Town of Ulster vs. ‘Dark Store Theory’

A little over a year after the topic first arose, Ulster town officials are again expressing their support for proposed statewide legislation that would seek to curtail the use of the “Dark Store Theory” in determining property assessments for retail buildings.

According to the theory, the retailer restricts the deed on the property they’re vacating that prevents other competing big box retailers from moving in, thus forcing the potential sale price of the building down well below what they originally paid for it.

Town of Ulster Supervisor James Quigley III said the practice can have deep financial repercussions for municipalities which rely heavily on taxes from retail businesses. With the town already feeling the pinch from a reduction in the property tax assessments at both the Hudson Valley Mall and TechCity, Quigley said the impact of big box retailers applying the Dark Store Theory locally could be devastating.


“The Dark Store Theory is a theory of appraisal that applies to chain stores — Home Depot, CVS, and the like — where the appraisers go in and argue during a tax certiorari action against the town that value of the property is basically to the second or third user,” said Quigley at last week’s town board meeting. “And since these buildings have been custom built for Home Depot or CVS, the values are dramatically different, much, much lower.”

The Dark Store Theory could also negatively impact the Kingston City School District. According to a 2017 report by Education Week, a national newspaper covering K-12 education issues, the State of Texas has estimated that the theory could cost municipalities $2.6 billion annually and school districts $1.2 billion annually within five years. In Michigan, where the Dark Store Theory first gained traction a decade ago, around two-thirds of all school districts have lost an estimated $75 million because of the practice.

The town’s resolution supports a similar resolution from the New York State Assessors’ Association seeking action by the state legislature and Gov. Andrew Cuomo to put an end to the use of the theory in New York.

“And since the town has been the victim of frequent tax certiorari actions by the likes of Home Depot, Lowe’s and Walmart, and they have asked for values that are clearly off the charts, and I mean the bottom of the charts,” Quigley said. “This is a policy that this Town Board, as we’ve discussed previously in 2017, would support.

The discussion was first brought to the board last year by Town Assessor James Maloney, who said the deed restrictions are potentially damaging to municipal tax bases.

“At the end of the day is you wind up with an indoor rummage sale or something like that, so the building sells for very, very little because it’s so deed-restricted,” Maloney said last year. “What people are doing is using the shuttered big box store that sold for $1 or $2 million as opposed to the $12 million that it cost to build it, and they’re using that as a comparable against the brand-new big box.”

There are 2 comments

  1. Penny

    I wonder if towns could fight back with designations for high volume retail zone, determining where high volume exists from business filings, and applying a premium. Thus, a dark building could be designated low volume retail zone.

  2. Zed F.

    If you compare the revenue from these stores to the costs of the government services they get, they don’t pay their own way. The result is higher taxes for the rest of us. Then they have the nerve to try this?

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