Attorneys on both sides of Walmart's appeal to cut its Pulaski County property-tax assessments by nearly half have filed their final pleas with the county judge, each arguing that the other cannot justify its suggested values.
At stake in the case is about $4.5 million in annual tax revenue for school districts and other government agencies in the county, but the appeal has drawn broader interest as tax assessors statewide said it is shaping up to be Arkansas' first serious test of the so-called dark-store theory.
The legal argument, which has found mixed success in other states, holds that big-box retail stores should be valued, for tax purposes, as if they are closed and vacant. Tens of millions of local tax dollars statewide would be in jeopardy if the courts sign off on the theory, an assessor has warned.
Neither attorney in the Walmart case used the term "dark store" in their final arguments submitted to County Judge Barry Hyde, instead focusing largely on the fundamental argument that the other side did not adequately prove that its dueling valuations were accurate.
The case is focused on the county's 2017 assessment of eight Walmart Supercenters and two Sam's Club stores at a combined $145 million. Walmart first sought to reduce the total value to $93.4 million and later slashed the combined value to $74.3 million, which would be a 48% drop from the county's valuations.
Jonesboro attorney Ryan Wilson, representing Walmart, said the tax assessor's office "offered absolutely no documentary proof to contradict" the company's reports -- "no competing report, no land [comparisons]; no improved sale comps; no lease comps; nothing."
Wilson in the filing Thursday argued that state law requires that both sides started the hearing "with nothing on their respective sides of the scales of justice."
"Once [Walmart] put forth sufficient evidence to establish true market value, it was incumbent upon the Assessor to put forth competing evidence to tip the scale the other way," Wilson wrote. "The Assessor simply failed to do so."
Bob Clay, the assessor's supervisor of commercial appraisal, was the county's only witness during the hearing.
Rather than defend the county's values, Clay "systematically and methodically examined" detailed reports prepared by an appraiser retained by Walmart, wrote Harrison Kemp on behalf of the county.
"Importantly, the County bears no burden of proof here," Kemp argued in the Tuesday filing. "It is exclusively the burden of [Walmart] to offer proof of the properties' 'true and correct value.'"
The filing seized on testimony during the hearing that Walmart's appraiser, Jeff Ford, was unaware that some of the land-sales transactions he used as comparison could have been between related parties.
Ford testified that related-party transactions should not be used as comparisons because they don't necessarily reflect actual market prices.
"This Court can take a reasonable inference that Mr. Ford's appraisals were prepared negligently," Kemp wrote. "The reliability of the entire appraisal is subject to doubt because of this most basic, admitted error."
Most of the land-sales transactions used by Ford were not questioned as potentially being between related parties during the hearing. Even if the questioned transactions were removed from the calculation, it would not have significantly adjusted his estimates, Ford testified.
The comparisons were "integral to the reliability" of all three appraisal methods Ford used to determine his estimates, Kemp argued. By attacking the credibility of the reports, the county argued that Walmart did not justify its suggested values.
Wilson's filing addressed the potential related-party transactions, but said the "argument missed the mark," noting that the county didn't offer definitive proof and "failed to testify that any of the other comparables had the same 'potential' issue."
The appeal's underlying issue -- whether active leases should be considered income when assessing big-box retail property -- was hardly referred to in the filings.
Hyde, who is not a licensed attorney, acts as a jurist when deciding property-tax appeals in county court. He presided over a two-day hearing earlier this month and will make a decision within 20 days.
Both sides have prepared as if they will appeal a losing result to Circuit Court and ultimately the state Supreme Court, observers have said.
During the hearing, Wilson, after repeatedly raising objections, told Hyde that he wanted to "make sure our rights and our record are preserved."
Kemp replied that he believed "our trial at circuit" court would start with a blank slate anyway.
More than $100 million in local tax revenue would be at risk if Walmart and other big-box retailers use the "dark store" argument to challenge assessments throughout Arkansas, said Washington County Assessor Russell Hill, who has been sounding the alarm on the theory for years.
Retailers argue that their buildings are so customized to specific needs that they cannot fetch a price on the open market that is comparable to their tax valuations.
Opponents contend that the alternative means potentially undervaluing a bustling Little Rock store by tying its worth to a vacant, misshapen lot in a different state.
Metro on 07/31/2019
Print Headline: Attorneys file final pleas in Walmart property-tax case