Hennepin County vs. The Wirth House

A year later and the house at 3431 Colfax Avenue North still sits in bureaucratic limbo.  I wrote a previous blog post about how the city of Minneapolis was needlessly proceeding with demolition, and to their credit they have both held off on tearing the structure down and worked with partners in an attempt to find a solution.  There are still city staffers just itching to pull the demo trigger on this one, but as a whole the city is really moving in the right direction on issues like this.  But now the holdup is with Hennepin County and it's not clear if a solution for rehab will be available anytime soon.  We certainly do not have anyone at the county willing to go beyond the bureaucratic call of "duty" at this time.

How did we get here?  Well...

A quick refresher for anyone who didn't read the previous post.  The house was privately owned, and the city moved to demolish it, a rare maneuver for structures outside of public ownership.  When preservationists like myself got wind of the demolition, we contacted neighbors and the McKinley neighborhood organization.  The immediate neighbors did not support demolition.  The family that previously owned the house (hence the "Wirth" name) was notified and they supported preservation and rehab.  The neighborhood group came out against demolition.  We found a willing buyer, Nicole Curtis, who would take on the rehab project.  All we needed was to keep the backhoe at bay while a way to transfer ownership was worked out.  The city cooperated several ways in that regard.

The house was in foreclosure limbo, with the bank not proceeding with any recapture action.  There were also back taxes and city assessments, as is common for boarded and vacant structures.  So the plan was to work with the Twin Cities Community Land Bank to get the bank to take foreclosure action and then transfer the property over to them.  A foreclosure would likely have resulted in clearing out the back taxes and assessments, and we could work with the city and the county to waive what remained (the rehab numbers wouldn't work if a new owner had to pay thousands in fees that belonged to a previous party).  And then the Land Bank could sell to Ms. Curtis (or another developer if there were multiple parties interested).

Instead, what happened was that the mortgage company released the lien, purportedly as part of their discussions with the Land Bank, although that is secondhand information.  As a result of that action, the current owner now had a property with only the back taxes and assessments owed - still too high of a financial bar to make rehab feasible, and an amount that would not be recouped in a demolition and eventual tax forfeiture.  So our local government then tried to reach out to him and work out a deal.  As you can imagine, he was unresponsive.  Likely he didn't even know he still owned the property, and even if he did, he had no incentive to do anything except let the forfeiture process play out.

After months of unresponsiveness, Nicole Curtis put his name out there on her Facebook feed and asked for help in communicating with him.  She managed to get in contact with him in under one hour, and he was willing to transfer his ownership to her.  That still leaves the back taxes to be resolved.  What follows below is an email from a Hennepin County staffer explaining all of the reasons why the county is unable or unwilling to waive the back taxes.  I am sure all of these reasons are true, but that does not make them any more acceptable.  Here is that message, and feel free to scroll past it if you wish as it is full of bureaucratic mumbo-jumbo.  I'll deconstruct it after.

I am responding to your email inquiry from Friday, May 16, asking for waiver of delinquent taxes for a 2014 property pending forfeiture where the last date to redeem to avoid tax-forfeiture is July 9, 2014. (emphasis in original) The subject property has been included in the notice of expiration of redemption process for 2014 as required by law, based on the 5-year redemption period for delinquent 2008 homestead classified taxes for a property not situated in a targeted neighborhood for the purpose of calculating the redemption period. The subject property was “bid in and sold to the State” on the Second Monday in May, 2009. The amount to redeem is $34,673.74, with interest calculated through 5/31/2014. The full year payable 2014 taxes amount to $1,455.60, with penalty on the first ½ calculated through 5/31/2014.

I am unaware of any general provisions to “waive” delinquent taxes in order to facilitate the sale of a dilapidated structure from the current owner to a third party to facilitate rehabilitation, as you have described. You may wish to have a real estate attorney familiar with Minnesota real property tax laws examine the statutes for applicability (e.g. Minnesota Statutes, sections 375.192, 270C.86, 469.1812-469.1815). I have attached to this email copies of the Hennepin County Property Tax Penalty Abatement Policy Guidelines and the Hennepin County Policy on Tax Abatements for Redevelopment or Development Purposes.

Regarding the delinquent and unpaid current year special assessments, the owner/taxpayer may approach the City of Minneapolis about abatement/adjustment of special assessments. I understand from conversations with City of Minneapolis’ staff that you have met with Regulatory Services. I recommend following up with Director Nuria Rivera-Vandermyde or Deputy Director Kellie R. Jones.

Regarding delinquent taxes, the property is eligible for the owner to enter into a 10-year Confession of Judgment for Delinquent Taxes payment plan. There are specific requirements concerning the “CJ.” So please contact our office if the owner wishes to explore that option (Customer Service Section, (612) 348-3734).

If the subject property is not redeemed, then the County Auditor will by operation of law cancel the taxes, special assessments, penalty, interest and costs (M.S. 282.07). Resident and Real Estate Services  manages all the real properties in Hennepin County where absolute title vests in the state of Minnesota, in trust for the taxing subdivisions, due to nonpayment of delinquent real property taxes. The County takes steps to classify and appraise all newly tax-forfeited properties. Hennepin County and City of Minneapolis have a Memorandum of Understanding providing for redevelopment of tax-forfeited lands situated in Minneapolis Targeted Communities, whereby the City is able to acquire 30% of the forfeited parcels situated in Targeted Communities, net of repurchases , for $1 per parcel plus administrative costs. There is also a provision in the MOU for additional conveyance from CPED to the Twin Cities Community Land Bank. You and Ms. Curtis might wish to consult with Minneapolis CPED staff (Elfric Porte, Edie Oates) about the opportunities for developers working with CPED for properties the City acquires via the MOU.

Please review the attached policy documents. If you have questions about the Economic Development Abatement Policy, please inquire to Shawn Wink, who is copied on this email.

To recap, based on circumstances and information supplied, preliminary conclusions are:

·         Consult with the City of Minneapolis concerning requests for abatement or adjustment of municipal special assessments.
·         No penalty abatement under County Policy due to lack of timeliness (and last homestead status was pay 2009)
·         No evidence provided to demonstrate that any taxes, assessments, penalty interest or costs that were erroneous or unjustly paid (M.S. 375.192)
·         Limitation on consideration of current plus two prior years, and no evidence provided of any clerical errors or taxpayer failure to file for reduction or adjustment due to taxpayer hardship (M.S. 375.192)
·         Requested abatement likely does not qualify under County Policy as the basis for providing an incentive for economic development or redevelopment as provided under M.S. 469.1812 to 469.1815 that also requires payment in full of delinquent property taxes

I hope this information is helpful. Regarding the property pending tax-forfeiture, please contact TFL Section Supervisor Jan Duffie (612) 348-8648 or me.

So here is what our county staffer is telling us.  The county is owed $34,000.  They are unaware of any provision that would allow them to waive the taxes for the purpose of transferring the property from one private party to another.  Although they allude that such a possibility may exist, they are telling the prospective buyer and seller to find that clause through the help of a real estate attorney instead of actually helping to facilitate anything.  And the only way to get rid of the $34,000 the county is owed is to let it go to tax forfeiture, which could take another year or more.  And to be clear:  the rehab and resale of this house is not feasible if the $34,000 in back taxes is part of the equation.

I am doubtful that the city will be willing to wait that long.  Every day that the house sits in this zombie-like state, the costs for rehab increase, so that by the time the house goes through the county's process repair may not be feasible.  This is the kind of bureaucratic nonsense that drives me insane.  If the house is torn down, the county will eventually lose their $34,000 anyway.  They will lose much more than that, actually, because it will be years before anyone builds new on the parcel and puts it back on the tax rolls.  The demolition won't be free either, although the city would probably bear that financial burden.  And if market trends continue then it's probable that the new construction would receive some sort of subsidy from local government.

Instead, we have a willing buyer and a willing seller.  The house would be restored and the only city or county money used as a "subsidy" would be the amount they stand to lose currently.  The ball is in Hennepin County's court, and their response is to tell us all the reasons why they can't do anything, after which they go back to their administrative duties while the house, the community, and the tax rolls all take a hit.  But hey, at least they did their job, right?

What this house and others like it need is a dedicated person within local government who would be accountable (as in "fired if you are unsuccessful" accountable) for shepherding it through its current state and into proper reuse.  Right now, that person and that position do not exist.  And so houses like the Wirth House lumber through the bureaucratic process, creeping ever so slowly towards demolition.  Who will step up to reverse this trend?