Walmart Suing to Reduce Its Property Taxes in Rural Michigan, Jeopardizing Town’s Services

A legal attempt by Walmart Inc. to reduce the property taxes it pays on its store in rural Houghton, MI would devastate the town’s ability to provide critical resources for its citizens, city leaders announced in a press statement in late February.

With a lawsuit initially filed in 2018, the world's largest corporation and the Upper Peninsula’s biggest retailer hopes to lower its valuation on the Houghton store and win both a retroactive $1.2 million refund and a future reduction in taxes. If Walmart succeeds in court, the town of 8,200 would see a 60% drop in property taxes, forcing it to cut funds for its local K-12 schools, veterans’ services, county medical care facilities, the local library, and the City of Houghton itself, the statement contends.

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Walmart claims that for tax assessment purposes, “an open, bustling store — such as the Walmart property on M-26 highway’s shopping corridor — should be valued at the same rate as older, vacant stores in markets where the retailer no longer operates,” according to the press release. This “dark store theory” is a known legal strategy that companies sometimes use to challenge their tax burden.

But Houghton claims in a subsequent suit filed against Walmart in federal district court that the corporation breached the development agreement signed by both parties in 2004. The city agreed to provide Walmart with land and infrastructure for a store expansion in exchange for Walmart’s commitment to increase the store’s assessed value to cover the expansion expenses and other ongoing costs.

At the time, the city transferred the property to Walmart, created a public roadway, funded the relocation of utilities, and agreed to wetland mitigation work. In return, according to the press statement, Walmart agreed to increase the taxable property value to $4.78 million, which would allow Houghton to justify the infrastructure investments.

The city expects the litigation to be long and costly and hopes to coordinate its efforts with other affected local entities.

“Walmart is important to our community, but this doesn’t privilege them from property tax responsibilities,” Houghton City Manager and Legal Counsel Eric Waara said at a February meeting. “Our local Walmart store employs veterans and hard-working parents who rely on city services, so it is disheartening that they are not willing to negotiate a solution to avoid negatively impacting public budgets and services for their customers and employees.”

A task force of city leaders, public school administrators, veterans’ service groups, the public library, and local economic development experts has been formed in Houghton to inform the public of potential service cuts.