never be attained because of changing retail trends. They point to empty big box store/spaces nearby that are shuttered due to bankruptcies and other closures. It seems that federal tax law’s allowance of accelerated depreciation may also be a factor in their arguments, allowing Walmart to claim full depreciation of the value of the building over a very short period of years.

In reality, the Warrenton store is highly successful, accounting for a fifth of total grocery sales in Fauquier County, leading the pack with more than $33 million in sales, as stated in the recent Fauquier Now article. The local government is entitled to receive revenue from the property commensurate with the value of the property under its current use.

The dark store theory comes with real costs to local governments across the country. The practice has been upheld in several states, including Michigan, where one nonprofit group has estimated localities have lost over $100 million in revenue since 2013. In Wisconsin, the tally is as much as $700 million.

It’s also important to consider the tax income and wages that have been lost when smaller retailers had to close their doors when they could not compete with the lower prices Walmart can offer through its sheer size and market power. Walmart beat the competition and is now using the bones of its victims as a means to further grow their profits.

If dark store arguments are successful in Virginia, more owners of commercial property will seek to pay less than their fair share, meaning we the citizens will pick up the shortfalls in revenue, typically through higher residential real estate taxes. While the way we shop has changed, retailers like Walmart who sit on top of the market must not be able to create their own rules.

While we will have to wait to see if this or other suits progress and what Virginia’s legal system has to say about the matter, the dark store theory should give localities reason to pause. In order to obtain approvals, developers of big box stores often claim they will be a boon to the economy, including the coffers of local government. The use of the dark store tactic would suggest that national retailers are not interested in the health and vitality of the communities in which they have been built. Given this trend, localities should be mindful of the entire life cycles of big box retail stores and the challenges related to redevelopment when considering future applications for this use.

The writer is the president of the Warrenton-based organization that covers nine counties.
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Mark House · March 12, 2019 at 9:35 am
Paula65 - We'd like to shop more locally yet since as you say many small businesses have closed, we don't go to Walmart, we go online when we can't find it locally. We realize that this a compromise that we don't like, yet is necessary in some cases.
Paula65 · March 3, 2019 at 10:25 am
Walmart doing what Walmart does best to rural America! They come to your town. Everyone shops there because it’s soooo much cheaper. Small businesses begin to disappear. They can’t compete with the Mega Giant. Now Main Street starts looking like a ghostown. Now all the small businesses are gone and you are left with few options. . Your property taxes rise and Walmart wins again! In the end you’re really not saving anything and sacrificing the look and feel of your town. Shop LOCAL and support small business in Warrenton. Don’t give your money to the Billionaire Walton family. They’ve got plenty. Give it back to the citizens in your quaint town! Support SMALL BUSINESS! Shop LOCAL
BestKeptSecrets · March 1, 2019 at 6:23 am
Walmart should not receive any more breaks.
Our teachers, county professionals and apparently buildings have sacrificed enough.
Mark House · February 28, 2019 at 4:50 pm
nonewtaxes - So are you saying that the wealthy shouldn't pay their fair share of taxes, like Bezos, Kushner and Trump. Bezos made $11 Billion dollars last year (due to his stupidity his soon to be ex-wife will get $69 Billion in the divorce). Kushner paid no taxes even though he made $80 million. So what is their fair share (spell check fare) in your opinion?
Tom LaHaye · February 28, 2019 at 11:56 am
Their argument that this store is old ignores the fact that they totally renovated the entire building, parking lot, and traffic flows through that parking lot just a few years ago. They also like to cherry pick, using failed stores' sale prices as comparables in their "Dark Store" argument while, as others have pointed out, this store is thriving.

I expect the court will also look to the recent VDOT expenditures to improve traffic flow in and out of WalMart which enhance the value of the property.
nonewtaxes · February 27, 2019 at 9:53 pm
How much does the Walmart family need? Gee wheez. Just because they have money dont mean they should pay more than their fare share in taxes. What is their fare share? The court will decide.

Too bad taxpayers pay for property rights to slow or prevent growth elsewise we'd have more money to pay teachers and the like.
Mark House · February 27, 2019 at 3:45 pm
How much money does the Walton family need? "....it would be wise of the board to view projected revenues of future applicants for big box retail store with more skepticism." I wish they would have viewed all past and future applicants with more skepticism. With the change in proffers allowance being taken away, the burden of supporting the influx of more people fell back on the citizens, not the developers. That was a big mistake on our past State governor and representatives part.
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