The hearing for David Busch's appeal of a vacant-building fee moved swiftly in Room 319 of Minneapolis City Hall.
His lawyer, Mark Kallenbach, argued that the nearly $7,000 fee was excessive compared with what the city spent to maintain the property. When the hearing officer refused to engage on that question, Kallenbach fumed, "This whole thing is a charade." Then, just as hearing officers have done in every one of about 100 appeals since 2007, the fee was upheld.
In its hardball effort to keep homes from turning into abandoned eyesores that can seed crime and other social ills, Minneapolis is charging owners of vacant properties dramatically higher fees than do other cities. It's one tactic among many that cities nationwide are deploying to reverse the trend of foreclosed and vacant homes, a phenomenon that a federal report shows has grown faster in Minnesota than in all but one other state.
The penalties have drawn a backlash. Busch immediately sued in response to the May decision, the latest of at least nine legal challenges filed against the city in recent years over its policies on vacant buildings.
The city's annual fee for owners of empty homes with code or nuisance violations soared from $400 in 2006 to $6,948 today. The fees brought in $2.2 million last year to help cover the cost of housing inspectors and maintenance.
The escalating fines prompt no apologies from one council member whose North Side ward has the largest concentration of vacant homes.
"We watched the community get raped by the banking industry, by the investment industry. ... This is our turn to demand our pound of flesh," said Council Member Don Samuels, who chaired the city's regulatory committee when the higher fees were enacted.
Amid rising foreclosures in Minneapolis, the City Council directed regulatory staff in 2007 to study the issue. They found the true cost of maintaining a vacant building was more than triple the $2,000 the city was then charging.
760 homes on registry
Today, the number of buildings in the Vacant Building Registration program-- about 760 -- is roughly the same as when the council directed the study, even after last year's devastating tornado in north Minneapolis, according to city reports.
Some houses on the list blend in with the rest of their occupied neighbors. But a trip to a dozen properties on the registry found most in visible distress.
A blue tarp hung off the edge of the roof at 3835 Colfax Av. N., across from two vacant lots, and a tangle of trees overshadowed the front.
At 2627 Oliver Av. N., a tax-forfeited property, at least six signs papered the gray-boarded front entrance. They announced that the building had been boarded up by the fire department, warned against trespassing, and said, "Lead hazard control -- do not occupy."
The porch was hollowed out at 2818 Fremont Av. N., where broken wood hung off the splintered white front and boards that once covered the facade were in tatters. Rubble sat where the steps used to be.
Samuels said the matter is personal for him. His home on Hillside Avenue N. sits near two vacant properties. He blames them for lowering his property value and attracting crime.
The banks that made bad loans and the landlords who hold onto these kind of buildings, he said, "should be taken to the public square and whipped."
Even though the region is not as plagued by empty homes as are many other parts of the country, a report last year by the U.S. Government Accountability Office found Minnesota ranked second in the nation -- behind only Nevada -- in its 100 percent increase of non-seasonal vacant properties in the past decade.
Fees to register these properties run far lower in other cities. It costs $1,100 in St. Paul, $300 in Philadelphia, $250 in Washington, D.C., and $100 in Atlanta. In Milwaukee, registering a vacant building is free for the first six months, rising to $250 upon each subsequent renewal if the property has no code violations and $500 if it does.
In Chicago, owners of vacant properties are required to register them for $500 a year. More than 8,500 new properties were registered last year, and another 4,608 came onto the rolls in the first half of 2012. Last summer, the city passed a stricter ordinance extending the requirement to mortgage lenders for empty homes. The Federal Housing Finance Agency sued Chicago over the new rules in December, claiming that Fannie Mae and Freddie Mac should be exempt.
Fees can vary
Still, not everyone pays the full amount of the vacant fee in Minneapolis. Many buildings move off the registry because they are voluntarily reoccupied. In other cases, the owner enters into an agreement to restore the property, it is lost through tax forfeiture or is voluntarily demolished, among other reasons.
Landlord Mahmood Khan, who has sued the city several times to appeal the fees, disputed the city's reasoning that the fee covers the cost to keep up the properties. He said he has been charged for maintenance on top of the $6,948. For instance, after Khan's property at 2631 Newton Av. N. was added to the vacant registry in January, other notices began pouring in. Records show the city sent bills for $120 to secure back doors, noting the dwelling was open to trespass, and $275 to remove scrap wood, metal and blue tarps. Charges were also sent for $275 to remove scrap wood, plastic, auto parts and scrap siding, and $233 to cut the grass.
Another landlord with vacant properties, Steve Meldahl, has contested the fees in three lawsuits.
Last November, Hennepin County District Judge George McGunnigle ruled that the city had the authority to enact a vacant-building ordinance, rejecting a claim brought by north Minneapolis property owner Morris Klock.
A property owner challenging the city won a victory in May, when an appeals court sided with Larry Naber, who fought the placement of his North Side property on the vacant registration list. The court found the city had erred in assessing Naber's property at 1332 Russell Av. N. in the program in 2009, but did not address the question of whether the fee was reasonable or constitutional.
Naber said he moved out of the paid-off house in the 1990s, rented it out for a while and finally left it empty because it needed work. He also became reluctant to try to sell it once the housing market declined. While acknowledging the home was empty, he appealed the assessment of a vacant fee because he contended that the nuisance conditions that the city discovered on the property -- such as a junk car and tall grass -- didn't justify its inclusion on the vacant list.
After losing the case before a hearing officer, Naber filed a lawsuit because "there's no due process built in ... an individual homeowner like myself can't challenge it other than going to court. It's as though you don't have the right to use your property as you choose to use it."
In Busch's case, according to a transcript of the appeals hearing, the city advised him to register what it believed to be a vacant property at 701 Newton Av. N. in 2010. A complicated series of events involving a contract for deed sale left his investment building without an occupant, and he refused to pay the fee.
As soon as the hearing office ordered the vacant fee to be upheld, Busch's lawyer filed a lawsuit filled with complex calculations determining that the city had overbilled hundreds of vacant-property owners because the cost of maintaining the buildings was substantially less than the fee.
"We concluded the only way to get anywhere is a lawsuit," Kallenbach said. "The city is not all wrong. There are properties that need attention; there are properties that need to be taken down. I just have a difficult time believing [the cost] is $7,000."
Maya Rao • 612-673-4210