Kroger sues to lower property value of Danville location

Published 3:44 pm Tuesday, October 31, 2017

Ben Kleppinger/
Kroger has filed suit in Boyle County Circuit Court over the property value of its Danville store. The store has been valued at $5.5 million since 2014; Kroger appealed in 2016, arguing it should $2.75 million. After local and state tax appeals boards ruled against Kroger, the grocery store chain appealed Oct. 25 by filing the suit in circuit court.

Kroger has filed suit against the Boyle County Property Valuation Administrator, arguing its Danville location should only be valued for tax purposes at about half of its current amount.

Boyle PVA Eddie Tamme valued the Kroger property on the south side of Danville at $5.5 million in 2014, according to PVA records; that value was used for property tax purposes in 2014 and 2015. Kroger submitted an appeal in May 2016, arguing the property’s value should be revised downward to $2.75 million.

At stake between the two values is around $37,000 in annual property taxes for Boyle County’s various taxing districts, according to comments made by Boyle County Judge-Executive Harold McKinney last week.

Email newsletter signup

The Boyle County Board of Assessment Appeals affirmed the PVA’s $5.5 million assessment on June 20, 2016, effectively denying Kroger’s appeal.

Kroger filed a letter in support of its case the same date of that hearing, stating the property is 7.03 acres and the main building is 62,295 square feet.

“Kroger has concluded that this store is at the end of its economic life and that it no longer properly serves its customer base in the area,” the letter reads. “As a result, Kroger intends to replace this store in the very near future. The appraisal submitted to this board was requested as part of Kroger’s review of the property.”

Kroger appealed the local board’s ruling to the Kentucky Claims Commission (KCC), which deals with tax appeals statewide. KCC heard the case in March and issued a final order Sept. 26, once again upholding the PVA’s assessment.

Kroger had 30 days to appeal KCC’s order by filing suit in Boyle County Circuit Court. Kroger did just that with one day to go, on Oct. 25.

Tamme declined to comment about the case due to the ongoing litigation. The attorney representing Kroger, J.B. Lind with Vorys, Sater, Seymour and Pease in Cincinnati, was not immediately available for comment Monday afternoon.

Kroger’s argument

In asking for a lower valuation on its property, Kroger used an assessment completed by A. Dwain Wheeler, a certified real estate appraiser, according to the suit.

Wheeler used two “traditional and well-accepted” methods for evaluating the property’s worth — “the sales comparison approach” and “the income approach,” according to the suit.

Court documents show the “sales comparison” method resulted in a value of approximately $2.8 million, while the “income approach” resulted in a value of a little more than $2.9 million, according to Wheeler. Wheeler’s final assessment came in at $2.75 million.

The hearing officer for KCC, Patrick Flannery, recommended accepting Wheeler’s assessment and changing the official value of the property, according to a findings of fact from Flannery prepared for the appeal to KCC.

The PVA, represented by Danville attorney Stephen Dexter, filed exceptions to Flannery’s findings, arguing among other things that:

• Flannery did not account for the fact the Boyle PVA is not required to reassess property annually;

• Kroger did not dispute the $5.5 million value when it was assessed in 2014, nor when it remained $5.5 million in 2015;

• Kroger did not dispute the previous assessment of $3.58 million; and

• Flannery did not find that the PVA assessment was “excessive or improper” or “erroneous,” which Kroger should have to prove before gaining a ruling in its favor.

In the suit filed in circuit court, Kroger argues that KCC improperly denied the appeal because it still included Flannery’s findings of fact in its rejection of the $2.75 million assessment.

“(State law) provides that, if an agency’s final order ‘differs from the recommended order, it shall include separate statements of findings of fact and conclusions of law,'” Kroger’s suit reads. “The Kentucky Court of Appeals has clarified that … ‘the final order must articulate a rationale for departing from the recommendation which is sufficient to explain the reasons for the deviation and to allow meaningful appellate review.'”

Kroger argues in the suit that KCC “blankly disregarded the hearing officer’s recommendation;” that “meaningful appellate review of the KCC’s final order is impossible because it is impossible to know how the KCC reached its decision;” and that KCC’s “rejection of the hearing officer’s recommended decision … is not supported by substantial evidence in the record.”

Kroger asks the circuit court to reverse the KCC order, adopt Flannery’s findings of fact “in full,” discard the PVA’s valuation and award “Kroger any other relief it deems appropriate.”

Fiscal court funded PVA defense

The Boyle County Fiscal Court funded the defense of the PVA valuation, Judge-Executive McKinney said during last week’s fiscal court meeting. The bill for hiring Dexter to represent Tamme at the local and state tax appeal boards came to $10,099.47, he said.

Speaking before Kroger had appealed the KCC order, McKinney said the order would result in about $37,876 annually in property tax revenues for the taxing districts that levy taxes on Kroger’s property.

“The big winner in all this was the Danville school system,” McKinney said. “… About two-thirds of that $37,000 is the Danville school system.”

McKinney said he has made contact with Superintendent Keith Look about the possibility of Danville Schools paying a portion of the legal bill proportionate to the amount of tax revenues the district stands to keep thanks to the KCC order.

“I think it’s about $25,000 — it’s about two-thirds” of the property taxes on the Kroger property, McKinney said. “If they pay their proportionate share, which is about $6,500, they come out way ahead on this.”

Valuation already up again

The 2016 value of the Kroger property remains undecided, but Kroger has already appealed its 2017 valuation, as well.

The PVA valued the property at $5.8 million this year — Tamme said it went up $300,000 due to the addition of Kroger’s new spirits store.

Kroger’s appeal, filed June 19, alleges the value should instead be $2.85 million — an increase of $100,000 over what it wants the 2016 value to be.

Kroger’s new appeal has yet to be heard.