County nears end of new commercial reappraisals

Published 7:00 pm Saturday, June 16, 2012

While the county will put its finishing touches on the new commercial assessments this week, many business owners are still speaking out against valuation increases in what they call a stagnant business climate.

The board accepted the assessments completed by Vanguard Appraisals earlier this week, but not all the appraisals are set. Last week, the Mower County Board of Equalization met with more than 40 commercial property owners who were appealing their values, many arguing their new values don’t accurately reflect the market. The board hired Vanguard for more than $270,000 to complete new property tax assessments for all commercial properties.

The county finished hearing the appeals Thursday, and the board will rule on the cases and possibly adjust values next week on Wednesday, Thursday and possibly Friday.

Email newsletter signup

After that, the only other option for property owners is tax court, at least until next year’s Board of Equalization meeting.

A flat climate

Commercial property owners are still voicing displeasure with the process, and the response to the property tax assessments hasn’t painted a rosy picture of a thriving business community.

“It’s definitely flat,” property owner Mark Nagle said of the business climate.

Though Nagle said his business at South Central Athlete has been good, he said the increased values don’t reflect what’s happening.

If business were booming in Austin and Mower County, Nagle said, there’d be new businesses popping up in the city and across the county.

“That’s not where it’s at now,” he said.

And if business were booming, Nagle acknowledged that an increase in commercial property values would likely be expected — and it may even go unnoticed when times are good.

But Mark Reeve, owner of Reeve Chiropractic Clinic, said the economy — at least for commercial property owners — isn’t yet headed in the right direction.

“If anything, commercial property values have dropped,” he said.

About five to 10 years ago, Reeve said, commercial and residential properties’ values were steadily increasing, but with the economic downturn, they’ve been on a steady decline for at least three years.

In this type of economy, large value increases don’t make sense, according to Reeve and other property owners.

“You can’t come into a depressed economy and depressed real estate market and say that your values have gone up that much,” Reeve said.

Reeve’s property value increased from $453,000 to $573,000 — an increase he said would have been large even if the commercial climate were strong.

“Even if you took a good year, you would not have values going up 26.5 percent,” he said.

Reeve described his new appraised value as a shock, and said it will have an impact well into the future.

“What it does is it affects you every year after that,” he said.

 A matter of fairness

To the county board, the new appraisals are not about new tax revenue or old values, they’re about fairness.

County officials hired Vanguard because they felt they needed to correct the commercial values because of many discrepancies found in old commercial values.

“The purpose is to equalize the values,” County Coordinator Craig Oscarson told one property owner Thursday.

Essentially, Oscarson explained, the purpose of the Board of Equalization — like the new Vanguard appraisals — is to ensure all property owners are paying their fair portion of the taxes.

Due to discrepancies and incorrect values, that wasn’t happening before: Some commercial property owners were paying too much, others too little. Those discrepancies stemmed from errors or a lack of comparable sales in the county.

Not all of the new Vanguard values increased. County Assessor Rich Peterson has said many commercial properties stayed near the same value or even decreased in the new assessments.

“Keep in mind, we did have values that went down,” Peterson said after the values were sent out this spring. “Not everything went up.”

But it’s no secret to county officials that the Board of Equalization and other meetings traditionally only bring out one side of the tax process: People who saw value increases.

To county officials, much of the Vanguard changes aren’t value increases or decreases; they’re value corrections. People with values increasing, officials maintain, were likely paying less than what they should have. On the flip side, people whose values decreased were paying too much before.

Overall, commercial property values increased 29 percent — which includes new construction — but the county won’t see any additional tax revenue from the Vanguard Appraisals. It means commercial properties take on more of the tax burden and residential properties take on less.

“It isn’t anything to do with money,” Commissioner Jerry Reinartz said, emphasizing that the new appraisals don’t make for any new taxes; the appraisals are at most a tax shift.

 Value vs. sales

David Clausen of Clausen-Jordan Mortuary appealed the value of his property in Adams to the board Thursday. He said the value increased from about $132,000 to $186,000.

Clausen said he talked to realtors about the price of the building.

“They said there’s no way in hell you’d be able to sell it for the appraised price — not in this economy,” he told the board. Clausen also saw large increases at his Austin location, but couldn’t officially appeal because he missed the city of Austin’s board of equalization meeting. His only option now is tax court.

Property owners like Karen Cosgrove and Bill Carroll Jr. have echoed concerns about the discrepancy between valued price and projected sales price. They’ve argued their properties would not sell for anywhere near the assessed price.

“If I can’t sell it for that, how can I be taxed for that amount?” Carroll asked the board Thursday.

Carroll’s property increased from $220,000 to $332,000 on the initial Vanguard report. Vanguard later brought the value down to around $296,000, which was still too high to Carroll.

Carroll, like many property owners, isn’t asking for substantially lower values; he would just like them to stay where they were.

“I don’t expect to pay less,” he said. “I just expect it to be fair.”

According to Peterson, commercial and residential values are based largely on recent sales of similar properties. For residential, there are comparable sales, which isn’t always the case for commercial properties. Peterson has called commercial appraisals very complex, because there’s a wide variety of property types from stores like Shopko, Target and Walmart to mom and pop shops to warehouses.

“There’s so much difference,” he said. “It gets much more difficult just because of the wide variety. You go ahead and look at residential: You got houses. A lot of the houses don’t vary a lot.”

In the case of Walmart or the mall, there are very few similar properties in the county and no comparable sales.

In fact, many business owners have said there have been few commercial sales of any type, especially in small towns.

Clausen told the board Thursday that there have been few commercial properties sold in Adams since 2008, largely because the financial crises stunted the number of sales.

To set the values, Vanguard used recent sales in the county, but they also used sales from other communities in Minnesota and Vanguard’s business range, according to Peterson. Part of the reason is there just weren’t enough sales for comparisons in the county on certain types of properties.

“Is it a concern for me?” Peterson said of using sales outside the county. “No, because we have to go to where we find sales.”