Analysis finds move to ‘dark store theory’ would sap $133 million in revenue from local government, schools

“Dark store theory” would allow commercial properties to eliminate the amount of business they do at a location from consideration in the valuation process for property tax purposes.

An analysis prepared by Johnson County Appraiser Paul Welcome suggests that a total of nearly $133 million in property tax revenue currently being collected from commercial landowners would disappear if Kansas were to adopt a “dark store theory” approach to valuation.

County Appraiser Paul Welcome’s analysis suggests a move to “dark store theory” valuation could eliminate nearly $130 million in tax revenue.

The analysis was prepared as the state Board of Tax Appeals considers cases related to the valuation of Target stores in the state. The company has argued that the traditional appraisal approach over-values Target properties, and that an alternative method that would sharply reduce the company’s property tax burden should be used instead.

Welcome’s report suggests almost $23 million in annual funding directed toward Shawnee Mission schools would be eliminated under the “dark store theory” approach, $14,312,265 in revenue collected under local option budget taxes approved by district voters, and $8,503,262 million in school funding collected under the state tax system.

Cities with large commercial property bases, namely Overland Park, Lenexa and Olathe, would also see millions in funding disappear.

It’s worth noting that “dark store theory” is just one of the alternate valuation approaches being considered by state government officials for future use. County Chair Ed Eilert gave an update to the Shawnee Mission Board of Education focusing more on the “hypothetical lease rate” approach, which may reduce commercial valuations by a smaller amount than “dark store theory,” but would still sap tens of millions from local agencies.

Welcome’s report analyzing the impact of the implementation of “dark store theory” commercial valuation in Johnson County is below:

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