Shawnee ‘closely monitoring’ potential revenue loss from ‘dark store theory’ appeals

After hearing that other taxing entities in northeast Johnson County are preparing to tighten their belts over the potential loss of tens of millions of dollars in commercial property tax revenues, a Shawnee resident has raised the alarm to his city leaders. In response, Shawnee city staff have noted that they’re “closely monitoring this issue.”

The Kansas Board of Tax Appeals has received a number of cases claiming Johnson County appraisers have over-valued commercial properties of big-box retailers by factoring in their sales revenues instead of just valuing the properties themselves.

Some cities in northeast Johnson County as well as the Shawnee Mission School District have noted publicly that they’re preparing for the potential loss in tax revenues generated from commercial property and having to pay back money they’ve collected in recent years.

Ray Erlichman
Shawnee resident Ray Erlichman raised concerns last week about the so-called ‘dark store theory’ and its impact on Shawnee’s revenues.

Shawnee resident Ray Erlichman, a frequent critic of the city’s government, thinks Shawnee should join the club.

If the state Board of Tax Appeals rules in favor of the big-box retailers — and Johnson County adopts the so-called “dark store theory” approach to valuation — then nearly $133 million in property tax revenue currently being collected from commercial landowners would disappear, according to an analysis by former Johnson County Appraiser Paul Welcome.

Erlichman asked city leaders at the July 22 council meeting how the city will start preparing for this possible loss. He noted that Shawnee has multiple big-box stores, including three Walmart stores, Lowe’s Home Improvement and Home Depot stores, and several others.

Erlichman added that City Manager Nolan Sunderman has who told him the city doesn’t have specifics yet, only “hypothetical numbers thrown out, that it could reduce the property taxes by as much as 30 percent and that there could be as many as three years in back property taxes having to be refunded. That’s speculative at this point as it goes through the court process.”

In an email after the meeting, Sunderman said Shawnee city staff are “closely monitoring” the issue and that the item was added to the city’s legislative agenda last year.

“As we receive more detailed information on the recent decision, we will be sharing that information with the governing body on potential impacts,” Sunderman said.

Erlichman said he hopes the city staff can prepare some “what if” scenarios in the budget over the next six months before the new terms for councilmembers begin, and make those plans available to the public “so the public is fully aware of what might happen so that should the retail stores prevail in the court actions, it doesn’t hit us as one big surprise.”

That’s my suggestion, so we don’t get blindsided based on what might happen, which is a strong possibility,” Erlichman said.