Property Tax Lawsuit Takes Expected Step Back, Legal Fight Continues

Post and stock photo (of a house that's probably over-assessed) by the Hawthorne Hawkman.

A lawsuit alleging that property tax assessments are unfairly calculated so that lower-income neighborhoods are paying more than their fair share has been dismissed on a technicality.  A brief NXNS recap of links:  the lawsuit documents can be found here, CURA mapped out where in Minneapolis people are paying assessments that are either more or less than market value, I posited that perhaps the key question is whether a post-foreclosure sale from a bank to an individual counts as a forced sale, and a Minneapolis assessor didn't answer that direct question. 

So where does the lawsuit stand now?  Well...

"Upper Drug-o-topia" - Gone!

Post and photo by the Hawthorne Hawkman.

With a name like "Upper Drug-o-topia," new NoMi blog readers might think that the city's demolition of this property is a good thing.  However, the house was solid and its needless destruction was nothing short of a colossal mistake.  Now, I'll be fair to CPED and explain that in attempts to use federal money to get out ahead of slumlords and other unscrupulous investors, the city and other non-profit partners have been buying up quite a bit to rehab or demolish in Hawthorne - and doing a fair amount of rehab too.  Also, their purchase of this house, in spite of the fact that the Hawthorne Neighborhood Council opposed its demolition, did lead to changes in how we work together to agree on the acquisition and disposition of future houses.

Because things have gone rather well since then, I'd be generally inclined to let this unwarranted demo go to the wayside.  But after the City Council voted to strip Hawthorne of $730,000 in NRP funds, and north Minneapolis of roughly $3 million, I'm of the opinion that neighborhoods ought not be so charitable towards city shortcomings.

I lived at 2218 Lyndale for a while, and the history behind the name "Upper Drug-o-topia" began shortly after I moved in, when...

City Assessors Dodge a Question

Post by the Hawthorne Hawkman, image from the Boston Real Estate Blog.

At yesterday's City Council hearing, in which neighborhood funding was stripped away, CM President Barb Johnson announced that city assessors would be available in an adjoining room to answer questions about property tax values.  The pressing item on my mind as soon as I heard this was "What exactly constitutes a forced sale?  What kinds of sales are and are not taken into consideration when determining a value?"  For new NXNS readers, that line of questioning has to do with a lawsuit in which it is alleged that north Minneapolis residents are paying taxes based on values at 300% of market value.

(On an interesting side note, one of the southwest Minneapolis residents who testified at the hearing mentioned the lawsuit and said his city councilperson told him it was nothing to worry about.)

Shortly after my testimony, I slipped out to ask an assessor a few questions, such as...

Taking a Peek at Assessment Statutes

Post by the Hawthorne Hawkman, image from the Miscellany 101 blog.

As the Minneapolis property tax lawsuit moves forward, people have wondered what our state statute has to say about assessed values.  The question has been raised here and on the Minneapolis Issues Forum, although no definitive answer has been given.  Well, here is what our state law has to say:

Minnesota Statute 273.11 (sub 1) begins:  "Except as provided in this section or section 273.17, subdivision 1, all property shall be valued at its market value."

Okay, so what is "market value?"

"Subd. 8.  Market value.  'Market value' means the usual selling price at the place where the property to which the term is applied shall be at the time of assessment; being the price which could be obtained at a private sale or an auction sale, if it is determined by the assessor that the price from the auction sale represents an arm's-length transaction.  The price obtained at a forced sale shall not be considered."  (emphasis mine)

What isn't yet clear from statute or other cases, is what exactly constitutes a "forced sale."  I would contend that a forced sale is a sheriff's sale or other court- or lender-ordered sale in which the entity selling may not have sold at the time, price, or other terms unless compelled to do so.  Post-foreclosure, a bank may be highly motivated to sell, just as an owner who has to relocate due to a new job might be, but the transaction is an arm's-length transaction at that time, and I do not see it as "forced."

We'll see if either the assessment policy, state law, or any ruling from this lawsuit interprets "forced sales" in the same way.  If so, it would seem that the lawsuit has merit.  And if it does, then it could seriously change the financial landscape for Minneapolis.  Even for someone who just wants to see fairness applied in tax policies, that's a daunting proposition.  That's because the map in a previous post encompasses 7,767 single-family parcels, and the total amount of over-assessed values is...

Weighing the Merits of the Minneapolis Property Tax Lawsuit

Post by the Hawthorne Hawkman, image from Texas Property Tax Consultants.

Yesterday we wondered if the price was right for assessed values in north Minneapolis and Phillips.  For anyone who hadn't already guessed, in each example listed in that post, the properties in the affected areas had the lower sales price but the higher assessed value and higher taxes as a result.

This blog was fortunate enough to be able to post the lawsuit documents before anyone else did, and today we get to break down what they contain.  These are only my impressions after reading through, so others are encouraged to offer their thoughts on this matter as well.  But mark my words, this could be huge.  We're talking potentially in the tens of billions of dollars in assessed values for single-family homes citywide.  Out of those tens of billions, it's not yet clear how much assessed values are incorrect (assuming the suit is found to have some degree of merit, obviously).  But then you start to think about multifamily, commercial, and industrial on top of THAT, and the financial implications are staggering.

The lawsuit that could rock the foundations of those finances starts with...

The Price is Right? North Minneapolis Assessed Values

Post by the Hawthorne Hawkman.  Contributed image.

Unless you've been living under a rock (assessed value:  $75,900) in north Minneapolis you're at least familiar in passing with the lawsuit alleging unfair assessment and taxation practices in the Camden community and the Phillips neighborhood.  This blog posted the court documents online, and I've had a chance to review them.  In this post, we'll break down the map above.

What's hard to see without clicking on the map to enlarge it is exactly how some of the nicest parts of the city are getting a more than fair ride.  While it's true that Jimmy Carter called Hawthorne the nicest neighborhood [he's] ever worked in, that unfortunately doesn't retroactively raise house values across north Minneapolis.  So the blue dots represent households paying taxes at about 60-90% of their recent selling price.  Green dots are at 90-110%, the range allowable by law.  Yellow is 111-150%, orange is 151-200%, red is 201-300%, and maroon dots signify those who are paying taxes based on a valuation over 300% of a recent sale.

In a delicious bit of irony, one of the assessors named in the lawsuit has even contested the valuation of one of his own properties.  But let's take a look at a few other comparisons, such as...

NXNS Exclusive! North Minneapolis Property Tax Lawsuit Docs!

Post by the Hawthorne Hawkman, image from the Redfin blog.

EDITORIAL NOTE:  The copy originally posted was missing several pages, most notably the end of Defendant Llangari's claims and the beginning of Defendant Kral's claims.  This was likely due to a scanner pulling two pages through at a time.  The link has been corrected, and the full document is now available.

Ask and you shall receive.  In a previous post, I said I hoped to post the lawsuit documents that claim north Minneapolis properties are being assessed unfairly and therefore taxed at a higher rate than they should be.  Within several hours, I was sent the document I was looking for, along with some other goodies.  The other items and a summary of the complaint are coming soon.  But for anyone who wants to review the lawsuit document...

Click here for a copy.  More will follow.