In Minnesota Housing Market, Assessment Disputes Rising

With the Minnesota housing market slumping, questions and challenges over 2007 tax assessments have more than doubled in Ramsey County over last year, and queries have risen significantly in Hennepin County.

• When the housing market was hot, homeowners reaped the benefits of rising property values - and paid higher taxes for it.
• Now that the market has cooled, some homeowners are expecting a break in taxes and seeking an explanation when they don’t get it.

This spring, Ramsey County fielded 998 inquiries about valuations, compared with 470 in 2006. In Hennepin County, queries jumped up 32 percent.

“One of the reasons we had … more appeals this year is folks saw their market value stagnate or perhaps even decline a little bit, but their taxable value continued to increase,” said Ramsey County Assessor Stephen Baker.

That phenomenon is the flip side of a system that worked to homeowners’ advantage during boom times by limiting the growth in the value on which they are taxed.

But the same system means taxable value can still rise in a sluggish market, much to the chagrin of many a Minnesota mortgage holder.

Another factor contributing to the second-guessing is that the property value statement sent to homeowners in March may reflect estimates from a year ago, when the market was more robust.

“When the markets are going up, most taxpayers are perfectly comfortable with the assessment lagging behind a bit,” Baker said. “But when the market starts to contract, they’re much less happy with that.”

When Jay Theriault got his tax statement and saw what Ramsey County said his home was worth, he did a double-take at numbers that looked too high.

“I said to them, ‘If you want to bring me a check for that amount, I’ll be out within the end of the week,’” Theriault recalled.

Theriault and his wife, Ruth Hjelmgren, both real estate agents, thought the assessment of their St. Paul home didn’t jibe with their sense of a slumping housing market in their area.

They appealed to the county and it sent an assessor out to evaluate their home. The county revised its estimate, which directly impacts the property tax paid.

“The number they came back with was pretty much on the nose,” Theriault said.

Overall, the March 2007 statements - for taxes payable next year - showed residential market values flat in the state’s two most populous counties.

Single-family homes in Ramsey County declined less than two-tenths of one percent when improvements were not included.

Hennepin County saw total residential property values increase 4 percent. Unimproved single-family homes in Minneapolis increased 1 percent.

Those figures contrast with the boom of the early part of this decade. Even tax statements that went out in Hennepin County last year showed an 8 percent increase in home values.

Like Theriault and his wife, other owners who believed their valuations were out of sync with a changing market have asked county assessors to take another look.

But not all of them win.

Ananth Pai challenged the $217,300 market value assigned to his Maplewood home. He took his concerns to Ramsey County officials at an assessment review meeting in Roseville.

Pai said he had a “perceived reality” that houses aren’t selling at the pace of a year or two ago, “and that must mean that property values are going down or should go down.”

The home mortgage holder said he worried improvements made in neighbors’ property unduly influenced the county’s assessment of his.

“I wanted to know that it wasn’t based just on averaging of a database,” Pai said. “I asked them if they would consider taking a look at the place just to make absolutely sure.”

He said an assessor came out to his house within a week of the Roseville meeting and inspected his property. He got a letter soon after saying the county wasn’t changing its mind.

“Overall it was fair,” Pai said of the appeals process. “I’m satisfied that somebody actually came out.”

A survey of Minnesota counties by the state show that, overall, property values grew more slowly in 2006, although a few communities saw small dips.

For the most part, “we were getting smaller increases,” said House legislative analyst Steve Hinze.

But Hinze said any softening in housing market - both statewide and as a nation - values this year won’t be realized on tax statements until 2008, if then.

Any further diminishing of values this year that is not captured in next year’s statements could become “what they may be complaining about next spring,” he said.

SOURCE: Minneapolis Star-Tribune