Judge Dismisses Kmart Claim on Property Taxes

A federal bankruptcy judge has dismissed a claim by Kmart that it had been overcharged millions in property taxes by several hundred cities and counties, including more than two dozen in California.

Judge Jack B. Schmetterer dismissed Kmart’s lawsuit because the retailer had not tried first to resolve its dispute at the state or local level in each case, according to an order he issued from his Chicago courtroom this week.

Some of the California jurisdictions named in the lawsuit were El Dorado, Kern, Santa Barbara, San Luis Obispo, Tulare and Ventura counties.

“The judge basically said, ‘If you want me to exercise jurisdiction, you have to explain why it is I have jurisdiction,’ ” said Tom Parker, an El Dorado County deputy counsel. “The judge certainly felt this was a vaguely worded complaint.”

An attorney for Kmart did not return repeated phone calls for comment.

The retailer sued hundreds of counties and cities for property tax refunds, claiming that 2001 and 2002 assessments of its stores in those areas were inflated. Most of the alleged overcharges involved tens of thousands of dollars in each jurisdiction.

In Santa Barbara County, for example, the alleged overcharge was about $50,000, while in Ventura and El Dorado counties the amount was about $30,000 each, officials said.

Some jurisdictions agreed to settle their cases early on. But about 400 local governments in 25 states banded together to continue the battle.They argued that the giant retailer, which filed for protection under bankruptcy regulations in 2002, was improperly trying to use those rules to reduce its property taxes.