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2013.03.19 Work Session PacketCRYSTAL CITY COUNCIL WORK SESSION AGENDA Tuesday, March 19, 2013 6:30 P.M. Conference Room A Pursuant to due call and notice given in the manner prescribed by Section 3.01 of the City Charter, the work session of the Crystal City Council was held at p.m. on Tuesday, March 19, 2013 in Conference Room A located at 4141 Douglas Drive, Crystal, Minnesota. I. Attendance Council members Staff Peak Norris Selton Therres Adams Norton Budziszewski Revering Deshler Tassoni Hoffmann Libby II. Agenda The purpose of the work session is to discuss the following agenda items: ■ Open Book Meeting with County Assessors ■ Commission Liaison update* * Denotes no supporting information included in the packet. III. Adjournment The work session adjourned at p.m. Hennepin County Assessor Department A-2103 Government Center www.co.hennepin.mn.us 300 South Sixth Street Minneapolis, MN 55487-0213 To: City of Crystal Mayor and Council From: Rob Winge, Principal Appraiser Tammy Schumacher and Michael Silker, Appraisers Date: February 25, 2013 Re: 2013 Assessment and Open Book Meeting The 2013 Crystal Open Book Meeting has been scheduled for Tuesday, April 2nd, 2013, from 4:OOPM to 6:OOPM. As preparation for the upcoming Open Book Meeting, please find the enclosed data to help you. Annual Revaluation Each year, one fifth of the properties in the city are reviewed and the records are updated. See the enclosed revaluation area map. Summary of the 2013 Assessment Each year the estimated market values are analyzed along with sales data from the market. Adjustments, as appropriate for each property, are made. The results of those adjustments for the 2013 assessment areas are as follows: Residential -0.3% Commercial/Industrial -3.4% Apartments +1.7% Condos -14.9% Townhouses +5.2% Duplex -4.1% Zero Lot Line -20.9% There are 7,978 taxable parcels in the city with a total market value of approximately $1,295,610,700. This value includes $6,130,000 in new construction improvements. The overall value change for all property types in the City of Crystal is -0.6%. An Equal Opportunity Employer Recycled Paper Olt- FOR-2(KSASSESSMENT: *INCLUDES: AII.DBTPAYRZ, XM.Property Types - all The Open Book Meeting Process Value notices are being mailed the first week of March. Taxpayers with value or classification concerns should contact the assessor's office. During the initial conversation the property owner may discuss their concerns and review sales information with an appraiser. The majority of callers, approximately 70-75 percent, are satisfied after a conversation with an appraiser. If additional attention is necessary the appraiser will review the property. The open book meetings provide a forum for property owners to meet with assessment staff on an informal basis to review information about their property and to ask questions about the assessment. Property owners do not need to make an appointment to meet with the assessment staff. They can simply show up at the dates and times stated on the Notice of Valuation and Classification, and an appraiser will discuss their assessment. Property owners who are not satisfied with the "open book" approach may appeal to the County Board of Appeal and Equalization and/or appeal to Tax Court. It is only a recommendation that the property owner attend the open book meeting to discuss concerns prior to the County Board of Appeal and Equalization. In a jurisdiction that does not have a Local Board of Appeal and Equalization, the property owner is not required to attend an open book meeting in order to appeal to the County Board of Appeal and Equalization. If you have any questions or concerns please contact me at 612-348-3046. Alternate Method of Appeal ---Open Book Meeting Open book meetings are an alternative to the Local Board of Appeal and Equalization. During "open book" meetings, the valuation and classification issues are handled by the assessor's staff on a one-on-one basis with the property owner. Typically, open book meetings are held by the county assessor's staff. However, larger cities with an appointed city assessor may hold their own open book meetings. The open book meetings are held in locations that are convenient for property owners. Often open book meetings are held over several days during both day and evening hours. This allows property owners to appeal when it best suits their schedules instead of having to rearrange their schedules to attend a local board meeting held at one place and time. The open book meetings provide a forum for property owners to meet with assessment staff on an informal basis to review information about their property and to ask questions about the assessment. This setting allows the assessor's office to resolve questions and reduce the number of property owners who feel the need to appeal to the County Board of Appeal and Equalization. Property owners do not need to make an appointment to meet with the assessment staff. They ,can simply show up at the dates and times stated on the Notice of Valuation and Classification, and an appraiser will discuss their assessment. Depending on the jurisdiction, the appraisers may have laptop computers to access information about the taxpayer's property. Some counties may be able to link directly to their computer-assisted mass appraisal (CAMA) system which allows the appraiser to obtain data on sales of comparable properties. When reviewing the details of the properly with the owner, the appraiser can verify the accuracy of the county's data and correct any errors. The property owner can also schedule an appointment for the appraiser to view the property if needed. Benefits for the property owner Property owners often find that the open book meeting is less intimidating than presenting their appeal to the Local Board of Appeal and Equalization. They often appreciate the fact that they can have their questions answered in a more private setting, and not have to be apprehensive about making a presentation in front of their friends and neighbors. In this one-on-one setting, property owners may spend as much time with the appraiser as they need. They can compare the value of their home with the values of similar homes owned by their neighbors. The process is very efficient because concerns and questions are often resolved immediately. Property owners can see that the appraiser collects the same information on all properties, reassuring them that the process is the same for everyone, and they have not been singled out for a value increase. Property owners who are not satisfied with the "open book" approach may appeal to the County Board of Appeal and Equalization and/or appeal to Tax Court. It is only a recommendation that the property owner attend the open book meeting to discuss concerns prior to the County Board of Appeal and Equalization. In a jurisdiction that does not have a Local Board of Appeal and Equalization, the property owner is not required to attend an open book meeting in order to appeal to the County Board of Appeal and Equalization. Benefits for the local board The benefit for the local board is that an open book meeting saves time for board Members. It eliminates the need for the board to become familiar with and educated on the local real estate market. Board members will be able to spend this time concentrating on their other duties as town board or city council members. In addition, board members can avoid confrontational situations with constituents and will no longer be put into difficult situations by having to make decisions about the property values or classifications of property owned by friends and neighbors. Benefits for the county While the number of appeals made at the open book meeting may not be less than the number of appeals to the local board, the benefit for the county is that the open book process allows for immediate consideration of issues, and in many cases, appeals are resolved before the County Board of Appeal and Equalization. The process is efficient for the county because it can often consolidate several jurisdictions into one meeting (or a series of meetings) instead of holding at least one meeting in each jurisdiction. Copied from the MN Dept of Revenue Local Board of Appeal Equalization Handbook. MINNESOTA- REVENUE www.taxesstatemn.us Assessor Estimates Property Tax Assessment Process Minnesota has what is known as an ad valorem property tax. This means property tax is divided among taxable properties according to their value. The final amount of propertytax the owner of a properly pays in any given year is the end result of a process that begins over two years before property tax statements are actually mailed to property owners. The process begins with the assessor collecting data on sales of properties within the market during a specific time period between October of one year and September of the following year (this period is known as a sales study period). Over the next several months and by using mass appraisal techniques, assessors analyze the data in order to estimate each property's market value for the next assessment (January 2). Pursuant to Minnesota Statutes, section 273.11 assessors must estimate the value of property at a value that would represent what the property would sell for in an operl-market arm's length transaction on January 2 of each year. The assessor cannot adopt a higher or lower standard of value because the value will be used for the purposes of taxation. Assessors also classify property according to its use on January 2. Between April and June, taxpayers have an opportunity to appeal both the estimated market value and the classification of their property. Values and classifications are generally finalized July 1 of each year. Local units of government then finalize their estimated budgets for the upcoming year. Once the budgets are finalized in December, the market values and classifications are used to divide the overall tax levy among all taxable properties. Tax statements are mailed by the following March 31. For example, sales of properties that occur between October 1, 2008 and September 30, 2009 are used by assessors to estimate a property's market value for the January 2, 2010 assessment. Following an appeal process that occurs between April 1, 2010 and June 30, 2010, the valuations and classifications generally become final on July 1, 2010. Property Tax Division - Mail Station 3340 St Paul, MN 55146-3340 Revised 07/09 This lengthy time frame may result in a significant difference between actual sales prices occurring in the current market and assessors' estimated market values for the current year's assessment. Using the final values and the local jurisdictions' proposed budgets, the auditor then estimates each property's proposed taxes payable for 2011. After public budget meetings are held and final budget numbers are adopted, property tax statements are mailed to taxpayers by March 31, 2011. in summary, sales taking place from October 2008 to September 2009 are used to estimate a property's market value as of January 2, 2010 which will in turnbe used to calculate property taxes payable in 2011. What is the role of the assessor? Assessors use historical sales in order to estimate each property's market value as of the assessment date (January 2) of each year. The assessor also classifies the property according to its use on January 2 of each year. Assessors also review other quantifiable data such as supply/demand, marketing times, sales concessions, vacancy rates, etc. to help in analyzing whether a market is increasing, stable, or decreasing. During increasing markets, this may benefit some property owners because a buyer may pay a price that is sipificazrtly higher than the assessor placed on the property for the last assessment. For example, if a property is valued by the assessor at $180,000 for the 2009 assessment (based on sales that occurred between October 2007 and September 2008), and it sells for $230,000 in August 2009, the new property owner is benefiting from the lower market value for the 2009 assessment which will be used to calculate taxes payable in 2010. The August 2009 sale of the property will be included in the study period of October 2008 to September 2009 which the This fact sheet is intended to help you become more familiar with Minnesota tax laws and your rights and responsibilities under the laws. Nothing in this fact sheet supersedes, alters, or otherwise changes any provisions of the tax law, administrative rules, court decisions, or other revenue notices. Alternative formats available upon request. Minnesota Revenue, How the Assessor Estimates Your Market Value 1 n assessor will use to value property for the 2010 assessment for taxes payable in 2011. This same lag time is also present in declining markets. For example, if the assessor places a market value of $200,000 on a property for the 2009 assessment (again using sales that occurred between October 2007 and September 2008), but the property sells for $175,000 in August 2009, does it mean the January 2, 2009 assessed value is incorrect? Not necessarily. It could signal a downturn in the housing market just began to occur between September 2008 and August 2009. The assessor will use the August 2009 sale as well as others occurring in the market to estimate 2010 marketbalues. The assessor does not raise property tax revenues by increasing values. Total property tax revenues are a function of county, school district, and city/town spending as well as state -paid local government aid and other factors. The value and classification of the property are merely a way to divide the total property tax levy among all taxpayers. The total amount of the levy will be collected whether values increase or decrease from one year to the next. An individual's share of the overall tax burden may change from year to year, however. What are sales ratio studies? Sales ratios show the relationship between the assessor's estimated market value on a property and the actual sale ' price of aproperty. Each year the assessor performs sales ratio studies on properties that have sold in their jurisdiction. These sales are stratified many different ways including by location and propertytype (residential, agricultural, commercial, etc.). The sales can also be stratified further such as by home style, subdivision, age of structure, location on or off water frontage, price range, etc. A single sale may not represent the true market activity. Rather, sales of all properties are reviewed to determine market trends. However, even if there are no sales occurring within the sales ratio study period, assessors are still expected to use their professional judgment and knowledge of the local market to annually value properties in their jurisdiction. Whenever any real estate is sold for a consideration in excess of $1,000, a Certificate of Real Estate Value (CRV) is filed These CRVs are the foundation of all sales ratio studies because they contain important information about each transaction. Assessors then verify the information contained on the CRV in order to determine whether or not the sale represents an open -market arm's length transaction. If the sale does not represent an open -market, arm's length transaction, it may not be used in the sales ratio study. Simply having an extremely high or low sales ratio is not a valid reason to remove a sale from the sales -ratio study. Rather, the extreme ratio indicates a need for additional investigation by the assessor. Again, sales ratio study periods are generally October 1 of a given year to September 30 of the following year. For example, for the 2010 assessment, assessors use sales that took place between October 1, 2008 and September 30, 2009. This -is the reason that assessors' market values may lag a bit behind current market activity. Assessors will use the median sales ratio as the statistical measure of the overall level of assessment. The median ratio is the middle ratio of all the ratios when they are arranged in order from highest to lowest (or vice versa). The median is used because it is not affected by extreme ratios. Department of Revenue guidelines indicate that the median ratio of a sales ratio study should be between 90 and 105 percent. Is it. possible for the values of some properties to decrease while others increase? Yes. Each segment of the market is different. Sales prices of certain types of properties can vary widely. Currently, sales of both farmland and recreational properties are strong and show appreciation. However, the sales of residential properties are stable or declining in some areas. Sometimes it can be difficult to estimate the rate at which a market is increasing or declining. Ideally, a property would sell twice within a certain period of tune, such as one year, . but all other characteristics of the property would remain the same. That way an appraiser or assessor would be able to isolate a time adjustment to indicate whether the market is increasing or decreasing or simply remaining stable. Do all areas increase or decline at the same rate? No. Some areas or neighborhoods are declining at a much faster rate than others that are showing stable values or values that are slightly increasing. Conclusion In conclusion, it is essential that taxpayers understand that there may be a legitimate reason for the assessor's annual market value to be different from current market conditions due to the lag time between sales study periods and sales taking place today. For additional information, please refer to Fact Sheet 12a Understanding Property Taxes and Fact Sheet 12c Understanding Your Assessment and the Appeals Process. Minnesota Revenue, How the Assessor Estimates Your Market Value 2