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HomeMy WebLinkAbout1994 04-18 CCM Board of Equalization MINUTES OF THE PROCEEDINGS OF THE CITY COUNCIL OF THE CITY OF BROOKLYN CENTER IN THE COUNTY OF HENNEPIN AND THE STATE OF MINNESOTA BOARD OF EQUALIZATION APRIL 18, 1994 CITY HALL CALL TO ORDER The Brooklyn Center City Council met as the Board of Equalization and was called to order by Mayor Todd Paulson at 7:05 p.m. ROLL CALL Mayor Todd Paulson, Councilmembers Celia Scott, Dave Rosene, Barb Kalligher, and Kristen Mann. Also present were City Manager Gerald Splinter, Hennepin County Appraisal Supervisor Bob Hanscom, City Assessor Mark Parish, and Council Secretary Barbara Collman. PURPOSE OF BOARD OF EQUALIZATION The City Manager explained the purpose of the City Council was to act as the Board of Equalization and act as an appeal board to the Assessor's setting of values and classifications. The assessment is not based on taxes, but on the market value of the properties as compared with similar properties. Once the local board acts, the assessment is forwarded on to the County. The City Manager stated the assessments affect taxes payable in 1995. He explained the properties are treated equally and fairly. He noted the Board of Equalization cannot at this time review assessments from other years. He then called on City Assessor Mark Parish. PROCEDURAL REVIEW OF PROPERTY TAXATION City Assessor Mark Parish introduced Hennepin County Appraisal Supervisor Bob Hanscom. He stated Karen Moe and Kay Manning, staff members, were also in attendance; however, Appraiser Joe DaBruzzi was unable to attend. The City Assessor then reviewed the procedures. used to assess property and to notify taxpayers. He mentioned state statute was followed in this area. He explained the assessments are based on a property's market value, or the most probable selling price. 4/18/94 _ 1 CITY ASSESSOR'S REPORT The City Assessor explained the Board of Equalization is established by State law and City Charter. Notices were published in accordance with law. In addition to the published notice, each property owner received a 1994 value notice indicating the 1994 market value. This notice was mailed March and early April. He described the tax system and how different classes of property have different tax rates as prescribed by law. The Assessor is responsible for placing market value on property. The Board of Equalization meeting is to review the assessment, values, and property classifications. The Board has the power to decrease, affirm, or increase a market value or to change a classification. The City Assessor explained 2,000 to 3,000 homes (mainly in the Northwest area) were reinspected during this assessment period, some following public inquiries. The Assessor also dealt with special projects and legislative changes. In 1994, the Eastern half of the community will be reviewed. The City Assessor noted residential values were virtually unchanged from the preceding year. He further stated office assessments were basically unchanged, apartments were increased approximately four percent overall, industrial was increased slightly, and retail was decreased significantly. The value of the commercial portion of the tax base declined approximately five percent overall. The City Assessor explained in a recent retail property case in Hennepin County a judge issued an order stating assessors do not have authorization to exchange information between jurisdictions. He explained his basis for disagreeing with the ruling, but there may be some confidential information about sales he will not be able to share. He counseled the Board if there are questions he cannot answer within the 20 days the Board is allowed to meet, those questions should be referred to the County Board of Equalization. The City Assessor asked the Board for questions. Councilmember Scott asked whether the plan for 1994 reinspections might be too ambitious to accomplish. The City Assessor agreed it is ambitious. He commented new software for portable computers was expected to help the situation, but it may not be available. He stated he is very confident the reassessment will be completed south through I -694 to 59th Avenue or 60th Avenue, and perhaps south of 57th Avenue. Mayor Paulson called on those who were in attendance. 4/18/94 -2- PUBLIC INQUIRY REGARDING LOCAL ASSESSMENTS Gary Brummer - River Glen Apartments ` Gary Brummer, owner of River Glen Apartments, 407 70th Avenue North, appeared before the Board. He called attention to his written review then recapped some of the figures. He noted a figure of $24,000 should be added to $668,000 on caretakers, who are paid in free rent. Mr. Brummer stated if the value of his property is raised, taxes will increase $12,000 to $14,000. Based on his figures, he is unsure where the extra money will come from. He mentioned his salary is five percent (approximately $33,000), which works out to approximately $8 per hour. Councilmember Rosene asked the City Assessor to clarify the assessment on River Glen Apartments. The City Assessor stated he had reviewed the property with Mr. Brummer, as well as noting the income and expense data. He mentioned Mr. Brummer had pointed out three physical problems (deteriorating plywood siding, sagging decks on second level, and parking lot asphalt) which would require resolution in the coming year. He did take those maintenance items into consideration. He pointed out property of this age will, of course, require maintenance. He compared the property to similarly aged and situated properties. After reviewing all information, he believes the original assessment of $21,500 per unit is fair and recommended it be affirmed. Councilmember Rosene asked the City Assessor whether he could explain what his thought processes were in making this assessment. He said he wondered whether the City Assessor was aware the assessment was an increase at the time he made it. The City Assessor answered his practice is to value the property, not to compare year -to- year figures. He added apartments, in general, were increased this year due to the fact the market has now stabilized and begun to improve. He further explained when Mr. Brummer purchased River Glen Apartments the property was in poor condition. Now, the property is in better physical condition, occupancy has improved and, therefore, it has a higher value. Mr. Brummer commented property is only worth what it is going to support. He stated his expenses are over the income and it is not worth that much. He handed out documents concerning the value on another property which is for sale in Brooklyn Center. There was discussion concerning the rent amounts on River Glen's apartments and garages. Councilmember Scott questioned the possibility of raising rents a marginal amount to increase cash flow and allow improvements. Mr. Brummer answered he would like to raise rents but doesn't believe that approach would work. 4/18/94 -3- Councilmember Kalligher asked whether the rents are comparable to other apartment complexes. Mr. Brummer said they are. He added the rents at River Glen may be a little higher, but electricity is included in the rent. Councilmember Kalligher asked when the last rent increase was made. Mr. Brummer stated he raised monthly rents $10 approximately one year ago. Councilmember Kalligher asked whether the apartments rent on a month -to -month basis or by lease. Mr. Brummer said he attempts to get year leases, but when year leases expire, most tenants continue on a month -to -month basis. Councilmember Kalligher asked about current occupancy. Mr. Brummer stated it is good, with only five or six empty units compared to eight or nine at the first of the year. Councilmember Scott questioned comparables. The City Assessor mentioned the report lists comparable sale prices, but stated he did not do a full appraisal for the Board. Councilmember Scott stated in looking at the comparables, it appears this complex is being appraised equally to the others. Councilmember Rosene agreed the assessment for River Glen seems comparable to the other apartment complexes. He also expressed concern about causing financial difficulty but at the same time he said he does not feel the Assessor is out of line. Mr. Brummer said he is only going by the income and expense amounts. He stated he does not see where the extra $13,000 or $14,000 will come from. Councilmember Rosene asked the City Assessor whether that figure is accurate. The City Assessor answered the legislature is still in session, but it probably won't be much different and is probably reasonable. Councilmember Kalligher asked whether Mr. Brummer is planning to raise the rents, as that might help. Mr. Brummer said he thinks doing that would give him a vacancy problem. Councilmember Kalligher suggested boosting the garage rental price by $5 per month. Councilmember Rosene commented even if the Board affirms the assessment, Mr. Brummer will have time to prepare and strengthen his case and make an appeal. Councilmember Scott suggested checking on garage prices as River Glen's seem to be a bargain. She said if Mr. Brummer were to raise garage prices $5 he would have $6,700 toward the tax increase. Mr. Brummer stated garages are rented easily in the winter but not in the summer. 4/18/94 -4- Mayor Paulson thanked Mr. Brummer for appearing and asked the Board to act. There was a motion by Councilmember Mann and seconded by Councilmember Scott to affirm the Glen River Apartments assessment. The motion passed unanimously. Councilmember Rosene stated he wished Mr. Brummer well in the appeal process and added he did not feel he had enough information to overturn the City Assessor's recommendation. Councilmember Scott complimented Mr. Brummer on the work that has been accomplished at River Glen Apartments. Mayor Paulson asked whether any other applicants were present. Robert Levine - Ryan Lake Partners Robert Levine, 3401 47th Avenue North, appeared before the Board. He described the facility he has managed since 1985. He thanked the City Assessor for his diligence in considering figures over the years. Mr. Levine stated he feels the value of the property from January 1993 to January 1994 did not increase and, in fact, decreased in value. He provided the Board with operating experience figures and reviewed them. He told how he had used the procedure assessors use to value property and found it actually dropped. He stated a value of $392,000 would be reasonable. He stated he was trying to show the value based on the performance of the Property Councilmember Kalligher asked about the differences in rental amounts. Mr. Levine replied there are three different types of apartments and also leases. He tries to raise rents whenever a lease expires. Councilmember Kalligher asked whether that practice will continue. Mr. Levine stated he hopes so, depending on whether the occupancy rate stabilizes. He stated quality tenants are difficult to attract. Councilmember Kalligher asked whether all ten garages are currently rented. Mr. Levine said they are. Councilmember Kalligher asked whether Mr. Levine will increase the rent on garages. Mr. Levine answered he is not sure, as the garages are not in "great" condition and he thinks $35 is too high. Councilmember Scott inquired whether Mr. Levine belongs to any apartment managers' groups. Mr. Levine stated members of his staff attend the meetings and he has attended them as well. He was unsure if much activity is taking place within those groups. 4/18/94 -5 - Councilmember Scott stated a great deal has been going on in the past year. She asked the City Manager to address the issue. The City Manager explained the property managers' groups have been involved in promotion and various activities. There was a motion by Councilmember Mann and seconded by Councilmember Kalligher to reduce the assessment for 1994 from the original amount of $482,000 to $456,500. Councilmember Rosene commented this figure would put Mr. Levine's value below Gary Brummer's River Glen Apartments. He commented the condition of Mr. Levine's property doesn't seem any worse. Mr. Levine said he has spent a lot of money on improvements. However, he stated based on last years operating experience, he cannot see any indication of the value increasing. He stated he had requested a reduction, even to $440,000, because the figures show a reduction in income, but stated he feels that, at a minimum, the assessment should not go up. He added he would have accepted the assessment if it had just remained the same, but cannot when it is being raised, which is an opposite result of the operating experience. Councilmember Rosene asked Mr. Levine if he could understand the City Assessor's earlier explanation that the overall market is looking better. There was a discussion between Mr. Levine and Councilmember Rosene concerning "cap rates," returns, and values on investment properties in the market. Mr. Levine repeated he did not feel an increase was justified. Councilmember Scott stated the Council has worked hard to keep to a zero budget. She commented homeowners have had to pay more in taxes even though they did not make improvements and, in addition, they may be on a fixed income, and they cannot raise rents to cover the difference. She added she really didn't want to, but the State decides where to raise taxes. Mr. Levine asked if Councilmember Scott had been referring to tax rate or to tax evaluation. Councilmember Scott stated she was talking about how much they have to pay in taxes. Mr. Levine stated there are two different issues. He stated at this point we are talking about fair market value, not tax rates. Councilmember Scott explained the Board is stating it seems as though Mr. Levine is being valued lower than comparable properties. She stated Mr. Levine is actually in a good situation as his occupancy rate is better than others. She suggested Mr. Levine should become active in the apartment managers' groups as they do share information on quality tenants, thereby lowering maintenance costs caused by problem tenants. 4/18/94 -6- Mr. Levine said his organization does screen applicants carefully. He also stated one of his staff does go to the property managers' group meetings. Councilmember Rosene asked the City Assessor whether Mr. Levine 's information is accurate and whether the increase was due to a stronger market or to other considerations. The City Assessor stated it was due to the stronger market and he typically does not compare year -to -year figures. He stated comparable sales are another equal method of determining value - not just the income actually derived. He said he does not disagree with Mr. Levine's statements. He stated he does not say the net income has taken a dramatic change, but he uses all information available to make an assessment. Councilmember Rosene questioned what the ramifications would be to raising the value and, thereby, the taxes. He stated he is uncomfortable encouraging landlords to increase rents as the tenants are the people least able to pay more. He wondered whether the low value is bringing in tougher clients. The City Manager said it is the County's job to see the City assessments are in line. Councilmember Rosene pointed out there is $16,000 difference between leaving the assessment the same and raising it and either figure is within bounds of typical Brooklyn Center values. The City Manager stated the Board's responsibility is to value fairly and comparably. He repeated Staff is recommending the assessment at $456,500. There was a substitute motion by Councilmember Rosene and seconded by Councilmember Kalligher to approve the assessment as recommended by the City Assessor. The motion passed unanimously. Councilmember Rosene told Mr. Levine he can now appeal and wished him success. Mr. Levine commented on the tax rates. He stated renters are paying more than three times more in taxes than homeowners and this is not fair. He added if you compare tax rates on income properties state by state, Minnesota is the highest by far. Mayor Paulson called for more appointments or walk -ins. There were none. Anderson Dry Wall There was a motion by Councilmember Scott and seconded by Councilmember Kalligher to affirm the Assessor's recommendation of $78,000 for Anderson Dry Wall. 4/18/94 -7- Councilmember Rosene stated he was not prepared to vote and asked to know the cause of the reduction. He asked what the property was assessed at last year. The City Assessor answered $94,500. Councilmember Rosene asked for an explanation of the reduction. The City Assessor explained this commercial property is for owner - occupied use. He stated it has reduced potential use because of size and zoning so the value was reduced accordingly. He pointed out when using a mass appraisal system, sometimes a closer look at a property changes an opinion. Councilmember Scott added sometimes vacant property on both sides can be added on. In this case, that is not possible as it is developed on both sides. The motion passed unanimously. LETTERS S.A.H. Partnership The City Manager presented a letter from S.A.H. Partnership. He asked the City Assessor to explain the rationale behind a reduction. The City Assessor explained two appeals were received, one from S.A.H. Partnership and one from Chi Chi's, the tenant. He stated after reviewing this 1993 lease, he found the market activity supports a reduction to $850,000. He added both the partnership and the tenant have agreed to accept the reduction. There was a motion by Councilmember Kalligher and seconded by Councilmember Scott to approve the assessment of $850,000 for S.A.H. Partnership. The motion passed unanimously. APPROVAL OF 1993 ASSESSMENT There was a motion by Councilmember Mann and seconded by Councilmember Scott to accept and approve the balance of the 1994 Assessment. The motion passed unanimously. ADJOURNMENT There was a motion by Councilmember Scott and seconded by Councilmember Kalligher to adjourn the meeting. The motion passed unanimously. The Brooklyn Center Board of Equalization adjourned at 8:23 p.m. Jow Deputy City Clerk Todd Paulson, Mayor Recorded and transcribed by: Barbara Collman TimeSaver Off Site Secretarial 4/18/94 -8 -