Loading...
04/24/2006 BOE - 00027737BOARD OF APPEAL AND EQUALIZATION CITY OF FRIDLEY APRIL 24, 2006 The Board of Appeal and Equalization for the City of Fridley was called to order by Mayor Lund at 7:08 p.m. PLEDGE OF ALLEGIANCE: Mayor Lund led the Council and audience in the Pledge of Allegiance to the flag. ROLL CALL: MEMBERS PRESENT: MEMBERS ABSENT: OTHERS PRESENT: Mayor Lund Councilmember Barnette Councilmember Billings Councilmember Wolfe Councilmember Bolkcom William Burns, City Manager Mary Smith, City Assessor Lynn Krachmer, City Appraiser Fritz Knaak, City Attorney MOTION by Councilmember Billings to continue the Local Board of Appeal and Equalization meeting. Seconded by Councilmember Barnette. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. Lynn Krachmer, City Appraiser, introduced Mary Smith, City Assessor, and Mary Boyle from Anoka County. He said this is a continuation of the local Board of Appeal and Equalization meeting held on April 10, 2006. The purpose of this meeting is to present information to support and/or establish a 2006 estimated market value for three properties whose owners appeared at the first meeting. As the Board, the City Council has the ability to change values or classifications in accordance with State law. The Board has three possible courses of action that can be taken on each case. They can affirm, reduce or increase the current value based on the information presented. If upon reaching a decision the property owner feels that the Board did not resolve their concerns, they may bring their case to the County Board of Appeal and Equalization which is on June 19. The three properties to be reviewed are as follows: (1) 7701 Main Street NE (industrial property); (2) 148 River Edge Way (single-family residential); and (3) 1567 Ferndale Avenue (single-family residential). BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 2 Mary Smith, City Assessor, gave a presentation on the first property, 7701 Main Street NE. She stated this property is a 19,200 square foot industrial property that is currently being leased. The 2006 estimated market value is $892,400 or $46.48 per square foot. It sold on January 3, 2006, for $735,000 which equates to $38.28 per square foot. The land size of this property is 61,518 square feet. This property sits on the corner of Main Street and 77th Avenue. In verifying the sale in March, she was told by the buyer that the appraisal came in at more and that the seller and buyer agreed on $40.00 a square foot minus the deferred maintenance that needed to be taken care of. She explained to the owner at the time that since values had already been set she would like to see the appraisal and income and expense information and would be able to make an adjustment to the value. To date, staff has not received the requested information. Staff did put together a sales comparison using properties that have sold in this area of the city. After adjustments were made to make them comparable to the subject property, the value was determined at $966,000, or $50.29 a square foot. Also using the average rent per square foot that Mr. Stock told her in March and applying the income approach, the value was determined to be $979,800 or $51.00 a square foot. It is staff's recommendation at this time to affirm the 2006 estimated market value of $892,400 or $46.48 a square foot. This would give the property owner the opportunity to take his grievance to the County Board of Appeal and Equalization. Warren Stock, owner, approached and stated the $40.00 a square foot was what Mr. Harris was asking for the property, not what was agreed upon. The price they had agreed again was the $735,000. Mr. Harris was present if there was an issue on the value of the property. The real concern is this is a 40-year old building, and the maintenance cost on a 40-year old building is substantially more than a new building, which makes its value as far as income vs. maintenance costs considerably less. The other part is a$700,000 investment on his income level and for what he will spend on maintenance will not equal any of the numbers Ms. Smith came up with. Mayor Lund stated based on Ms. Smith's presentation, it looked like the value was $51 per square foot. Mr. Stock stated he has not done those calculations. His calculated that after taxes, insurance, interest on the loan, and the maintenance costs, there is around $2201eft for major improvements on the building. Mayor Lund stated staff inentioned that to date, Mr. Stock had not yet supplied them with any additional information. He asked what additional information was needed. Ms. Smith stated in March, she asked Mr. Stock for the appraisal and income and expense information on the property. She also called Mr. Stock on April 11, after the Board of Appeal and Equalization meeting and told him what she needed to get this resolved. Mayor Lund stated if Mr. Stock would like to refute staff's valuation, they need some information from him. He asked Mr. Stock if he was renting this with a net lease. Mr. Stock said taxes are included in the square foot price. Mayor Lund asked if he was doing a net lease. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 3 Mr. Stock stated, no. They have leases, and water and sewer are included. Richard Harris (previous owner of subject property), 6200 Riverview Terrace, stated the property has been for sale for four years. He had a little trouble selling it. They had it priced at $40 a square foot. They had several people try to put a deal together. They could not do it at $40 a square foot. Finally, Mr. Stock put it together and the way he did it was by putting a lot of cash into the deal. The sale price was $735,000. He talked to several banking institutions on the other loans. He has been in the business for many years. He has built buildings and still runs the business. The building is worth $735,000, and that is what they got for it. He talked to several banking institutions and they would not go a nickel more than $500,000, which is around 80 percent of the value. That does not even come close to $735,000. That is why they were having trouble with it. They had four different people look at it but could not do it because the banking institutions did not feel the building was worth $40 a foot. As far as the rents go, it does not compute. It does not work out to be $51 a square foot. Mayor Lund asked Ms. Smith how she came up with the calculations of $50.29. Ms. Smith stated when she talked to Mr. Stock in March, she asked him what kind of rents he was getting on the place and he said on average it was $6.25. Mr. Harris stated that includes sewer, water, maintenance, grass cutting, and taxes. If you take all the taxes and everything else out, it is down around $4.80. It also includes the building insurance. So $6.25 per square foot is the total rent they pay. They do not pay anything e�ra for grass cutting or taxes. Councilmember Billings asked Ms. Smith if the numbers she arrived at were based on a telephone conversation in March. Ms. Smith replied for the income approach, yes. Councilmember Billings asked if she requested information from Mr. Stock after the last meeting. Ms. Smith said she did. Councilmember Billings asked if he had provided the information since the last meeting. Ms. Smith said he did not. Councilmember Billings stated to Mr. Stock the problem here is they have the Assessor coming up with one value. When he was at the meeting they asked him to provide information so they could take a look at it. Mr. Stock did not come through for them to be able to look at. He suggested to Mr. Stock that he provide the County with information so they can do an analysis of their own. He does know that on the County Board of Appeal and Equalization there have always been four or five real estate sales people and real estate appraisers and they go out and analyze the property themselves. He can either bring it with him to the County Board of BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 4 Equalization meeting or, if he can get the information to Ms. Smith ahead of time so she can present it to the County, they can actually do an analysis and, if the County staff agrees with his numbers, he may be able to get it taken care of at the first meeting. MOTION by Councilmember Billings to affirm the estimated market value of $892,400 for 7701 Main Street N.E. Seconded by Councilmember Barnette. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. Mr. Krachmer stated the ne�t property is 148 River Edge Way. The 2006 estimated market value was established at $337,500. It consists of a 1,008 square foot rambler with a full walkout basement. This property was last viewed by staff on April 13, 2006. It is in fair condition with deferred maintenance being observed. The property has a lot size of 76 x 454 on the Mississippi River. The following properties have been chosen as comparables to the subject property, are riverfront sales, and have been adjusted for differences: (1) 169 Hartman Circle, sold for $376,000 in October 2004. This property is a rambler on full basement, consisting of 1,530 square feet. This property was last seen by staff in June 2005; (2) 173 Hartman Circle, sold for $405,000 in May 2005. This property is a rambler on full basement, consisting of 1,486 square feet. This property was last seen by staff in June 2005; and (3) 165 Hartman Circle, sold for $375,000 in June 2005. This property is a rambler on full basement, consisting of 1,395 square feet. Staff was unable to view this property during the last reassessment. The average value after adjustments were made to the comparables is $337,500. It is the recommendation of staff that after review of similar properties and applying the sales comparison approach to value, that the 2006 estimated market value for PIN 15-30-24-43-0057, 148 River Edge Way, remain the same at the established value of $337,500. Tim Hoglund, owner, approached and stated he bought this house in 2002 for $230,000 because it is close to his mother's house. He could afford the taxes on that. Mr. Krachmer had stopped out at his house twice and was open to very little compromise, and he thought he should state his case. He showed a photograph of the house and stated it does not have a lot of curb appeal. He said the neighborhood, although nice, is not comparable to the Hartman Circle neighborhood. He compared the properties, pointing out one of them was 500 square feet larger than his. The smallest property of the three is still close to 400 square feet larger than his property. If you went to his neighborhood you would see that three of six houses along the river there, three of them have single-car garages. They are just not comparable to Hartman Circle. He compared the property at 301 Rice Creek Terrace. It had a big backyard, it has a two-car garage, and four bedrooms. That is all he knows about it, but it was below $250,000 as he recalled. He bought a home last year in the St. Anthony Park neighborhood. For some reason they adjusted it to $310,000 this year so it went down $25,000. In the meantime, his house on River Edge Way that was worth $266,000 is now worth $337,000. That is $66,000 plus and the burden of proof is all on him. He is supposed to go out and get appraisals and lose $350. He thinks it is very difficult for ordinary citizens to defend themselves against professionals. He thinks the value is at about $300,000. He would ask for $310,000. That is still $50,000 higher than last year. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 5 Mr. Krachmer stated he called Mr. Hoglund the morning after the Board meeting. Mr. Hoglund came in and they made an appointment for him to go out the ne�t day and look at the house again. He said he made a$35,000 adjustment. The comparables are in average condition, no updating, and all original kitchens. Dr. Burns stated he believed he heard Mr. Hoglund say his basement ceiling heights are only 6 feet. Mr. Krachmer replied as you go down the stairs, it probably juts out but he did not have to duck his head or anything. Mr. Hoglund stated it is 5 or 6 feet. Mayor Lund asked about the other comparables such as having a two-car garage. Mr. Hoglund stated they all have two-car garages. His is a large single. Mr. Krachmer stated his is a deep single. Mayor Lund said he would agree with the analysis of the e�terior pictures that the other homes on Hartman do seem to have more curb appeal and fresher landscaping. Mr. Krachmer stated their backyards go for about 20 feet and then go down. Mr. Hoglund's goes for 300 yards. The land value is the same on all of them. If you are on the river, all the land is the same no matter how deep. They have not gotten down to the specifics. They are still working out those differences. Mayor Lund stated on the comparables Mr. Krachmer showed the conditions a minus $35,000, probably because they have not had updating. Mr. Krachmer replied the $35,000 would be the house in his estimate to average, not good, but at least to the average where the other sales were. Mayor Lund stated so he did have the subj ect property as average whereas the other comparables are average good. Mr. Krachmer replied that is because they are bigger. The size has all been adjusted for. The $35,000 would be a house in pretty good shape actually. Mayor Lund stated his thought, too, is that okay the averages of these others, Mr. Krachmer is already devaluing his about $40,000. Mr. Hoglund replied $40,000 does not buy much building now. Mayor Lund stated but a lot of updating. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 6 Mr. Hoglund stated he believed when people drive up to his house they are not going to see a house worth $337,000. He knows this house had a history of hard sale. It was on the market for a while, but his mom was right there and he wanted to move back to Fridley. Mayor Lund asked Mr. condition house and the $40,000 differentiation? Krachmer if he had a lesser amount on this because it is an average other comparables were average good. Is that where he sees that Mr. Krachmer stated he took 5 percent. Mayor Lund stated that brings up $35,000 on all the comparables. He saw that all of the comparables are considerably larger properties as well. Mr. Krachmer stated they are also adjusted for size. Councilmember Billings stated the $35,000 is a reduction that Mr. Krachmer is placing on comparables 1, 2, and 3 to bring them down to the level of the subject property. Mr. Krachmer stated that was for condition only. Councilmember Billings stated, in other words, because the subject property is in a less than good condition, he has reduced, in order to come up with a comparison, he is saying it would take $35,000 to bring the subject property up to an average to good condition so he is subtracting that from the three comparables. The second adjustment above the totals, the size dollars, they have subtracted $29,000 from the one, $27,000 from the one, $22,000 for the other. That is to adjust for the square footage. MOTION by Councilmember Barnette to affirm the estimated market value of $337,500 for 148 River Edge Way N.E. Seconded by Councilmember Billings. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. Mr. Krachmer presented the third case regarding 1567 Ferndale Avenue N.E. The 2006 estimated market value was established at $190,300. This property consists of a 960 square foot split foyer with a lower level approximately 90 percent finished. It was last viewed by staff in Apri12005. It is in fair condition with deferred maintenance being observed. This property has a lot size of 72 x 133. Ferndale Avenue is 1.5 blocks north of Gardena. This property was sold in January, 2005, for $168,000. After review of the property at that time staff reduced the value, due to deferred maintenance beyond the normal wear and tear on a home. This reduction is still currently on the property. The following properties have been chosen as comparable to the subject property and have been adjusted for differences: (1) 1413 Meadowmoor Drive sold for $200,000 in November 2004. This property is a split foyer consisting of 768 square feet with the lower level finishing of 385 square feet. Staff was unable to view this property during the last reassessment. (2) 5775 Washington Street sold for $219,900 in September 2005. This property is a split foyer consisting of 1,157 square feet with the lower level finishing of 560 square feet. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 7 Staff last viewed this property in 2002. (3) 6627 Anoka Street sold for $217,000 in January 2005. This property is a split foyer consisting of 1,004 square feet with lower level finishing of 732 square feet. Staff last viewed this property in 2001. The average value determined after adjustments were made to the comparables is $192,600. It is the recommendation of staff that, after reviewing the sales of similar properties and finding sales comparisons approach to value, that the 2006 estimated market value for PIN 24-30-24-11-0085, 1567 Ferndale Avenue N.E., remain at the same established value of $190,300. Mark Sims, owner, stated he asked that they look at the documentation he provided them on the April 10. Councilmember Billings stated on Mr. Sims' comparable, as an example on 5775 Washington Street, he comes up with $61,500 worth of adjustments. Mr. Sims replied those are based on what a fee appraiser suggested. Councilmember Billings stated staff has given them a comparison to the same property, and they come up with $30,000 worth of adjustments. Mr. Sims stated his second question would be he would like to see what they have before them, the adjustments that were made and the values that were made to different things. Mayor Lund stated his is in condition of fair where the comparables were average. Mr. Sims stated he just wanted the information for what he assumes would be the ne�t step. He is not able to analyze this at the moment. He wanted to state that they purchased this house on December 30, 2004, for $168,000. That was 98 point something of the listed asking price. At that time the estimated market value was $188,600. Four months after their purchase, the assessment went up to $196,500. When he questioned that they lowered it to $178,000 which he agreed to. He assumed though that the taxable market value would be decreased an equal percentage and it was not. They adjusted it downward to $178,000. He agreed so he did not have to come here and see them last year. This year they have assessed at an estimated market value of $190,000 plus. He has made no improvements to the property. It is still in the same condition. As he told them last time, they spent a period of ownership so far to date cleaning up the property which was he considers poor condition. They hauled away over 30 square yards of debris that was left on the property. All the interior doors have holes in them. There was no floor covering on the two bedrooms that they have. It is in poor condition and what they were able to do to the property was negated by the storm. On April 10, he asked them to lower the market value to $168,000. He would like to do that again today. Mayor Lund clarified they had readjusted it to $178,500 for last year and this year he would like it to go down another $10,000. Mr. Sims replied, yes, because he believed it went up an inappropriate amount last year. Mayor Lund stated very few properties ever devalue but just about all properties go up in value. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 24, 2006 PAGE 8 Mr. Krachmer stated he found about nine sales and he took the three very lowest of all the sales and did his adjustments to the very lowest. He considers those in average condition. He has not seen them. They could be in lower condition, but he still did a healthy adjustment he thought would bring this home up to an average condition. Mr. Sims asked what adjustment he would consider fair. Mr. Krachmer replied, $35,000 is more than adequate. Mr. Sims stated all of the properties all look average; the interior of his property is not average or fair. It is poor. They are working to clean it up and intend to improve it. He thinks they should lower the value because it has been artificially raised too much. MOTION by Councilmember Barnette to affirm the estimated market value of $190,300 for 1567 Ferndale Avenue N.E. Seconded by Councilmember Billings. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. MOTION by Councilmember Barnette to adjourn the Board of Appeal and Equalization meeting. Seconded by Councilmember Billings. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MEETING ADJOURNED AT 8:10 P.M. Respectfully submitted by, Denise M. Johnson Scott J. Lund Recording Secretary Mayor