Setting the Record Straight on the Big Box Property Tax

Michigan law requires a property’s State Equalized Value (“SEV”) to equal 50 percent of its True Cash Value (“TCV”).  True cash value is statutorily defined as the property’s usual selling price, i.e., its market value (“MV”). In Michigan, as in most other states, property is also assessed based on its MV. In most other states, however, property is assessed at 100 percent, not 50 percent, of MV.

With that background, let’s examine the actual facts compared to what was reported in an article in the June 12, 2016 edition of Crain’s Detroit Business, which contains misinformation typically disseminated by those seeking increased taxation, including the Michigan Municipal League (MML).  

According to the MML, big box store assessments reflect MV less than $25/square foot. In looking at a large sample of stores, here are the numbers for Michigan, using the 2015 tax year values:

  • the average SEV of Sam’s Club stores reflects a TCV of $49.53/square foot
  • the average SEV of Wal-Mart stores reflects a TCV of $48.73/square foot
  • the average SEV of Lowe’s stores reflects a TCV of $43.99/square foot (not the $22.10 the Michigan Municipal League claimed)
  • the average SEV of Target stores reflects a TCV of $43.03/square foot (not the $24.97 that the Michigan municipal league claimed) 

The MML’s claim that these stores are assessed based on a MV that is less than $25.00 per square foot is an incredible misrepresentation.  

Furthermore, the League disregards the significant effect of tax rates. For example, in North Carolina, the average tax rate is $0.65 per $100 of market value, while in Michigan the average is almost four times that level. Critically, in North Carolina, property taxes are so low that usually it does not make economic sense to seek reductions, even when the property’s assessment is clearly excessive. Even assuming the League is telling the truth about the average valuation of Lowe’s North Carolina stores, which is a big assumption, the taxes on a Lowe’s store in North Carolina are far less than the taxes imposed on a Lowe’s store in Michigan. View NC property tax rates here.

In the Crain’s article, the information provided by Ottawa County’s Treasurer also contradicts the MML’s claim that Michigan’s big box stores are typically valued under $25/square foot. Per the Ottawa County Treasurer, the County’s 14 big box stores have a combined taxable value of about $43.2 million. With that total taxable value, the total TCV would be at least, and likely more than, $86.4 million. For the 14 stores, the average market value would be $6,171,429, and if the average market value per square foot were really $24, then the building area of the 14 stores would have to average in excess of 250,000 square feet! We are not aware of a single Ottawa County big box store at that size, let alone 14 stores that could possibly average over 250,000 square feet. Sadly, many Michigan House members voted on HB 5578 based on critical misinformation.