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04/13/2009 BOR - 29228BOARD OF APPEAL AND EQUALIZATION MEETING CITY OF FRIDLEY APRIL 13, 2009 The Board of Appeal and Equalization meeting for the City of Fridley was called to order by Mayor Lund at 7:02 p.m. PLEDGE OF ALLEGIANCE: Mayor Lund led the Council and audience in the Pledge of Allegiance to the flag. ROLL CALL: MEMBERS PRESENT: Mayor Lund Councilmember Barnette Councilmember Saefke Councilmember Varichak Councilmember Bolkcom OTHERS PRESENT: William Burns, City Manager Scott Hickok, Community Development Director James Kosluchar, Public Works Director Don Abbott, Director of Public Safety Richard Pribyl, Finance Director Mary Smith, City Assessor Lynn Krachmer, City Appraiser Fritz Knaak, City Attorney LOCAL BOARD OF APPEAL AND EQUALIZATION MEETING — 7:00 P.M. Mary Smith, City Assessor, stated the meeting is held in accordance with Minn. Stat. § 274.01. The purpose of the Board is to establish a consistent appeal procedure for property owners who want to appeal the 2009 estimated market value or classification of their property. Only appeals for this current year's valuation or classification may be heard. As the Board, the City Council has the ability to change values or classification in accordance with State law. The Board has three possible courses of action that can be taken on each case. They are as follows: to affirm, reduce, or increase the current value based on 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 Anoka County Board of Appeal and Equalization which will be held on June 15. Ms. Smith stated according to Minnesota State Statutes, the Board is to have a majority of the Council members be in attendance to have a quorum. There must be at least one member at each meeting of a local board who has attended an appeals and equalization course developed or approved by the Commissioner of Revenue within the last four years. The Board shall see that all taxable property is properly classified and valued. If property is omitted from the tax rolls, it BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 2 may be added by the Board. The Board cannot give a class of property an increase or a decrease. They may only increase or decrease individual properties. The Board must hear cases for the current assessment year only. If the Board makes reductions to individual properties, the amount of the reduction cannot exceed 1 percent of the City-wide aggregate assessment. If the Board finds a case of undervaluation, it may raise the valuation of the property, but it must first notify the owner. The Board must complete and adjourn within 20 days from the time it convened. The procedures for the Board of Appeal and Equalization will be to hear the property owners' concerns and accept any information that appellant may have in regards to their value. The Board may then direct staff to reappraise the property and report back to them at a reconvened meeting. Written appeals will be read once the property owners who are present have completed their appeal. Once read, the Board may confirm the 2009 estimated market value allowing the property owner to take the appeal to the County Board. Ms. Smith stated the 2008 reassessment consisted of viewing 1,800 properties. These properties were located in the southeast section of the City. Each of these properties was initially visited. If the owner was not home, a tag was left asking them to call and set up an appointment. If there was no response, values were estimated assuming some improvements had been made since our last reassessment. In order for these property owners to appeal their value, they will need to have staff physically review their homes. Ms. Smith stated there were 160 residential sales that occurred in Fridley from October 1, 2007, through September 30, 2008. This number consisted of single-family homes, townhomes, double bungalows, and condominium sales. The dates of October 1, 2007, through September 30, 2008, are important as they are the dates established by the State for our sales ratio study. The State's required sales ratio needs to be between 90 and 105 percent. These ratios are determined by taking the estimated market value and dividing it by the sales price. To bring the assessment within the State's recommended range, there were reductions in structure value from 8 to 11 percent depending on the style for single-family properties and 15 percent for townhomes, double bungalows, and condominiums. Along with this, most land zones saw a decrease in value of approximately 9 percent. These reductions brought the assessment within the State's range. The adjusted overall ratio for Fridley is 94.4 percent. These changes resulted in an overall decrease in residential value of 8 percent. Ms. Smith stated, regarding the commercial and industrial, a study of fair sales indicated that our sales ratio was within the recommended range by the State. The maj ority of commercial/industrial properties remained the same or experienced a slight decrease in value. Land values remained the same. This resulted in an overall decrease in value of 1.4 percent. Ms. Smith stated as a result of apartment sales within Anoka County, decreases were made to the apartment rate. Overall this created a decrease in value of 2.8 percent. 1. Dave Morrissette: 1313 — 73rd Avenue NE (actually 1313 and 1323 but 1313 is only shown on the tax record); two four-unit buildings, 106 — 77th Way NE and 7673 East River Road BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 3 Mr. Morrissette stated he is a small investor. He owns about ten buildings in three different counties. Three of them are in Fridley. He is contesting the tax value on all three. He has been through a lot of buildings in the last two years and is pretty aware of the sales and what they are priced at. One of the buildings he bought in December 2007 (right when the market was starting to go down) is a duplex on 73rd Avenue. It was a foreclosure. The first address is: 1313 — 73ra Avenue NE (actually 1313 and 1323; but 1313 is only shown on the tax record); the other two are two four-unit buildings, one address is 106 — 77th Way NE and one is 7673 East River Road. The one building he wants to talk about more than any is the one he bought in December 2007. He paid $224,900 for it. It was a foreclosure property. He brought it up to the assessors last year. He did not contest it because they said it was kind of late in the year. They go through September, and it was a foreclosure. Over the last year in 2008, he has looked at numerous properties. The values went down anywhere from 25 to 35 percent over the last year for these type of buildings. In his opinion, the two to four unit buildings have been hit harder, because they were over assessed, and people paid too much for them for years. Mayor Lund asked when he said there has been a 25 to 35 percent decrease, is that in the sales price devaluation? Mr. Morrissette replied that is in the sales. Mayor Lund asked if he had seen the tax statements. Mr. Morrissette said he has not. Mayor Lund said these are unusual times, and rarely is anybody paying fair value. Foreclosures are being sold at a substantial discount from banks. Mr. Morrissette said one of the things city assessors have told him is that you cannot use foreclosure sales. He does not think the State Statute exactly says you cannot use foreclosure sales. It says you cannot use forced sales. When he looked through it he does not see a definition of forced sales in the law. He said the assessed value for the duplex is $226,100. It is assessed more now than when he bought it in December 2007. He could not get that kind of money for a building like that. Mayor Lund stated he guessed he needed a little bit clearer understanding. He asked if staff had been to the property during the past year to inspect it. Mary Smith, City Assessor, replied, no. Mayor Lund asked staff that is not in your cycle right now? Ms. Smith replied, correct. Lynn Krachmer, Appraiser, replied, this summer. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 4 Mayor Lund stated he is going to ask the parties to discuss the valuations and see if some adjustments need to be made. He thinks they are going to stick with what they perceive to be fair based on the criteria typically used. One of the items used in an assessment valuation is what was it sold for in a buyer-seller purchase. Also, what do you use for income? The easiest way to determine these valuations is an appraisal, but he knows that costs money, too. Mr. Morrissette said appraisals are tough. It is tough to finance the buildings. Mayor Lund said Mr. Morrissette bought the property in 2007 and he said the valuation is now higher than when he bought it. He asked about the valuations. Mr. Krachmer, City Appraiser, said Fridley does not have any good duplex sales. There were about five foreclosed sales, one which was Mr. Morrissette's. Mayor Lund stated when valuations were going up, you were benefiting because of the delay from when they actually placed a valuation on the duplex until the time you are paying for it. There is like an 18-month delay. Mr. Morrissette may see a devaluation in next year's statement. That is something that needs to be looked at. Mr. Krachmer replied duplexes have dropped in value about $40,000 to $50,000 in the last two years. He said he did have the values of the sales for the foreclosed duplexes. One sold for $295,000; one sold for $220,000 and Mr. Morrissette's sold for $224,000. Those are foreclosed sales which they do not use in the study. They had to go countywide for sales of duplexes. Ms. Smith stated they will give Mr. Morrissette a call and set up a time when they can go view his properties. Councilmember Bolkcom asked about the process for the meeting. She knows they are going to listen to everyone tonight and get back to them. Mr. Krachmer stated they need time to analyze the cases. Councilmember Bolkcom said this is different because in the past they have come forward and staff has come back to the meeting and said, we have reviewed the case and you either need to confirm or not confirm. So we still have to do something with all the appraisals on the 27tn Richard D. Pribyl, Finance Director, said staff will be coming back on the 27th with their recommendations to the Board. Mayor Lund stated we will still need to formalize it. Mr. Pribyl stated the City Assessor will actually recommend to the Board affirming the value or taking some action. So the City Assessor will have some recommendation of action on everybody who is here this evening. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 5 Mayor Lund said if anyone is not happy with the results after talking to staff, they need to be present for the next meeting. Otherwise, Council will affirm staff's recommendation. Councilmember Bolkcom stated unless they say it is different. They could come back and still say something different. 2. Leonard Kos, 5468 Altura Road NE. Mr. Kos stated the property is located just south of I-694 and a little bit west of University. You could label it a freeway property. He looked at the assessed valuations that have been assigned from the period 2005 to the present, and there is a steady escalation regardless of what the market shows. Mr. Kos asked why the increasing escalation and was told that it was because a fireplace was discovered in the home. Mr. Kos said this has been of record for a long time. The appraiser stated the City had no record of the fireplace installation. Mr. Kos called the building inspector who confirmed, yes, a permit was pulled in 1987. It was subsequently inspected after the installation. Likewise, assessors have come through the property since then. The fireplace is a small, "zero tolerance" fireplace, 13-inches in depth and about 2 feet wide. It was converted to gas. The inspector came out and checked it out. He was not trying to hide the fireplace. It has been there and it really should not be re-taxed as such. It is not a big issue, but nonetheless the fairness doctrine does apply. Mr. Kos stated, secondly, he categorized all the properties on Altura Road as freeway or near- freeway properties. They are a little different in scope and in fact the market value is a little bit testier than typical residential properties which are immune to this noise and pollution. There are roughly 32 houses in the Altura Road area. Half of them went up in value and half of them went down. He guessed it points to the fact that maybe you have different criteria for assessing what market conditions are. He gave a few examples of the assessed values: The assessed value for 5455 Altura was around $118,000. Two doors down there is a story and one-half with a double attached garage. The value for that was pushing $226,000. He said there is a difference in value. He guessed he would re-examine. Especially viewing the fact that these are freeway properties. Councilmember Bolkcom asked how much his value went up from last year. Mr. Kos replied, from he thinks $157,000 in 2004 to around $185,000. In 2008 it went to $186,000. Mr. Krachmer asked what the valuation for his property is in 2009. Mr. Kos replied in 2009, he got some relief, $174,900. Mayor Lund stated it sounds like it is catching up now. There is always a lag. He asked what the last valuation was. Mr. Kos replied, $174,900. Mayor Lund asked what it was the year before. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 6 Mr. Kos replied, $186,000. Mayor Lund stated so it went down $11,000 to $12,000. Mr. Kos replied, not quite $12,000; but he thought it was still about $5,000 over-valued. Mayor Lund stated to it may be true that the fireplace was not previously caught. He asked how long it had been there. Mr. Kos replied, 21 years. Mayor Lund asked if it was customary when building permits are pulled that the assessor's office gets notification. Ms. Smith replied yes, they do get a copy. Mayor Lund stated and the box for the fireplace was never checked off for that property? Mr. Krachmer stated it must have been overlooked for years. The last time he went through the house, he happened to be in the living room and noticed and said it would need to be put on. It was never on before. Mr. Kos stated maybe in the judgment of previous assessors they thought there was little incremental value with it. Mayor Lund stated he would be interested in how much the valuation goes up. It seems it would be very little. Mr. Kos stated it is a matter of principle for somebody now to tell him after 21 years he is now being taxed for incremental value. He would like them to look at what actually exists and say, we are not here to recapture events 21 years of age. Mr. Krachmer stated this fireplace was not taxed for 21 years. So, actually he was getting a break for 21 years. Mayor Lund said staff would contact Mr. Kos. Mr. Kos said they have been through that. He came out and looked at it. Oddly enough there is a stack on the front of the house. Mayor Lund stated he is going to see if they are going to reassess it or if they will stay at where they are at and then we will discuss it at the next meeting. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 7 William Burns, City Manager, said he looks at the North Metro Realtors sales values quite often. His recollection is he did not see values in Fridley start to fall precipitously until about September 2007. Mr. Krachmer replied, from what he read, the market peaked July 2006. Dr. Burns replied, he did not see a sharp decline until that point in time so he thinks it would be reasonable to expect those values to continue to decline up until very, very recently. Mary Smith, City Assessor, replied yes, because you have to keep in mind that the 2008 value was based on sales from 2006 to 2007. 3. Irwin Reynolds, 530 Ely Street NE. Mr. Reynolds stated he is at the meeting to dispute his property tax value. He has several different copies of recent valuations of the property and also from 2007-2008 which is supposed to be the valuation of his assessed value payable for 2010. He also has the properties that sold in 2007 to 2008 and what they sold for. Mayor Lund asked if he was talking about the comparables. Mr. Reynolds replied, yes. Mayor Lund asked where he got the comparables. Mr. Reynolds replied he used the foundation size and square footage and went online. He said in one month from February to March, the value dropped $2,970. Mayor Lund said he took the foundation size and took it to an on-line service. He is talking about valuations that dropped precipitously in what time period? Mr. Reynolds replied, when you go to Cyberhomes.com, you type in the address, and they bring up a satellite picture of your home and what it is valued at. Mayor Lund asked when it dropped. Mr. Reynolds replied, in one month from February to March of this year, it dropped $2,970. They give you a chart as to what your home value was for the duration period that we are talking of, 2007 to 2008, and the chart shows it is clearly below what they have for assessed value. Mayor Lund asked what the assessed value is. Mr. Reynolds replied they show an assessed value of $202,100. It is nowhere close to that. Mayor Lund asked what he would sell his house for. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 8 Mr. Reynolds replied, it is not what he would sell it for. It is what he can get for it. Mayor Lund asked what he thought was a reasonable price to sell his house. Mr. Reynolds replied, when he called the assessors, they said he cannot go by foreclosures or short sales. There are homes on his block within five houses away. One just sold recently for $139,900. Another one, the assessment taxes on it was $1,989. It sold for $110,000. Those homes are on his street. Now, he is going to say he wants $202,000 for his? It is not going to sell, because they buying all these other homes which he has printouts of their property values, for more square footage than what he has, selling for a lot less money. Mayor Lund asked if the house that sold for $110,000 was a foreclosed house. Mr. Reynolds replied, no, and it was not a short sale. Neither was the one that sold for $139,900. Mayor Lund asked Mr. Reynolds to share the information with the City Assessor, and asked staff to contact Mr. Reynolds. He asked Mr. Reynolds to give staff a little time to review the materials. If Mr. Reynolds is in disagreement with them, he needs to come back on Apri127. Councilmember Bolkcom asked Mr. Reynolds what the value of his home was right now on Cyberhomes.com. Mr. Reynolds replied, it is $159,489. His neighbor is a realtor, that is why he knows what the homes sold for 2007-2008. 4. Norma Rust, 360- 57th Avenue NE. Ms. Rust stated they purchased a dwelling at 360 — 57th Avenue, and she looked at the total valuation on that which was $234,300. The building itself was valued at $181,000 so that comes out to 77 percent of the total valuation. The structure is 1,729 square feet. She looked at other homes that sold in the very near proximity. On those, the ratio on the total valuation to the value of the building, the buildings were valued in the 63-66 percent. She does not know why this particular building that they bought is valued at 77 percent of the total valuation. When she ran the figures using the percentage on the square footage, the per square foot valuation taxable on those other properties ranged anywhere from about $51 up to $92 per square foot. Taking into account that land is always going to be land, it is always going to have the same value. She thinks that the taxation on her property is high based on the 77 percent figure. She thinks the total valuation should be going down to $208,900, leaving the land value as it was at $53,300 but changing the value on the building to $155,600 which drops it down to the 62-66 percent ratio for the total valuation. Mayor Lund asked the staff to look at those figures. They will get in touch with Ms. Rust. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 9 5. Ralph and Gloria Swanson, 511 — Ely Street NE. Mr. Swanson stated he is here to protest his assessment. He is a neighbor of Mr. Reynolds. He has some of the same information. Their house on Cyberhomes.com is valued at $156,247. It has 1,028 square feet and is next door to the house that sold for $110,000 within the last couple months. Up the block, about five houses, is another house that sold for $136,140 which is approximately the same size. It is a much newer home and very well kept up. He got the information from a realtor. Most of them had more square footage than his, and are probably up around $135,000 to $140,000 on just an overall average. Councilmember Bolkcom asked what the assessed value of his home was. Mr. Swanson replied, $194,900. Mayor Lund stated he will share that information with staff to review. He asked if the list of sales was short sales, foreclosed sales or depressed sales. Mr. Swanson replied, he got the information from a realtor, and he said they were not short sales. Mayor Lund asked if he has addresses or property identification numbers for those properties. Mr. Swanson said he had the addresses. Mayor Lund stated staff will be contacting him and asked that he share that information with them. If he is unhappy with what they finally come up with, then he will need to come back on the April 27, and the Board will make the final determination. If he is still unhappy with the determination, that allows him to go to the County Board of Appeal and Equalization. Mr. Krachmer stated to Mr. Swanson that they will be contacting him to set up an appointment to come out and review his property. William Burns, City Manager, stated in response to Councilmember Bolkcom's question about what we attribute the value to, it would be a lot clearer as they talk to other people if they would start by telling us what the value is that we ascribed to the property and then proceed to describe the value and why they think it is different. 6. Spencer and Gay Minear, 1291 Gardena Avenue. Ms. Minear stated they live in the Moore Lake Hills area and she thought only four houses sold in the timeframe they are talking about. She did not think there were any short sales. They sold from $144,000 to $180,000. The $180,000 home was bought by the County. Mayor Lund asked what their property was valued at now. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 10 Ms. Minear said they had two properties. She is not contesting the land but they come together. That is $190,700. She is looking in her neighborhood, and there is nothing comparable to their size selling for anywhere close to that. She definitely feels their property has been hanging up there when the whole neighborhood has been sliding. Mayor Lund asked Ms. Minear to share what she had with staff and meet with them. Mr. Krachmer stated Ms. Minear said their neighborhood is small. He said the there are 1 to 9 zones in Fridley, and this is a mass appraisal system. If, for example, she lived in Zone 3, they would look at all sales throughout Fridley that are zoned as a 3. There could have been 20 sales in zone 3 that they used. Ms. Minear stated she did include others. She concentrated on Moore Lake and put that in the first section, others in the neighborhood, and then tried to pick up comparables in Fridley at large but it is hard to know exactly what is a 3-bedroom, 1-bath rambler. Mayor Lund said he thought staff would be able to help her. Mr. Krachmer stated he can send out the sales information they used for their study in that zone. Mr. Minear stated all those figures are from the appropriate timeframe and the sale prices are down much lower past that timeframe. So next year we will be back unless it has gone down further. Ms. Minear stated regarding the $180,000 home, that was early in that timeframe and they tended to drift even lower in that timeframe. Mr. Minear stated the home that sold for $180,000 which is the only one that comes close to the assessed value of their home in their neighborhood was a purchase by the County to put a group home into that neighborhood, and they paid a premium to get it in there. Mr. Krachmer stated usually they do not count government sales. 7. Gene Rafferty, American Legion, 7365 Central Avenue N.E. Mr. Rafferty stated he is a member of the executive committee of the Fridley American Legion Post No. 303. He is here to appeal the valuation of PIN No. 12-30-24-13-00-84, Lot 2, Block 1, Walnut Addition, subject to easement of record. The address is 1360 Onondaga Street which is the parking lot behind the Fridley American Legion at 7365 Central Avenue NE. Mayor Lund confirmed they are contesting the valuation of the parking lot and not the building. Mr. Rafferty replied correct. Malcolm Watson who has many years experience in appraising was to be their spokesman tonight; however, he is unavailable because he had knee replacement BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 11 surgery. He has written a short letter stating their case. Mr. Rafferty appeared tonight to reserve their right of appeal to the County. He asked that the Board to affirm the value. Mayor Lund stated they do not have to do that yet. The County Board meets on June 15. They may be able to take care of it. He said with Mr. Watson being the spokesperson for the American Legion's dispute, and Mr. Rafferty representing them tonight, are they okay with that? If they want the County to handle it, that is fine. Mr. Rafferty said he is operating on Mr. Watson's advice. Mayor Lund stated he is going to have staff look at the American Legion parking lot assessed value. On April 27, the Board will make their final recommendation and the American Legion can take it to the next level if that is what they want to do. Mr. Rafferty replied he does not think they have any choice. Councilmember Barnette stated they were told the property is in a commercial/industrial category. He asked if that had changed. Mary Smith, City Assessor, replied no, it has been in the commercial/industrial category; however, there is a new classification that was available to charitable organizations beginning last year. The last date to file is May 1 of every single year. They did file it for taxes payable this year on the parcel where the building sits. They will need to file that same application for taxes payable next year, and then it will be classified at that 4C3ii classification. The classification is commercial/industrial; however, they have the opportunity to change that every single year but it is after these valuation notices come out. Mayor Lund asked when they do the annual paperwork, does that mean that the valuation will go down. Ms. Smith the value will not go down, but the classification rate of 4C3ii is less than commercial/industrial rate. Mayor Lund asked so the valuation does not go down but they end up paying less property tax. Ms. Smith replied, correct. Councilmember Bolkcom asked Mr. Rafferty what was the valuation last year on their tax statement? Mr. Rafferty replied, the valuation last year was $32,500 and was raised for payable in 2009 at $73,100 which is approximately an 18 percent increase. Ms. Smith stated these last two years it has been set at $73,100. The 2008 value was at $73,100; the 2009 value is at $73,100. It is the same. She increased the land value during the year of 2007 on all commercial/industrial properties to bring them up to where she felt they should be. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 13, 2009 PAGE 12 That was the reason for the huge increase from $32,500 to $73,100 from 2007 to 2008. The 2008 value and the 2009 value are at $73,100. Mayor Lund informed Mr. Rafferty staff will be in touch with him or Mr. Watson. MOTION by Councilmember Bolkcom to receive the following: 1. Letter from Malcolm Watson regarding American Legion parking lot valuation. 2. Information from Spencer and Gay Minear regarding sales in their neighborhood. 3. Income and expense statement from David Morrissette. 4. Information from Norma Rust on sales or valuations of other double bungalow properties. Seconded by Councilmember Varichak. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY. MOTION to continue the Board of Appeal and Equalization meeting until April 27, 2009. Seconded by Councilmember Barnette. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY AND THE MEETING ADJOURNED AT 7:50 P.M. Respectfully submitted by, Denise M. Johnson Scott J. Lund Recording Secretary Mayor