Continued: Property tax hikes prompt meeting with Hennepin County assessor

Not all lake bays are created equal. Neither are all neighborhoods, streets or houses.

As a result, some residents on Lake Minnetonka find themselves paying more property taxes than others who live off the lakeshore.

That disparity prompted Hennepin County Assessor Tom May this week to take the extraordinary step of going out to Mound to answer questions from dozens of angry residents upset by the valuations his office has placed on their homes.

"We're glad to talk to anyone at any time about their market value," said May, who spent more than two hours explaining the procedures of his office and how values are reached.

May tried to explain that the location of a property -- the bay it is on, the street and neighborhood where it is located -- determine the value of the house because the appraiser is judging what it might sell for.

Those explanations, at times technical, did little to ease the residents' concerns.

Lakeshore residents believe they are paying higher property taxes than those living off the lake, although they use no more city services than other residents, they said Tuesday.

"We do believe we are subsidizing others," said Connie Szarke, who is part of an informal lakeshore owners' group that spontaneously formed to investigate the issue.

Nothing changed

Although the meeting was civil, those who attended indicated they had not changed their minds about their valuation or been convinced that estimated property values -- some of which have gone up by double-digit percentages this year alone -- are accurately reflecting today's Twin Cities' real estate market.

"Most people that are being assessed don't believe that their value is being assessed accurately," Mound Mayor Mark Hanus told May and two appraisers who joined him.

Residents asked May to change the way the appraisals are done -- something he said he can't by law do on his own -- and charge everyone at the same rate.

"We would like to see some equitable tax reform," said Szarke. "A lot of lakeshore owners are being taxed right out of their homes."

May said the tax rates are set by county and city governments to meet their budgets and thus are not up to the assessor's office to decide. He said the estimated market value of the house, which determines how much tax is paid, is made by his office but is also subject to review by the state to make sure valuations on houses are equally applied.

One of the major problems this year, May said, is the elimination of the state's limited market value provision that artificially kept down property tax increases by limiting how much a property's market value could go up each year.

The elimination of that provision, May and his colleagues said, might be one reason some people saw tax increases of 15 to 20 percent this year.

"You're paying for the relief you had," said Phil Jensen, a senior county appraiser. "It happened to me. I lost the limited market value on my property, and it went up 20 percent."

The lag

The biggest issue people had with their property tax bills was the lag that exists between when the estimated valuations are made and when the notices are received, which can be as much as 18 months.

May said the appraisals are based on home sales during a fiscal year, from Oct. 1 to Sept. 30. The county valuations are set on Jan. 2 of the following year, then mailed out in March or April. So they could be based on home sales that occurred as much as 18 months earlier.

Given how much the real estate market has deteriorated in the past 18 months, the Mound residents are not happy with the estimates they are seeing for their properties.

"They should have been going down sooner," said one resident who identified himself as a Realtor who sells homes in the area. "I think you are hurting the lake people ... disproportionately."

Of even more concern is that with this lag, the values of some properties might go down while those of other, more desirable properties continue to go up, even when there is a slow real estate market.

"The lag is the lag," said Mayor Hanus, himself a lakeshore property owner. "But the lag should be the same for all properties. I've had reports of off-lake property going down [in value] and the lakeshore going up."

May and his appraisers tried to explain that this is because higher-demand property will hold its value a bit longer when a downturn starts, but that eventually it will even out because that property will come down in value like other properties.

He pointed out that in Mound, about 57 percent of the properties are going to see a valuation decrease because of the soft housing market.

"We don't make changes arbitrarily," said Jensen, who does appraisals in the area. "We try to look at what is going on. When we have evidence that [a valuation] didn't make sense, I back off."

Heron Marquez Estrada • 612-673-4280