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BOE 04/22/2013 BOARD OF APPEAL AND EQUALIZATION MEETING CITY OF FRIDLEY APRIL 22, 2013 The Board of Appeal and Equalization meeting for the City of Fridley was called to order by Mayor Lund at 7:05 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: Darin Nelson, Interim City Manager James Kosluchar, Public Works Director Darcy Erickson, City Attorney Deb Skogen, City Planner Mary Smith, City Assessor Patrick Maghrak, Appraiser Philip Vande Kamp, Stone Trail, LLC Mary Boyle, Anoka County Mary Smith , City Assessor, stated this meeting is held in accordance with State Statute 274.01. The purpose of the Board is to establish a consistent appeal procedure. Only appeals for the January 2, 2013, valuation or classification may be made. The Board has three possible courses of action. These are 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 County Board of Appeal and Equalization which will be held on June 17 at 6 p.m. Ms. Smith reviewed the responsibilities of the Board: •Have a majority of the members in attendance to have a quorum. •There must be at least one member who has attended an appeals and equalization course approved by the Commissioner of Revenue within the last four years. •If a property is omitted from the tax rolls, it may be added by the Board. •The Board may only increase or decrease individual properties. •If the Board makes reductions to individual properties, the amount of the reduction cannot exceed 1% of the City-wide aggregate assessment. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 22, 2013 PAGE 2 •If the Board finds a case of under valuation, it may raise the valuation of the property, but it must first notify the owner. •The Board must complete and adjourn within twenty days from the time it convened. Ms. Smith stated the procedure is to hear property owners that are present and accept any information provided and direct staff to review property if they have not already. Any written appeals will be read once the property owners who are present have completed their appeal. Ms. Smith reviewed the 2013 Assessment. There were 107 qualified residential sales that occurred in Fridley from October 1, 2011, through September 30, 2012. These sales involved single family homes, townhomes, double bungalows and condominiums. These are the sales that were used by the State for the Sales Ratio Study. Ms. Smith stated that to bring the assessment within the State’s recommended range of 90 to 105%, there were decreases in structure and land values of most property types. Single family structure rates in the lower grades were reduced by 4 %. Townhomes had rate reductions from 2 to 7% depending on style. Condo rates were down from 10 to 20% depending on style. An average rate of decline would be deceiving since they varied so much from style and type of home. Ms. Smith stated besides structure rates decreasing, most single family land zones required a decrease in land value also. The townhome and condo land zones were also subject to significant decreases. This created an average decrease of 5to 6% of total residential value. This is about half the rate of decline from the previous assessment. Ms. Smith stated a study of commercial and industrial sales within the county indicated that values were decreasing. These properties experienced a reduction of 4 to 5% in structure value. This compares to last year’s decrease of 8%. As a result of sales within Anoka County, adjustments were made to apartments according to the number of units. The adjustments ranged from a decrease of 2 to 4%. These reductions brought the 2013 assessment within the State and County’s recommended ratio. Ms. Smith reviewed the following appeals: Appeal 1: 110 Mississippi Pl NE - Pin No. 15-30-24-42-0108 2013 EMV: $129,600 After review of the subject property and other comparable sales it is staffs’ recommendation that the original EMV of $129,600 be affirmed. Appeal 2: 100 Mississippi Pl NE - Pin No. 15-30-24-42-0109 2013 EMV: $108,400 After review of the subject property and other comparable sales it is staffs’ recommendation that the original EMV of $108,400 be affirmed. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 22, 2013 PAGE 3 Councilmember Bolkcom asked about the last paragraph on Page 11 where it talks about sales. It says the first six months of 2013 prices were up 8%. She asked if sales really increased or if people were putting homes up for sale at a lower value in 2012. Ms. Smith replied that the sale prices are up 8.2%. Councilmember Bolkcom asked if the increase was because homes were worth more or the housing market was better. Darin Nelson, Interim City Manager, noted that is the sale price, not the market value. Ms. Smith said that looking at the first six months this year to last year, it is up 8.2%. Councilmember Bolkcom asked why sales are up. Mr. Nelson replied that they are seeing a rebound in the market, there are fewer homes on the market and that is driving up the price. Councilmember Varichak added that there are also fewer foreclosures. Councilmember Bolkcom thought foreclosures were not included in the assessed value. Ms. Smith said that they use arm’s length transaction traditional sales. Philip Vande Kamp, representing Stone Trail, LLC, handed out information to Council and reviewed the information in detail. 110 and 100 Mississippi Place are two separate pins but were sold together. The property is average quality rental with some significant wear and tear. Councilmember Bolkcom asked for the size of the two bedrooms. Mr. Vande Kamp answered 10 x 9. Councilmember Bolkcom asked what average quality rental meant. Mr. Vande Kamp replied that it is not superior quality; the paint was not done completely, there are nicks in the walls, damage in the walls that is painted over, and linoleum is worn. It is not an upscale property. Mr. Vande Kamp said the property is located on the corner of Mississippi Place and East River Road which is a very busy intersection. The neighborhood consists of rental properties, multi- family rental and most are four-plex units. The assessed value of a four-plex is around $212,000 to $220,000. The assessed value of his property, both units, is $259,100. This value includes a 20% reduction because of damage. Councilmember Bolkcom noted that the amenities of the other properties are unknown. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 22, 2013 PAGE 4 Mr. Vande Kamp said all he knew is that the four-plex property had two bedrooms and one bath. Mr. Vande Kamp said that he purchased the property of 100 and 110 Mississippi Place for $157,850. The property was on the market for at least six months and it was a bank owned property at time of purchase. Currently, the assessed value of 110 Mississippi Place is $129,600 which is 64% more than the sold price of $78,900. 100 Mississippi Place was assessed at $129,600 less 20% for condition or $108,400. That 20% deduction will go away once the property is reconditioned and improved. Unfortunately there were few twin homes sold and there were none in Fridley. There was only one fair market sale in Coon Rapids included on the analysis for $103,500 and this home is not in a neighborhood similar to Mississippi Place. Mayor Lund noted that the Coon Rapids home was adjusted in value for that reason. Mr. Vande Kamp asked what geographic area should be used and are the properties comparable to Fridley and Mississippi Place. None of the properties used were from Fridley. They came from Blaine, Lexington and Coon Rapids. Six comparables were used and the first three were traditional sales and others were bank or distressed sales. If the analysis is based on arm’s length transaction traditional sales then why are distressed sales used? He asked why the subject property was not used. Mayor Lund said if the foreclosure comparables were removed, the average would go up and make the assessment even higher. Mr. Vande Kamp replied possibly, but the point is, there are no comparable properties. Councilmember Bolkcom asked what Mr. Vande Kamp suggested to use for comparables. Mr. Vande Kamp replied Columbia Heights, which is two miles away. The first comparable is a much higher rate property. Councilmember Bolkcom noted that the subject property had 700 more square feet and a $10,000 adjustment was made for superior condition. Mr. Vande Kamp said there are no comparable properties, which is why values like this are entered. Patrick Maghrak, Appraiser, said he has been out and looked at the subject property. He discussed with Mr. Vande Kamp the cost to fix things with 100 Mississippi Place and said it would take about $20,000 to fix everything. He has taken careful notes of the condition, water damage and talked about it with Mr. Vande Kamp. Mr. Vande Kamp replied that there are no comparable properties which is why adjustments are made. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 22, 2013 PAGE 5 Mr. Maghrak said finding comparables is difficult. There are 858 twin homes in the County, with 50 sales, of which 4 were qualified sales. This type of home is a problematic property type because they are unique. The reason four-plex properties cannot be used as comparables is because you cannot sell off one unit at a time. It is an advantage to have two units you have control over. You can sell one side or the other. Mr. Vande Kamp said that is the point he is trying to make. There are no comparable properties. What is reasonable and balanced? Is a 64% increase reasonable and balanced? When he purchased this property, there were six offers and his was the highest. The sale was close to the market price. He suggested using a proposed value of 19.6% higher than the foreclosed price, making a fair market value of $188,728 or $94,364 for each side. This does not include the 20% reduction for condition. Mr. Maghrak noted at the time of the sale, one unit was available and the agent indicated that the second unit was available but was not on the market yet to anyone else. The petitioner is correct that comparables are difficult. He noted that comparables 1-3 are smaller than the subject property and finding something as new as the subject property was challenging. There is little weight on comparables 4 through 6. Comparable 5 is the same builder, nearly identical and next to a noise wall on Highway 10, also located in the same kind of cul-de-sac. It is not a perfect situation. There are 858 twin homes in the County, 36 are newer than the subject property and 15 are larger than the subject property. Because of the challenging property, we have to go where traditional sales take us. Mayor Lund asked about using the rental income approach. Mr. Maghrak said it could be done, but they would have to go to a deeper level. Mr. Vande Kamp said that if they used rental, the four-plex generates more rent than the two units and is assessed at a lower value. Mr. Maghrak asked what the monthly rent was on the subject property. Mr. Vande Kamp replied $1,230 to $1,250 for each side. Councilmember Bolkcom asked if Ms. Smith had anything to add from her presentation. She did not think that because this property is not in a single family neighborhood and is next to a four-plex, the value would decrease. It is near a convenience store, a bus station and a gas station. Those types of things are appealing to someone wanting to rent this property. Mr. Maghrak agreed that access to amenities matter to the owner/occupant. Adjustments were made for some properties based on location. Comparable 3 was adjusted down for location. Councilmember Bolkcom asked if there were any comparables in Columbia Heights. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 22, 2013 PAGE 6 Mr. Maghrak said that there is a unit in Columbia Heights that is very similar but it has not sold. That property is assessed at $161,900 per unit. It is about the same size, style, same number of bedrooms and bathrooms and was built in 2002. Mr. Vande Kamp noted that if it sold, it would not be in the same time period. Mayor Lund said that he has a similar property in New Brighton in a comparable area. It is a rental twin home, two bedrooms per side, one bathroom, and smaller square footage of 960 per side where the subject property is at 1,760 per side, three bedrooms, and two and a half bath. His rent is $950, subject property is $1,250. His property has similar amenities like gas station, strip mall, rental property to the south, commercial rental to the north and residential property behind. He received a market appraisal and with four comparables. His property was valued at $186,200 or $93,500 each side. This is a lower value than the subject property but his is not as large. He thinks the assessed value is pretty accurate and the adjustment is fair because of the damage. Mr. Vande Kamp noted that Mayor Lund compared to valuations in 2013, and this assessment was to use values that occurred from October, 2011, through September, 2012. Mayor Lund noted that his market valuation for next year is identical. Mr. Vande Kamp said his property is for sale at $128,000 each side; which is a 64% return on his investment in less than seven months. Mayor Lund said that Mr. Vande Kamp could pay to have an appraisal done. He said Mr. Vande Kamp did a good job with his research but he thought the assessed value was fair. A bank sale price is not looking at fair market value at the time of sale. Mr. Vande Kamp asked if the rental approach was used if the four-plex next door could be used. Mayor Lund said that would not be a fair assessment. Ms. Smith agreed that you could not compare a four-plex to a twin home. A four-plex has three other neighbors and the subject property collects over $1,000 in rent per side and has more square footage. Councilmember Bolkcom asked if it would be worth reviewing this property any differently. Mr. Maghrak replied that they would not learn anything new. The Statute requires valuing the properties as individual units and the income approach will not change anything. There is very limited data, and this property has been compared to traditional sales similar to size and age. The petitioner got a great deal on the purchase of this property. The value cannot be changed, as it would bring harm to others who own twin homes in Anoka County. MOTION by Councilmember Saefke to affirm the value of 110 Mississippi Place NE at $129,600 and 100 Mississippi Place NE at $108,400. Seconded by Councilmember Barnette. BOARD OF APPEAL AND EQUALIZATION MEETING OF APRIL 22, 2013 PAGE 7 UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY . MOTION by Councilmember Bolkcom to move into record the 16 pages of material passed out by petitioner Vande Kamp tonight. Seconded by Councilmember Saefke. UPON A VOICE VOTE, ALL VOTING AYE, MAYOR LUND DECLARED THE MOTION CARRIED UNANIMOUSLY . MOTION by Councilmember Varichak to close 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 AND THE MEETING CLOSED AT 8:07 P.M. Respectfully Submitted, Krista Peterson Scott J. Lund Recording Secretary Mayor