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HomeMy WebLinkAboutCity Council Packet 04-15-2008 BOEAgenda City of Plymouth Board of Appeal and Equalization Tuesday, April 15, 2008 7:00 p.m. Council Chambers 1. Call to Order. 2. City Assessor's Report. 3. Public Comments. 4. Adjourn. DATE: April 15, 2008 TO: Plymouth Local Board of Appeal & Equalization FROM: Janene Hebert, City Assessor SUBJECT: 2008 LOCAL BOARD OF APPEAL & EQUALIZATION I- l The following. report includes statistical analysis and general information about the 2008 assessment for the Local Board of Appeal & Equalization. The Assessing Division uses this information to determine values for the annual January 2 assessment. The purpose of the Local Board of Appeal ,& Equalization is to hear testimony from property owners on their objections to the assessor's.2008 estimated market value or property classification. Testimony may be provided in three ways: In person; I In writing; or By the property owner's representative. Please keep in mind that under state law, the scope of the Board of Appeal & Equalization's authority is limited. The board may only address market value and property classification issues. It may not adjust taxes. At the conclusion of the meeting, the Board of Appeal & Equalization will recess. It will reconvene at 7:00 p.m. on April 29, 2007. The board will decide on all appeals at that time based on staff reports and information submitted by property. owners or their representatives. We hope that the information in this report makes your job as a member of the Board of Appeal & Equalization easier. As you review it, please feel free to contact me at 763-509- 3252 with any questions or comments you may have before the board convenes. r- f TABLE OF CONTENTS h Local Board of Review & Equalization Authority 1 Local Board of Review & Equalization Overview 2 City of Plymouth Assessing Staff 4 2008 Assessment Summary 5 2008 Assessment Introduction 8 1 2008 Assessment Statistics 11 f 2008 Ratio Study 12 l Appeal Process 14 Maps 16 Local Board of Review & Equalization Authority Minnesota Statutes, Section 274.01, states that the council of each city shall be or shall appoint a Board of Appeal & Equalization. The Plymouth City Charter requires the City Council to act as the Local Board of Appeal C Equalization. The 2004 Legislative session enacted a bill that requires members of the Local Boards to attend a training session that outlines their duties and responsibilities. Councilpersons Bildsoe, IIelvitt and Black have attended the training session. Assessments of property are made to provide the means for the measuring. of the relative share of each taxpayer in meeting the costs of local government. It is the duty of the Assessor to assess all real and personal property except that which is exempt or taxable under some special method of taxation. If the burden of local government is to be fairly land justly shared among the owners of all property of value, it is necessary that all taxable property be listed on the tax rolls and that all assessments be made accordingly. The authority, of the local board extends over the individual assessments of real and personal property. The board does not have the power to increase or decrease by a percentage all of the assessments in the district of a given class of property. The County Board of Equalization can make changes in the aggregate assessments by class. Although the local board has the authority to increase or reduce individual assessments, the total of such adjustments must not reduce the aggregate assessment made by the Assessor by more than one percent. If the total of such assessments does loiyer the aggregate assessment made by the Assessor by more than one percent, none of the adjustments ivill be allowed. This limitation does not apply, however, to the correction of a clerical error or to the removal of a duplicate assessment. In reviewing the individual assessments, the board may find instances of under valuation. Before the Board can raise the market value of property, it must notify the owner. The lav does not prescribe any particular form of notice except that the person -whose property is to be increased in assessment must be notified of the intent of the board to make the increase. The Local Board of Appeal & Equalization assures the property owner an opportunity to contest the valuation that has been placed on his/her property or to contest or protest any other matter relating to the taxability of his/her property ex)t the tax. The board is required to review the matter and make any corrections that it deems just. Local Board of Review & Equalization' Overview There has been a lot of publicity regarding the real estate market this past year. Plynnouth has experienced a downward swing in the residential market. Residential properties are no longer selling for inflated prices over their list price. Houses are on the market for a longer period of time and are selling for list price or below. Some properties in the City of Plymouth saw changes in their estimated market value. The value changes range fi-om basically no change to general citywide increases to substantial decreases due to locational, market activity. The upper end bracket of residential properties experienced less of an impact than did the lower valued homes. The Minneapolis Area Association of Realtors reported that in December the buying environment is as good as it's been since February 2005. With both home prices and mortgage rates in decline, the time is ripe for area buyers. The number of closed sales is down for the year. The average percentage changes in valuation are as follows: Property Value Percent Value Percent Value Percent Chime Change Chime from from from 2005 to 2006 2006 to 2007 2007 to 2008 Residential 7.8 % 2.3 % 2.8% Residential 4.1% 13.0% 2.0% Lakeshore Condominiums 4.2% 2.3 % 5.7% Townhomes 5.2 % 0 % 4.8 % Apartments 3.0.% 14.2 % 1.5% Commercial/ 7.2% 18.4 % 1.3 % Industrial Exceptions to the above market value changes would include new construction, quintile areas, reappraisals, and/or other market adjustments. The condominium and townhouse market has slowed and the market is saturated with inventory It has become a highly competitive market. The buyers have more to choose from and inventory is remaining on the market for longer periods of time. Vacant land sales have slowed as well. Investors do not have the capital to hold vacant land for a long period of time before development can begin. The value schedule used by the Assessing Division is as follows: Land outside the MUSA with no utilities Nvas reduced 2 110,000 an acre. Land inside the MUSA with no utilities remained at $160,000 an acre. Land inside the MUSA with utilities remained at $200,000 an acre. On March 14, 2008, 25,366 estimated market value notices were mailed to Plymouth property owners. State laws provides that the assessment shall be an annual assessment with all property in the taxing jurisdiction re -valued to its market value every January 2. The City of Plymouth continued to have a large quantity of building permits for new construction and remodeling projects. This does not include the 6,800 quintile parcels that were reviewed and re -appraised. In its 1993 session, the Legislature passed a law imposing a limit on how much an assessor's estimate of market value is permitted to increase from one year to the next for taxation. Under the law, assessors are required to continue to estiunate the market value of all properties. However, the laws requires the use of a ning property tax bills. Approximately 317 of the 25,366limitedmarketvalueforpurposesofdetermi parcels in the City qualify for a limited value. These properties are taxed on their limited market value, not their estimated value. In Plymouth, $19,028,500 of estimated market value is not being taxed due to the jlimited taxation law. The Limited Market Value Lawn is gradually is scheduled to sunset in 2009. The 2008 assessment just completed represents many hours of staff research and tune. We feel confident the 2008 assessment is fair and well equalized throughout the City of Plymouth. Respectfully submitted Assessing Department Staff i I 3 Plymouth Assessing Department CitAssessor Janene Hebert SAIVIA Jan Olsson AMA, RES Appraiser Supervisor' Michael Vander Linden CMA Appraiser Cindy Bowman CMA Appraiser Paul Kingsbury CMA Appraiser Peggy Schulman Assessment Technician josh Jolins'i 4 Part -Time Appraiser Jake Pidde CMA Commercial Trainee 2008 ASSESSMENT SUMMARY The 2008 Assessment affects all property owners in the City of Plymouth. As required by current state laiv, the Assessor is required to reassess all property each year. State Statute states that: All real property subject to taxation shall be listed and assessed ever), year with reference to its value on January 2 preceding the assessment. This has been done and the owners of property in Plymouth have been notified of any change. Minnesota State Statute 273.11 reads: All property should be valued at its market value. It further states that "in estimating and determining such value, the Assessor shall not adopt a lower of different standard of value because the same is to serve as a basis for taxation nor shall he adol)t as a criterion' of value that price for which such property would sell or in the aggregate with all the property in the town or district but he shall valise each article or description of property by itself, and at such sum or price as he believes that same to be fairlv worth in In Orley. The statute says all property shall be valued at market value. This means that no factors other than market (such as economics, personalities or politics) shall affect the Assessor's value and the subsequent action by the Board of Appeal 8: Equalization. Market value has been defined many different ways. Simply stated, it is "the highest price estimated in terms of cash which a property will bring if exposed for sale on the open market by a seller -who is Nvilling but not obligated to sell, alloNving a reasonable time to find a purchases- ivho is willing but not obligated to buy, both with knowledge of all the uses to which it is adapted and for which it is capable of being used. The real estate tax is an ad valorem tax which is based on the value of property and not on the ability of the property owner to pay. The values placed on all real estate in Plymouth are based on the amount ofland and the improvements upon the land, -,vlule no consideration is given to who owns the land. The 2008 Assessment (not the 2008 taxes) reflects 0.2% overall valuation decrease from the 2007 assessment (including new construction, quartile adjustments, and/or market adjustments). This can be demonstrated as follows: G 2007 TOTAL CITY VALUE 2008 TOTAL CITY VALUE PRELIMINARY) 2008 PERCENTAGES 10,041,802,600 10,018,968,800 Total Value Change: 22,833,800) 0.2%) Value of New Construction: 168,044,900 1.7% Change of Existing Property: 190,878,700) 1.9%) 0 I I I 1 I 7 City of Plymouth Percentage Value Growth 2008 Assessment Introduction The number of permits for new construction is down and the staff has concentrated on existing neighborhoods and property types to ensure equalization. Each lake was reviewed either by boat or with the benefit of Pictometry. Pictometry is a ne v software that enables an appraiser to view all aspects of a property from a variation of angles. To ensure accuracy, aerial photos of Hennepin County are taken every t vo years and the imagery is made available to all jurisdictions within the county. Those,areas of the city that equal 20% of all existing properties have been physically reviewed during 2007 and represent over 6,860 parcels. This is commonly referred to as the "Quintile." In the areas of re -inspection, new items that previously were not on our records were added, or where applicable, deleted. Of all homes reviewed 54% were internally inspected. A preliminary sales study wvas analyzed, prior to placing a final value on each property inspected. Plymouth's preliminary residential median ratio entering the 2008 assessment was 96.0%. Hennepin County determines this ratio. They compare the January 2, 2007, estimated market values to sales occurring from October 1, 2006, through September 30, 2007. The average residential decrease for the January 2, 2008, assessment vas -2.8%. This wvas determined by comparing the January 2, 2007, estimated market values to the same sales, thus establishing the 2008 estimated market values at a median sales ratio of 94.6 and a mean ratio of 94.6 with a coefficient'of dispersion of 4.3. In accordance with the results of this sales study, certain areas of the city, certain styles, and certain sizes of houses were adjusted in value, either lower or higher than the prior year value, to more properly reflect actual market values. This past year the depreciation on existing homes was in the single digits. The 2007 median sale price of existing housing stock (off the lake) in the City was $ 365,100; this price does not include to-v-vnhouses or condos. This is extracted from the Hennepin County Ratio Study of all arms -length transactions involving single family homes. Lakeshore in Plymouth vas adjusted according to the sale activity on each individual lake. The iaverage lakeshore property received an decrease of approximately —2.0%. The median sale price of existing lakeshore property in 2007 wvas $704,500. Various townhouse and condominium complexes were adjusted according to market activity as well as studied to determine if the number of bedrooms per unit affected the sales prices. Townhomes as well as condominiums received a decrease in market value. The median sale price of condominiums was $179,000. The median townhouse sale price was $ 256,300. The 2007 commercial and industrial market can be summed up in one word -steady. Office building sales started strong but slowed midyear due to tighter lending requirements. While significant remodeling and updating occurred, there vas limited ne-w construction activity in the office market. One ne-%v office building came on line, the Select Comfort Corporate Headquarters. i 8 The Twvin Cities industrial market continued its positive direction in 2007, but did slow down dramatically from the past two years. The T\ -vin Cities retail market had a shaky year in 2007. The year started off strong, but pulled back from midyear on. The retail market became more challenging tlu-ough 2007 largely due to the slowing housing market. lae retail market was lit in two different ways. The first is in retail sales. With less disposable income available, consumers are spending less. Secondly, many franchise owners purchase their first franchise by borrowing against their current assets, primarily their home. The 2007 Twin Cities apartment market continued its decrease in vacancies for the third straight year. Overall vacancies are at 3,6%, down from 4.0% one year ago and 5.6% two years apo. Two driving factors for the lover vacancy rates are the continued housing struggles and lack: of new construction. Even though apartment market fundamentals are healthy, pricing and deal volume have been affected by the debt markets. Credit restrictions have also made financing difficult for land acquisitions and new developments may he hindered going forward. The following table outlines the change in the total market value of the commercial, industrial, and apartment markets. Change Sector Total New Constuction Net Commercial 7.3% 6.3% 1.1% Industrial 3.3% 1.5% 1.8% Apartment 2.0% 0.7% 1.3% The value we place on properties is accomplished only after we have conducted thorough studies in the market place. Costs of replacement are checked with builders in the area, as well as cost manuals that are available, which are put together by experts in the field of building and appraising. Sales of property are constantly analyzed to see what is happening in the market place.. The assessors/appraisers do not create value; they only measure its movement. Equitably assessing property values is part science, part judgment, part communication skills, and largely a mystery to many property owners. Add to that the fact that property construction, financing and o\vnership are more complex today than ever before and the task: becomes more difficult. Training cannot tell us how to find the "perfect" value of a property, but training can consistently produce the same estimate of value for identical property by different assessors. That, after all, is a working definition of equalization. The following pages contain helpful information that will make your job as a member of the Board of f Appeal & Equalization more productive. 9 I 1 DISTRIBUTION OF 2008 ESTIMATED MARKET VALUE BY PROPERTY I 10 2008 EMV Residential S 7,368,825,300 Commercial/ Industrial S 2,026,565,400 Apartments S 623,578,100 Total S 10,018,968,800 2008 ASSESSMENT STATISTICS Total City Parcel Count (01-02-07) 25,165 Total City Parcel Count (01-02-08) 25,366 Parcel Count Per Appraiser 2008 Assessment 4,227 Assessor's Industry Standard per Appraiser 3,000 2007 Total Estimated Market Value 10,041,802,600 2008 Total Estimated Market Value (Preliminary) 10,018,968,800 2006 to 2007 Total City Valuation Growth 7.10% 2007 to 2008 Total City Valuation Growth 0.2) 2006 Total Building Permits 3,553. 2007 Total Building Permits 4,009 2005 Plymouth's Median Home Sale Price 367,900 2006 Plymouth's Median Home Sale Price 380,100 2007 Plymouth's Median Home Sale Price 365,100 Does not include townhouses or condos) 2007 "Median" Sales Ratio (Assessment Level) 95.7% 2008 "Median" Sales Ratio (Assessment Level) 94.6% 2007 Coefficient of Dispersion (Assessment Accuracy) 5.8% 2008 Coefficient of Dispersion (Assessment Accuracy) 4.3% 2006 Approximate Number of Sales (including new construction) 1,847 2007 Approximate Number of Sales (including new construction) 1,158 2008 SALES RATIO STUDY Equalizing is done today through the process of sales studies. These studies compare the Asses- sor's value with that same property's actual sale price. This comparison gives us ratio indicators that are recognized by the County and the Minnesota State Conu-nissioner of Revenue. The ratio indicators must reach acceptable levels or they will trigger corrective action for general across-the- board adjustments by the County Assessor or the Commissioner of Revenue. These general cor- rections -are essentially a "shotgun blast" type correction that affects the adequate and inadequate values alike, and although they correct equalization across -jurisdiction lines, they do just the oppo- site within a jurisdiction by increasing inequity The Commissioner of Revenue and the Hennepin County Assessor have mandated that any juris- diction falling below a 90.0% plateau will be forced into corrective action, and then everyone suf- fers. Our coefficient of dispersion in this year's study is 4.3%. (Anything under 10 is considered excel- lent.) This is comparable to other jurisdictions of our size in Hennepin County. This is a direct result of our computerization of the appraisal process and demonstrates our ability to administer fair and equalized valuations at both ends of the value spectrum. Our price -related differential is currently at 100.447. This shows our ability to treat higher priced homes as equally as the lower priced homes. 100 is consideredeU rfect. Hennepin County Sales Statistics STYLE OF SALES AVG. SALE PRICE MEDIAN RATIO Ramblers 89 5308,300 938 Splits 132 S310.100 947 Two Stories 165 54.50,000 948 Rambler -Cluster 1-1011les 12 3S82,300 946 Splits -Cluster Homes 10 5239,800 962 TWO Stories -Cluster Homes 6 S289,200 962 Condominiums 173 S179,000 948 Townhomes 165 5256,300 945 TOTAL 752 The above figures are based on the sale of existing homes that meet the state criteria for arm's length transactions for the 2008 assessment. i 12 13 PLYMOUTH 2008 RESIDENTIAL PROPERTY VALUE DISTRIBUTION VALUE PERCENT OF HOMES Linder $100,000 63 138 100,001 to $200,000 14.59 3,203 200,001 to $300,000 34.25 7,520 300,001 to $400,000 25.47 5,593 400,001 to $500,000 13.12 2,880 500,001 to $700,000 9.32 2,046 Over $700,001 2.62 575 Total 100% 21,955 UNDER $100.001 $200,001 $300,001 $400,001 $500,001 Over 100,000 TO $200,000 TO $300,000 TO TO TO $700,001 400,000 . $500,000 $700,000 VALUE Living Unit Breakdown TYPE OF DWELLING 2007 ASMT 2008 ASMT OF UNITS OF UNITS Apartments 7,190 7,190 Single Family Homes 15,737 15,839 Duplex 72 69 Condominium 2,824 2,856 Townhomes 3,226 3,422 Permalease 32 30 Mobile Homes 59 59 Farm Houses 12 11 Seasonal Recreation 6 6 Co -Op Units 210 210 TOTAL LIVING UNITS 29,468 29,692 A increase of 224 living units over the 2007 assessment. Total number of homesteads 2/1/08 20,767. 1 APPEAL PROCESS VALUATION NOTICE DISCUSS VALUE WITH THE ASSESSOR'S OFFICE LOCAL BOARD OF APPEAL & EQUALIZATION DENY CHANGE APPEAL VALUE ADMINISTRATIVE REVIEW I APPROVE APPEAL I COUNTY BOARD OF EQUALIZATION DENY APPEAL STATETAX COURT I 14 MAPS a i;o! UNTED MARKET V i, I'. City ofPtymouth Adding Quality to Life Why are my property taxes going up when the value of my home is staying the same or declining? I thought there was a "levy limit" that froze the property tax rate on my home! Why did the taxable value of my home increase even though the market value stayed the same? These are just a few of the questions that we've received during this time of stalling or falling home prices. Property taxes in Minnesota are a complicated and often confusing topic for residents. We hope the following information answers some of your questions. Assessor's Values Lag Behind The Market. :Property taxes payable in 2008 are based upon the property's estimated market value as of Jan. 2, 2007. This value is based upon the Assessor's analysis of market trends during 2006. Thus, when you pay your 2008 tax bill, your property's valuation is already two years old. But That's Not Fair! Remember, during a rising real estate market, we all enjoyed the fact that the Assessor's valuation seemed to lag behind the true value. Now, in a stable or declining market, the reverse is true. In either event, though, all properties are rising or falling with the market and, in general terms, the tax burden of an individual property is not affected .by the lag in values — either in an up market or a down market. When Values Rise, The City Collects More Taxes. So, Isn't There An Incentive For The City To Increase My Property Value? Property taxes are fundamentally different than income taxes or sales taxes. In those cases, the tax rate is fixed and the taxes collected are determined by multiplying the rate by income or the value of goods purchased. With propertytaxes, the property tax rate is determined each year after the City, the County and the school district make their budget decisions. Property valuations are then used to allocate the tax burden in an equitable manner across all properties. A rising real estate market does not generate more tax revenue nor does a flat or declining market result in less tax revenue for the City. Property valuation simply determines how the tax levy will be spread out and your share of your community's property tax bill. If your value increased more than the average value increase of other properties in the City, you will assume a greater burden of the tax bill — and vice versa. How Does The Value Of Non-residential Property Figure In? Plymouth has a stable commercial/industrial tax base that benefitsresidential taxpayers. However, for many years, the value of residential properties in the City increased at a. faster pace than non-residential properties and the tax burden fell more heavily on residential taxpayers. The reverse is now occurring and commercial/industrial properties have a greater share of the burden compared with last year. Why Wasn't The School District's November Referendum Included In My Truth -In -Taxation Notice? The Truth -in -Taxation process is tightly regulated by the State. According to law, Truth -in -Taxation notices must be mailed by the County before the November referendums, so the approved school district leery was not included in parcel -specific notices. This is the case in all communities that had a November referendum. Plymouth Assessing Department i 15