By Journal Staff

ESCANABA — To the city of Escanaba, its four-year legal battle with Menards over property taxes is more than a simple dispute over a piece of property between one municipality and one company. It could have statewide ramifications.

The city is seeking $200,000 in funding from other Michigan municipalities to “set a precedent” in the Michigan Tax Tribunal and “end the dark store war once and for all,” a June 29 letter from Escanaba City Manager Patrick Jordan to other Michigan municipal leaders states.

The city estimates it will need to raise the additional funding from sources outside its borders “to ensure that the city and its local cost-sharing units can cover litigation through the conclusion of the hearing,” the letter states.

Both national retailers and municipalities are awaiting the outcome of the Menards remand hearing, due to the long-term implications on the “dark store” property tax assessment method, which reduces the taxable values of open and operational “big box” stores to that of closed and vacant buildings, Jordan said.

In 2016, the Michigan Court of Appeals ruled that the Michigan Tax Tribunal had “committed an error of law” when it reassessed the value of Menards’ Escanaba store and reduced the city’s tax assessment on that property more than 56 percent for three years.

Menards appealed the decision to the Michigan Supreme Court, which refused to hear the case “because we are not persuaded that the questions presented should be reviewed by this Court,” as stated in an Oct. 20 order.

The case has been at issue since 2014 when Menards won an appeal through the tax tribunal, resulting in a three-year adjustment to Menards’ property value for its 166,196-square-foot building on 18 acres. The 2012 value dropped from $48.43 to $20 per square-foot; the 2013 value from $49.54 to $21; and the 2014 value from $50.88 to $22, according to a May 14 Escanaba Daily Press article.

As part of the 2016 appellate court ruling, the tax tribunal has been ordered to hear more evidence on deed restrictions — which limit what buyers can use vacant stores for — and hear more evidence regarding the cost-less-depreciation-approach, which is one method used to determine property value.

That is where the need for funding comes in, Jordan said, as demand for information far exceeds what would normally be required in a typical tax tribunal case.

“Escanaba is aware that it cannot simply “show up” for this critical hearing,” he said. It must provide what the tribunal and the court of appeals is looking for: a comprehensive study of the dark store theory.

Jordan said the issue is “a fight for all local units, not Escanaba’s fight alone, as no single unit can afford the challenge alone.”

He said the Michigan Township Association, the Michigan Municipal League and the Michigan Association of Counties have expressed support for Escanaba in the matter and are “actively engaged in seeking support, answering questions, working with the state and assisting with the unique legal issues that this important case presents.”

Jordan said Escanaba officials are mindful of the implication that accepting a settlement agreement from Menards may have if it were offered.

“Other local units would then be forced to litigate the meaning of the Menards decision without the benefit of precedent in the tribunal that the forthcoming remand hearing could have established.” the letter states. “Because of the impact of a settlement on other local units the city will refund all contributions if it settles this case.”