A national retail chain is using the courts to possibly reduce its local property taxes as it has in other states in recent years.
Some area government officials are concerned that if the company succeeds, other big-box stores could soon follow suit. The result would be less tax money for already lean government budgets, they say.
"If they want to drive a nail in our coffin, start cutting the ad valorem tax," said Calhoun County Administrator Ken Joiner.
The home improvement retailer Lowe's last week filed separate lawsuits in Calhoun County Circuit Court for its two stores in Anniston and Oxford, arguing that the property taxes for both buildings are too high. The suits are appeals made after the Calhoun County Board of Equalization in July denied Lowe's allegation that the property tax levied on its stores exceeded their true market value.
The board is charged by law to hear and adjudicate appeals to property values and assessments made by county tax assessors.
A spokeswoman for Lowe's declined to comment Thursday, saying the company is in a "quiet period" leading up to the release of its earnings report next week and so can't respond to media questions.
Karen Roper, Calhoun County Revenue Commissioner, whose office collects ad valorem taxes, said her office uses a state-provided manual to assess property values based on square footage and land studies. The tax is divided up among the state, county and city governments, with the largest portions going to school systems and the Calhoun County Commission.
Roper said her office's own appraiser and a private property appraiser have assessed the value of the Lowe's buildings in the last two years.
"We hired an independent appraiser to use in court when they protested the first time to show what a private appraiser would assess," Roper said.
According to county records, the Lowe's in Anniston is valued at about $10.7 million, and the company paid more than $118,000 in property taxes last year. The Oxford Lowe's is valued at about $9 million and the company paid more than $85,000 in taxes on the property last year.
Lowe's has yet to state on record how low it wants its property taxes to drop, just that its properties are being overvalued.
Lowe's, which reported $56.2 billion in sales for its 2014 fiscal year and has 1,840 stores, is using an argument sometimes called the "dark store" method. The method argues that the individual store buildings constructed by companies like Lowe's are cheap, unique and are rarely sold, so they should be assessed with lower value.
"These big retailers are arguing that because their business model is to build these custom buildings that are cheap, they should be valued as if they are closed," said Olivia LaVecchia, research associate for the Institute for Local Self-Reliance, a Washington D.C.-based nonprofit advocacy group that advises communities on planning. "This has been impacting local government budgets."
The effect is even more profound when considering that the method is also used to justify tax refunds to companies for all the years of their buildings' existence.
National Retail Federation and the Alabama Retail Association spokesmen declined to comment for this article, saying that they didn't have people to speak about Lowe's or the dark store method.
Lowe's has already had some success reducing its property taxes in other states, particularly in Michigan and Indiana, LaVecchia said. For example, Marquette, Mich., recently had to pay a $755,828 tax refund to Lowe's. Also, according to a study the Association of Indiana Counties commissioned, if the dark store method becomes the norm in Indiana as it did in one county, the value of more than 17,000 commercial properties would drop by $3.5 billion. Revenue reductions from property tax caps would mean $43 million lost by local government and schools, the study states.
LaVecchia said other retailers are starting to use Lowe's method to lower their property taxes in those states. So far, no other retailer beside's Lowe's is pushing for lower taxes in Calhoun, Roper said.
Still, Calhoun isn't alone in Alabama with pending cases from Lowe's.
"This issue has been raised and filed in a number of Alabama counties," said Sonny Brasfield, executive director of the Association of County Commissions of Alabama. "Marshall County looks like the first place in Alabama where one of these cases will be tried."
According to court records, an Oct. 20 trial date has been set for the Lowe's case in Marshall.
Brasfield has said that from what he's seen, all the Lowe's cases in the state are following the same dark store argument.
"Our concern would go well beyond one single retailer," Brasfield said. "If this line of thinking gets through the court, every person who thinks they have a distinctive building will be lining up on courthouse steps."
Brasfield said county governments rely heavily on property taxes and would suffer if large retailers were allowed to suddenly lower their tax payments.
"It would impact virtually every county in the state," Brasfield said. "The impact would be felt more acutely at the local level, but also at the state level in the General Fund."
The Alabama Legislature is currently struggling to find money as it is to fill a $200 million shortfall in the 2016 budget.
Joiner said property taxes make up nearly 40 percent of the county's budget, which has been tight for years due in large part to the Great Recession.
"We haven't seen any growth in county property tax in several years now," Joiner said. "We had hoped there would be a bounce back in the market."
Anniston City Manager Brian Johnson said most of the city's money comes from sales taxes, with only a small portion from property taxes. But with the city currently contemplating cuts for another lean budget, every dollar counts, Johnson said.
"Right now every revenue stream is important and I don't want to see any unnecessary reduction in any of them," Johnson said. "It's not sales tax but property tax is a revenue stream and if it goes, that means we've got to cut somewhere."