Eric Mattson was not surprised that the small vacant lot he bought last year near the shores of Lake Waconia was increasing in value.

What shocked him was the $189 million market value the Carver County assessor's office came up with for the 55- by 80-foot lot, making it the most valuable property in Waconia and possibly the county.

"It was such an obvious mistake," said Mattson, 41, who was looking at a property tax bill of $2.5 million. "It was over the top. It was very funny."

The story has been creating quite a few chuckles since it began swirling around Waconia this week.

But no one is laughing at the assessor's office, where the problem started. Neither is anyone at the Carver County Board, the city of Waconia or the Waconia School District.

Those three entities -- which were counting on the $2.5 million in increased property tax collections -- now face the daunting task of raising taxes or cutting budgets to make up for the shortfall.

"This is not an 'oops.' This is a major error that affects an awful lot of people," said Mark Lundgren, director of the Carver County division that oversees the assessor's office.

Error wasn't caught at first

What has Lundgren and other Carver County officials most concerned is that the error was not caught for several months. It was discovered only last week when the property owners called to complain.

"Our initial reaction was shock," said Susan Arntz, Waconia's city administrator. "We were puzzled why it wasn't caught earlier by the county."

In the fall, the county sent out tax estimates to 34,000 property owners. Now, it must send out new estimates.

"We need to take accountability. This was clearly our mistake," said Carver County Administrator Dave Hemze.

He also has to figure out how to cover a $900,000 shortfall in the county budget.

County, city and school officials are expecting a lot of hard questions next week when they hold special meetings to discuss what they are going to do to balance their books. If they tried to raise taxes on other property owners enough to cover the shortfall, the increase would range from about $30 a year on a typical home in Carver County to as much as $330 on a typical home in Waconia.

So officials are looking instead for ways to cut proposed spending.

Hemze, for example, has decided to forgo buying a new $100,000 truck for public works, as well as delay furniture purchases and reduce the county technology budget by $90,000.

"We're not going to stop plowing snow. We're not going to stop mowing parks," said Waconia's Arntz, whose city is facing a shortfall of about $750,000.

'We were assured'

Arntz and Waconia School District Superintendent Jerry Kjergaard said Thursday that they had questioned the county's initial numbers when they came out in August.

"We didn't think it was right, but we were assured that it was correct," said Kjergaard, who is trying to figure out what cuts might need to be made to the district's budget plans. "I'm not happy, but what is it they say happens?"

Lundgren said the trouble began in August when a clerk went into Mattson's file to change the designation of the property, at 233 Lake St. E., from homestead to non-homestead to reflect its change in status after its sale.

The clerk filled in the $18,900 proposed valuation, but then mistakenly hit the key to exit the program. The computer added four zeros to fill out the nine numerical spaces required by the software, thus indicating the value was $189,000,000.

Increase by a factor of 10,000

The error was compounded when proofreaders failed to notice that the value of Mattson's property had increased by a factor of 10,000.

Lundgren said the county has instituted new procedures to assure this doesn't happen again, including daily proofreading of property tax records that are changed.

Mattson, a consultant who used to work in mergers and acquisitions, said the error was discovered by his wife, Julie, last month when she opened the county's property tax estimate mailed to their home.

She called the county assessor's office to say the property tax estimate was wrong. Although the valuation has since been changed, Mattson's wife got no immediate response from the county assessor.

"I'm sure they get a thousand calls a day from people saying their property tax bills are wrong," Mattson laughed.

Then she called Mattson to try to explain to him what she was seeing on their proposed property tax increase.

"When she called," Mattson said, "she said, 'I'd read you this number, but there are way too many zeros.'"

Herón Márquez Estrada • 612-673-4280