Shawnee Mission preparing for possible impact of ‘dark store theory’ appeals on district budget

Jay Senter - July 26, 2019 11:30 am
Chief Financial Officer Russell Knapp addressed the board on Monday.

The ripples of the Kansas Board of Tax Appeals’ recent ruling in case brought by Walmart alleging that Johnson County had overcharged the retailer millions in property taxes have extended to the Shawnee Mission School District.

The so-called “dark store theory” appeals brought by Walmart and other big-box retailers have challenged the method Johnson County appraisers used to value commercial property. Though the issues will likely be tied up in appeals for some time, they’ve caused alarm among local government officials, who are preparing for the possibility of millions in commercial property tax revenue disappearing — and having to pay back money collected in recent years.

During a presentation at Monday’s board of education meeting on the budget for the coming year, Shawnee Mission Chief Financial Officer Russell Knapp told the board that the district was keeping an eye on the situation and looking at strategies for building up reserves so that it would have the funds to pay back taxes if the cases ultimately break in the retailers’ favor.

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“If an adverse ruling comes back to the county, we would have to do a refund,” Knapp told the board. “I don’t know what the dollar amount is.”

Knapp noted that, because of the complex formula that brings in revenue for schools and how certain kinds of revenue must be allocated, it would be the district’s capital outlay funds — which are primarily used for facilities, construction and maintenance — that would be primarily affected by the “dark store” appeals.

Operational funds, which are used to pay salaries for teachers and other staff, would not be affected as much.

Regardless, Superintendent Mike Fulton said the issue was worthy of significant consideration.

“It’s really important that you plan for the worst. Because if you don’t and there’s a big bill that comes due, it can really send you into a tailspin. I think we’re still trying to understand what the potential impact is, but you have to proactively plan.”

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