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City Council Minutes 04-08-2009 Joint Board of ReviewCouncil Minutes -April 8, 2009 AGENDA SPECIAL MEETING - MONTICELLO CITY COUNCIL BOARD OF REVIEW Wednesday Apri18, 2009 - 6 p.m. Mayor: Clint Herbst Council Members: Tom Perrault, Glen Posusta, Brian Stumpf and Susie Wojchouski. Others: Greg Kramber, Wright County Assessor, Lori Thingvold, Property Appraiser and Tony Rasmussen, Sr. Property Appraiser Mayor Clint Herbst opened the Board of Review. Members of the Council and representatives from the Wright County Assessor's office were introduced. Lori Thingvold explained the changes in residential valuation and submitted a booklet explaining the valuation process which included pictures of the comparable sales used in this study period. The time frame for the market study was from October 2007 through September 2008. The data from this period is used for setting the valuation for 2009 which is the basis for taxes payable in 2010. Clint Herbst asked if the Assessor's office sees a point where improvements in technology would change the time frame set for the market study thus allowing the study data would be more current. Greg Kramber responded that it was in late 2008 that the economic problems escalated so most of the time frame for the market data study was during a period of higher values. As far as changes in the time frame of the study he indicated that is set by the state. Lori Thingvold indicated during the study period there were 104 qualified sales which did not include foreclosed properties. Using these sales the median sales ratio was 101.1 %. The State of Minnesota requires that the ratio be between 90%-105%. The median sale price of the sales in the study period was $186,300. She added that there were 67 foreclosure or bank sales which had a median price of $135,000. Lori Thingvold also brought up that there are currently 8 qualified sales that will be used for the 2010 valuation. These sales have a ratio of 98.5% and median sale price of $172,500. Greg Kramber said the Assessor's office has worked hard to meet the requirement which capped at the low 90's. It was noted that residential value decreased 10.04% and the decrease in commercial property was .72%. Clint Herbst asked why there was such a discrepancy between residential property and commercial property. Greg Kramber explained the Department of Revenue breaks their study into different categories of residential, commercial-industrial and agricultural. They are required to be 90%-105% county-wide on each type. Last year on the commercial they were at 88.1% so they were required to increase the valuation on all commercial property to reach 90%. Tony Rasmussen commented on the trends county wide stating there were 1300-1500 residential sales with 806 of those being qualified sales. This compares to 1361 qualified sales in 2007. There are 1004 properties that are in some form of foreclosure proceedings. New construction valuation is down $100,000,000 county-wide which is a significant decrease. The previous year there was 2,000-3,000 platted lots available and last year that number had dropped considerably. The Department of Revenue did increase Green Acre valuation about 33%. He went on to discuss 1 Council Minutes - Apri18, 2009 commercial property in Monticello. The poor market impacted the commercial property. Unplatted and unimproved lands have seen a reduction in value this past year. Tony Rasmussen said most residential prices are higher than assessed valuation but he believes the list price will come close to the appraised value. He noted that the economic downturn came at the end of the study period used for the 2009 valuation. Ryan Nett, 6304 85th St NE (155-160-013050) in the plat of Carlisle Village submitted information on the cost of the house and its valuation. The property is currently valued at $326,700 for taxes in 2009 and valued at $203,900 for 2010 taxes. The owner paid $205,000 in September of 2008 for the structure which had some hail damage and was a foreclosed home. The total price of the home with the replacement of the damage was $220,000. The appraisal on the property was $219,000. Lori Thingvold showed pictures of that property and four other comparable sales. The owner indicated he tried to get an appraisal to show a value of $250,000. The bank came up with an appraisal of $255,000. He felt the valuation was higher than it should be. Greg Kramber said if the damage to the structure still existed the valuation could be discounted but according to the owner the damage has been corrected. Lori Thingvold felt the valuation established was valid. Greg Kramber said the motivation of the appraisal can lend to a certain result. Brian Stumpf didn't feel there wasn't enough evidence to warrant changing the valuation. BRIAN STUMPF MOVED THAT NO CHANGE BE MADE IN THE VALUATION FOR 155- 160-013050, 6304 85TH STREET NE. CLINT HERBST SECONDED THE MOTION. MOTION CARRIED UNANIMOUSLY. It was noted that the next step of the appeal process is with the county. Steve Johnson is the owner of three properties on Block 2 of the original plat of Monticello. The change in valuation for 2010 versus 2009 was significant. He stated the some properties on the street were flat while others were increased by 15%. He felt the valuation of the building should have gone down since the buildings are not occupied or the rent was reduced in order to retain tenants. He stated the whole area is distressed. The valuation went up on the parcel at the corner by 15%. Greg Kramber said the reason for this is the size criteria used in the valuation. They found smaller buildings are hurting the sales ratio. The value of the two buildings went from $200,000 to $230,000. Steve Johnson said he had to take a rent cut in order to get the space occupied. Steve Johnson argued that he is only maintaining the building and not improving it so he didn't feel the valuation should increase. The valuation for parcel 155-010-052031 (westerly building) is $302,700(largest building; formerly Johnson Store). This building is 8,500 square feet. Parcel 155-010-052070 for 2007 and 2008 was valued at $48,400 and for 2009 at $55,300. Parcel 155- 010-052090 for 2007 and 2008 was valued at $152,000 and for 2009 it was valued at $175,000. Glen Posusta noted that was fairly large increase. Tony Rasmussen stated its location was important. It was noted by Department of Revenue standards more than 5% down is a good sale. There are more properties listed for sale and they are listed for more than the assessed value. Clint Herbst noted that there was a 10% increase to commercial property and Wright County had to work to get some of the back down. Monticello dragged the County down especially in small office sales. The sales in Monticello were 50-60% of the assessed valuation. Steve Johnson said the building is a detriment to the value of the lot. There was discussion on the methods of determining value on commercial property such as the Marsh and Smith, replacement cost and income method. Tony Rasmussen and Greg Kramber briefly explained the methods of determining value. Greg 2 Council Minutes - Apri18, 2009 Kramber said the problem is in every down town in the county. Steve Johnson said commercial property is worth the rent you can get out of it. Steve Johnson said adjacent properties had gone down in value and he felt it was an issue of fairness. Greg Kramber said other commercial sales in Wright County were at 90% but Monticello was at 50%-60% so if equity is an issued perhaps Monticello's valuation should have been jumped up a few years ago. Greg Kramber said the County looks at all three approaches on valuing commercial property. Tony Rasmussen said for the older buildings $70/ft is typical. Susie Wojchouski noted Carlson Wagonlit had an apartment and asked how that affected valuation. Greg Kramber said those are handled differently. Clint Herbst said if the City is not in the 90%-105% range on sales everyone is getting hit with an increase. Brian Stumpf felt because for several years there was no increase it is inevitable that at some point there would be an increase. BRIAN STUMPF MOVED NO CHANGE IN THE VALUATION FOR PARCELS 155-010- 052031, 155-010-052070 AND 155-010-052090. GLEN POSUSTA SECONDED THE MOTION. MOTION CARRIED UNANIMOUSLY. Steve Johnson stated he is reserving his right to appeal the valuation. Mielke Development representative, James McCombs spoke. He stated that cap rates are going up and cited instances. He said cap rate is 6% on the Mielke property. He said the best commercial property sells at 6%. His client felt that they are overvalued compared to similar property in Monticello. He indicated they met with the County Assessor and were told that condo sites were valued more than strip malls. The Mielke retail condominium development has 7 units; two are owner occupied and five are rented. He cited the valuation of the building of Edina Realty in front of the Wal-Mart site. Greg Kramber said the total square footage of the building divided by tax provides you with the cost per foot. Mr. McCombs suggested that the EDA to a study of the commercial property to see what their value is. Glen Posusta questioned why there is such a big swing. Brian Stumpf said there were some reductions in the valuation on this property. Greg Kramber said the cost per square feet is $126 not $140. Other commercial property runs $111 to $115. Greg Kramber said the difference is that this property is not a strip mall but seven condominium units that could be sold separately. Al Loch said the condominium feature landlocks the tenant so they can't expand. Dan Mielke said the condominium feature is a tax burden because it is less marketable. Brian Stumpf said he could not tell one commercial property owner that another commercial property should be reduced again when it has already been reduced. Dan Mielke said there concern is that they are pay $.80/sq ft more than the Edina Realty building which has Highway 25 exposure. Clint Herbst asked what the impact be if the property was changed from condominium to non- condominium. Tony Rasmussen said this building is 10,000 sq feet compared to the other site which 19,000 sq. ft. Greg Kramber said the bigger the building the less the cost per foot. Clint Herbst said he understood the TH 25 exposure making a difference but questioned whether being adjacent to Wal-Mart impacted the valuation. The condominium space sold at $147 and $193. Greg Kramber said there is justification for size adjustment and cited instances of that. Greg Kramber also noted there was a clerical error which when corrected would result in a savings of $800/year for Mielke. Greg Kramber will be going before the County Board to get the error corrected. Glen Posusta asked if a remedy would be to put this property into separate parcels. Greg Council Minutes - Apri18, 2009 Kramber said he doesn't make those kinds of recommendations because he doesn't have all the background information. Greg Kramber said generally multiple units are more valuable than individual units. Dan Mielke said since they don't have TH 25 frontage they have to charge less rent in order to get tenants. Tony Rasmussen asked if an appraisal had been done on this property within the last 6 months. Dan Mielke said they are in the process of refinancing but at this point in time nobody knows the amount of the appraisal on this. If this property is being refinanced and an appraisal is being done the Assessor's office would consider it. Lee Mielke said it appears there is a lot weight placed on the fact that it is a condo unit. Lee Mielke said they realize the condo market is different now than what it was when the property was developed. He said people don't want to be a unit in a bigger project because what it happens if it fails. Also the tenants are landlocked and cannot expand. Tony Rasmussen asked about the original appraisal the site when it was developed. Tony Rasmussen said there is value in that they can sell their units. Dan Mielke asked if it is state law that condominium value is different than a strip mall or is it the assessor's option. Greg Kramber said they look at best and highest use. The parties argued whether being a condominium unit was a plus for valuation. Jim McCombs said retail condominiums are not popular because it does not allow for expansion. He said the reason retailers rent is so that they can adjust size of the space for the growth or decline of the business. As far as difference in valuation the factors to consider are one is a condominium and the other is not; one has TH 25 exposure and the other does not and there is the difference in size between the two buildings. Jim McCombs suggested his client make two unit condos and asked whether that would make any difference in the valuation. Tony Rasmussen said the difference from $126 condo to $110 was based on the site being one parcel. He didn't have what the cost difference would be if it was two units. Dan Mielke said state law does not require the assessor to value condominium units differently. Glen Posusta asked about the space adjacent to the Wild Wings Restaurant. It was noted that was not a fair comparison since the space adjacent to the restaurant was a shell. Dan Mielke said they are paying $70 more per square foot than the people they are competing with who have exposure on TH 25. Tony Rasmussen said it is not an apple to apples comparison when looking at condominium units and strip malls Greg Kramber said the County could adopt 1/2% sales tax to reduce property taxes. He added that a reduction in one property valuation would have to be picked up by other property because the city, school district, county taxes are still levying the same dollar amount. Brian Stumpf said the value for this property has either stayed the same or has gone down and he didn't feel he could approve a reduction when no one else was getting it. Dan Mielke said they are not asking for a break but that they just don't want to pay more BRIAN STUMPF MOVED NO CHANGE IN THE 2009 VALUATION FOR THE CONDOMINIUM UNITS PID 155-205-000100, 000200, 000300, 000400, 000500, 000600 AND 000700. Glen Posusta said he didn't find it to be worth more because the property doesn't have TH 25 exposure and he can't compare this to downtown. Greg Kramber said there are differences between the sites emphasizing that a condominium unit is a different entity than a strip mall. He said some of the data supplied could give a skewed perception. TOM PERRAULT SECONDED THE MOTION. MOTION CARRIED WITH GLEN POSUSTA VOTING 1N OPPOSITION. 4 Council Minutes -April 8, 2009 Greg Kramber said while he is not recommending this option he is bringing it to their attention. At the present time one individual owns three units and the other one owns four units. By putting each unit in a separate name it would give them I/2% off the first $150,000. Tony Rasmussen said that is what is allowed under current legislation but cautioned that legislation can change. Dan Mielke complimented the County Assessors office for working with them on this. Susie Wojchouski asked Jim McCombs if the vacancies in Monticello were higher than in other communities and if it was because retail are taxed too high. Tony Rasmussen said their office did look at Scott Douglas's building and it does compare with the property around it. The Douglas property is valued $122,000 and is going up to $129,000 or $61 /sq. ft. Greg Kramber advised those who had questions to contact their office. He also thanked the Wright County Assessor's staff for their work. Lori Thingvold brought up a couple of additional items. They are proposing to lower the value for the property at 912 West River Street (155-010-044020). The property had a value of $119,200 and it was proposed to be lowered to $85,500. GLEN POSUSTA MOVED TO REDUCE THE VALULATION FOR 912 RIVER STREET WEST (155-010-04402) TO $85,500. BRIAN STUMPF SECONDED THE MOTION. MOTION CARRIED UNANIMOUSLY. Lori Thingvold stated they had received a letter from Shawn Weinand who could not be present for this meeting but had requested to meet with the Assessor's office to go over the valuation of their commercial properties. Council stated they would take no action at this time since the meeting with Weinand had not yet taken place. BRIAN STUMPF MOVED THAT NO CHANGE TO VALUATIONS BE TAKEN BY THE COUNCIL AT THIS TIME AND THAT IT BE LEFT TO COUNTY STAFF TO MAKE CHANGES IF THEY DEEM NECESSARY. TOM PERRAULT SECONDED THE MOTION. MOTION CARRIED UNANIMOUSLY. Brian Stumpf commented that the Board of Review needs quality input from the full Council and he was disappointed with the level of input at this meeting. BRIAN STUMPF MOVED TO ADJOURN AT 8:20 P.M. TOM PERRAULT SECONDED THE MOTION. MOTION CARRIED UNANIMOUSLY. 1Jo.Atl~lr\ ~~~.~oS~r~Q9-~ Recording Secretary