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1. Michigan Townships Association (MTA)
2. Michigan Association of School Boards (MASB)
3. Michigan School Business Officials (MSBO)
4. Michigan Association of Counties (MAC), and
5. Michigan Assessors Association (MAA)

The Tax Tribunal committed an error of law and adopted a wrong principle requiring reversal when it failed to determine and value the property according to its highest and best use, where the evidence established the property’s highest and best use was continued use as a free-standing retail building with no
restrictions, but the Tribunal accepted and used comparables with restrictions preventing the full range of retail uses or that were not freestanding retail uses without adjustment. The utilization of deed restricted properties or properties purchased for another use other that the subject’s highest and best use to value the subject, and where those comparables were not properly analyzed to account for the restrictions and differing uses, does not result in a determination of the true cash value of the subject and is therefore is the adoption of a wrong principle and/or an error of
law requiring reversal and remand.

After a hearing on petitioner Menard, Incorporated’s challenge
to respondent City of Escanaba’s tax assessment, the Michigan Tax Tribunal (the tribunal) rejected Escanaba’s assessment and found in favor of Menard. Because we conclude that the
tribunal made an error of law and its decision was not supported by competent, material, and substantial evidence, we reverse.

The appeal involves a recently-built, 166,196 square foot Menards store in the City of Escanaba. For the 2012 through 2014 tax years, the property was assessed at a range of $47 a
square foot in 2012 to $49 a square foot in 2014. This value is within the middle range of comparable assessments in Michigan and the surrounding states for similar stores. Tribunal
Member Abood dropped the value to $20 to $22 a square foot.
This case tests the “Michigan Dark Stores” theory, utilizing distressed sales. Menard relied exclusively on the sales comparison approach. Respondent relied on the cost approach
with some sales support. Tribunal Member Abood based his decision entirely on 8 sales provided by Menard’s appraiser, of which 5 were sales of deed restricted property prohibiting a
commercial use. Most of the proffered “comparable” sales resulted in the conversion to manufacturing property, one involved a foreclosure sale, and another was not self-standing
building but was part of a mall.