by Mary Rupert
An appeal that might end up costing the Unified Government $10 million in future years was won recently by the Hollywood Casino at Kansas Speedway, which challenged its property taxes for 2015.
According to Mike Taylor, a spokesman for the UG, the ruling from the Kansas Court of Appeals in December is being appealed by the UG to the Kansas Supreme Court. The appeals court heard the appeal from the Kansas Board of Tax Appeals. The appeals court ruling discussed very technical appraisal methods.
Wyandotte County valued the casino property at $157 million, and the casino claimed it was worth only $68.7 million, Taylor said. BOTA settled on a middle figure of $102 million.
BOTA used the casino’s “income allocation” approach to appraisals versus the UG’s “management fee” approach.
Taylor said several other companies are appealing their property taxes nationwide, using the “dark store theory” that the county should value the property for what it is worth only when the building is sitting empty. This is a theory that is not commonly accepted in the field and is not taught in training to any of the county appraisers, he noted.
Taylor recalled that when several companies were bidding to build a casino in Wyandotte County, they had to put up a $250 million investment with the state to qualify. At that time the Hollywood Casino stated it would be a $300 million investment, he said, and the casino claimed that the land at Turn 2 of the Kansas Speedway was worth just $100 million sitting empty. He said that was proposed to be an in-kind contribution toward the $250 million investment.
“Now what’s happened is they come in after the casino is built, and claim the whole thing is only worth $68.7 million. That makes no sense,” Taylor said.
He said the UG had requested the casino to provide a real estate investment trust document to show what the casino was worth, to help with the valuation, but the casino did not give them the documents. Now the UG is arguing they should have provided those documents.
“What we estimate, if the BOTA decision for 2015 carries through the 2018 tax year, the UG could have to refund $10.8 million plus interest,” Taylor said.
Taylor said he doesn’t expect the BOTA decision to affect this year’s UG budget, but the UG will have to start setting aside funds in reserves for the future, as it is unknown how it will ultimately come out.
When looking at the list of BOTA cases online, one can see a great number are from Johnson County, where companies such as Walmart, Target, CVS and Walgreens have successfully used the “dark store theory.” They argue that the store should be valued on what it would be worth if it were empty.
Wyandotte County also has a number of properties listed as appealing or having appealed their property taxes, including The Woodlands, Nebraska Furniture Mart and Schlitterbahn. One of the Schlitterbahn cases references the property where Menards is being built. Menards, based in Wisconsin, is one of the original big box stores that started this whole “dark store theory,” Taylor said.
Taylor said Phil Ruffin purchased The Woodlands property, a former horse and dog racing track, around four years ago for $15 million, and the UG appraisers set it at $7 million, on the 2017 taxes.
“BOTA out of the blue said it is only worth $540,000,” Taylor said. “That’s an impact of 92 percent reduction in taxes. Instead of $298,000 in taxes, he’ll have to pay only $23,000 in taxes if that decision stands.”
The UG also is appealing that case. Taylor said The Woodlands’ appraiser said the highest and best use of the property was to build a residential subdivision, and based on that, BOTA said the property was only worth $540,000. Taylor pointed out that The Woodlands’ owner keeps asking the state to get a gaming law changed to reopen The Woodlands with slot machines and horse racing.
“Our question is, which is it, a track or a subdivision with houses?” Taylor said. “They’re gaming the system.”
Taylor said Mayor David Alvey and mayors from the metropolitan area recently met with the governor to discuss the way BOTA is handing down decisions. These decisions affect not just cities, but also the entire tax base, he said. There were a number of persons appointed to BOTA by former Gov. Sam Brownback, he added.
“The first 20 mills on the property tax bill goes to the state for the schools, then to the community college, library mill levy, city and county,” he said. “So it’s not just undermining the UG, it undermines the tax base for the state.”
He added if the Hollywood Casino ruling stands, the Bonner Springs schools could have to pay back hundreds of thousands of dollars to the casino.
The UG in the past has made some development agreements with some new stores or businesses requiring a payment in lieu of taxes instead of the property tax. That has helped, but it’s not really the end solution to this situation, according to Taylor.
The appeals have the potential to shift the tax burden onto the other taxpayers. Taylor said the whole tax base that pays for police, fire and good streets is affected by these decisions.
“It is a real threat if this trend continues,” he said.
Current appraisal figures in Wyandotte County
Different parts of the community are reinspected each year as part of the appraisal process.
Most recently, there was a 6.7 percent median increase for all classifications of property in Wyandotte County, according to a UG spokesman. This had an effective date of Jan. 1, 2019, and values were mailed out on March 1, 2019.
The aggregate change was a 6.3 percent increase in appraised values from 2018 to 2019, as of June 26, 2019, according to the spokesman. It was an increase of $605.6 million.
The 2018 appraised valuation of all classes was $9.65 billion in Wyandotte County, with the 2019 valuation of all classes at $10.25 billion.
The areas of Wyandotte County that experienced the largest increases in valuation on March 1, 2019, were the Downtown-Central area, which experienced an 11 percent median appraised value increase; Stony Point area near 78th and I-70, which experienced a median value increase of 12 percent; and the KU Med area, which experienced an increase of about 12 percent, according to a UG spokesman. These increases were due to market conditions and sales in these areas, according to the spokesman.
In the prior year the valuations for warehouses and downtown rows experienced median increases of 8 to 9 percent, which were based on market conditions, according to a spokesman.
Property appraisal time in Wyandotte County
This is currently property appraisal time in Wyandotte County. Staff members from the appraiser’s office are reinspecting properties in the Bonner Springs and downtown Kansas City, Kansas, and Central area, according to UG officials.
Kansas counties are on a six-year reinspection cycle of all properties, with reinspections scheduled in the summer and fall. Different neighborhoods are selected for reinspection in different years.
Staff from the appraiser’s office will be driving vehicles, as well as wearing badges and apparel identified with the Unified Government logo, according to a spokesman.
Staff will be checking the listings, measurements and characteristics of all buildings on each property visited, and will contact owners for information, or leave questionnaires. They will have IDs. Residents who have questions about the process may call the appraiser’s office at 913-573-8400.