Board of Equalization - April 9 and April 30, 2019 Minutes

April 9, 2019
The Board of City Commissioners met as the 2019 Board of Equalization at 7:30 o'clock a.m., Tuesday, April 9, 2019, in the City Commission Chambers at City Hall, Fargo, North Dakota, to consider the 2019 assessments of property in the City of Fargo for tax purposes.
Members present: Gehrig, Grindberg, Piepkorn, Strand, Mahoney.
Members absent: none.
Member Mahoney presiding.
2019 Property Tax Assessments:
City Assessor Ben Hushka submitted the 2019 Assessment Department Annual Report and summarized the various items. He explained the purpose of the Board of Equalization is not to determine value, but about equity and assuring the values the Assessment Department has determined this past year are uniform and equitable among similar properties. He outlined the Board of Equalization Statutory Duties, Property Tax System Components and the formula used to arrive at Taxable Value. He said the total appraised value, regardless of taxable status, in the City of Fargo for 2019 is about $16 billion, up about 4.1% from last year. All properties are valued, he said, then there are various types of exemptions: fully exempt, discretionary and partially exempt. An estimated 21.5 percent of property in Fargo is exempt property by some means, he said, with discretionary exemptions about 2.9% of the projected tax base. He said if discretionary exemptions went away, the mill levy could be reduced about 8.5 mills based on the 2018 levy, which would reduce taxes on a $100,000 residential property by $36.00 and on a $100,000 commercial property by $40. He said a Tax Increment Financing (TIF) district is where properties pay full tax and the difference on the tax in the value predevelopment and current value is captured to pay off the financing for the TIF. Last year the incremental taxable value was about $17.8 million, he said, and now with the Matrix Properties TIF expiring and a couple additions, the total taxable value is about $7.2 million. He said the prediction for the 2019 Fargo taxable value is $592,621,464, making the value of a mill $592,600 or a 6.6% increase of which 2.9% is new growth and 3.7% is on existing property. He explained how the Assessor’s Department does its work and how the State monitors the value by using sales ratios. Statute says that values are to be at market value, he said; however, the State Board of Equalization allows a tolerance of 90% to 100%. He said periodic reappraisals are conducted, doing ratio analysis and adjusting values in areas where Assessors cannot get in neighborhoods. He explained how the State determines true and full value and adjusts tolerances and the required compliance. He outlined the differences in mass appraisal for assessment and individual appraisals and obstacles such as focusing on uniformity, limited sales, gathering data and limited resources due to the number of properties. He said all 36,000 properties have to be valued every year for true and full value as of February 1st. He said www.fargoparcels.com is available for anyone to look at property information including ownership, year built, size, current year valuations and most previous information, special assessment information, links to legal description, Cass County Property Tax information and GIS maps.
Rodney Lym, 1229 45th Avenue North:
Mr. Lym said after going up about 5% each year, this year his property went up 14% which he feels is excessive. He said he has appealed and arranged for an inspector to look at his property.
John Holland, Wildstone Development:
Mr. Holland said he is here for several properties in Maple Valley, and he spoke with staff about values when he received them. He said all the properties were listed and sold at the same price and the assessed value is coming back at about 118% of the sales price. Special assessments are being added to sales price, he said, and owners are paying property tax and now specials added on top of that, increasing the value and essentially adding a tax on a tax. There are many examples in Fargo where sales are influenced by the value of specials, he said, it is confusing to buyers and it is not market value. He said there could be two similar properties where one owner has paid down their specials and that property is assessed less and the only difference would be the outstanding specials balance.
Mr. Hushka explained that specials are levied to properties for the cost of public improvements which enhance the value. Special assessments require finding a public purpose that the improvement is needed, he said, and that each property assessed receives a benefit. He said when sales information is sent to the State, it is required that prices include all special assessments assumed by the buyer.
In response to a question from Member Gehrig asking when assessing a property that has a $15,000 special assessment, does it then become $15,000plus the value of the home, Mr. Hushka said specials are only considered when analyzing sales, it is not that the property is assessed and $15,000 is added.
Mark Buchholz, Buchholz Properties:
Speaking to the state of the market in his industry, Mr. Buchholz said, the area as a whole is at 9% rental vacancy, which is high and incentives are being used now to attract renters. While he favors economic development and the tax incentives provided, he said, where it all stops needs to be evaluated, as well as the affect on hotels or apartments. It looks like taxable base is being lost by continuing to subsidize, he said, maybe not by giving up tax dollars but by deferring collection for 20 years. It would appear that the City does not come out ahead, he said.
In response to a question from Mr. Buchholz on how Fargo compares as far as partial exempt property and what drives that number, Mr. Hushka said the amount of development is so different from one location to another at any given time; however, there is a better handle on fully exempt property numbers. He said Fargo is at 18% to 19% and Bismarck is closer to 40% to 50% due to all the State-owned property that is fully exempt.
Nathan Everson 1810-20-21-40-41 Sheyenne Loop North, 4119 14 Avenue North:
Mr. Everson said he also owns commercial rental property and development land on 19th Avenue North. He said one property with industrial buildings in the older part of the Industrial Park increased 23.5% over last year and he has asked the Assessor’s Department to look at it again. While he understands this meeting is not about specials, he said, vacant land on 19th Avenue North near the new MidAmerica Steel site, has specials greater than the listed sale price of the property. He said this year’s assessment rate went up 18 times, with one parcel going from a valuation of $8,000 to $153,000. He said when he lived in Williston he thought a 6-fold increase on vacant property there was excessive, until he received the notice of an 18-fold increase here. He said it confusing that five parcels in a row have varying increases and he has asked the Assessor’s Department to look at his property.
Terry Schander, 1821 3rd Street North:
Mr. Schander said the valuation of his house came in at $383,200 and he shared a document showing sale prices of comparable properties. He said he feels some south side properties may have been selected to bring the average price up higher. He said he has had discussions with a lender and a realtor and was told having a new home in an old area means if it is sold it is difficult to get comps in that area for something that matches his home. He does not understand why south side homes four to five miles away were used to value his home on the north side.
Jonathan Casper, 1921 Rose Creek Parkway South:
Mr. Casper said he owns Alliance Management Group and is involved with 40 plus properties in the area. He said his concern is five, multi-family properties where appraisals were hundreds of thousands of dollars apart on appraisals done in the last 12 months. Three of the five were recently purchased by an investor group, he said, and he has a fiduciary obligation as a manager to bring up such a gap between assessment and a recent valuation. The multi-family market in Fargo is seeing decreasing rent for the first time in a long time, particularly newer projects. He said the community is growing and 900 new people are living in apartments each year; however, 1,200 or more are being built so the market reports show a negative absorption rate.
David Campbell, Campbell Property Group:
Mr. Campbell said he represents Campbell Property Group and he also has seen valuations on multi-family properties increasing over time. He said it was logical in the timeframe of 2009-2015 when the market was so healthy; from 2016-2018 there were massive concessions never seen before and rents are declining. He said incomes are down 25% and values are increasing. He said he would ask for the same consistency and reasoning to be applied now with an opposite affect compared to when the market was healthy.
Teri Birkelo; County 20 Storage and Transfer:
Ms. Birkelo said she represents Robert Nelson and County 20 Storage and Transfer. She said they saw a 43% increase in just the land value portion of the assessment and an 8.27% increase on the building. She said year after year, the investment in Fargo continues to go up and there are big increases in properties besides just multi-family.
Member Mahoney said it is obvious listening today that apartments are in a different situation than they have been for awhile.
Member Gehrig moved the Board adjourn to 7:30 a.m., Tuesday April 30, 2019.
Second by Grindberg. All Members voted aye and the motion was declared carried.

April 30, 2019
Agreeable with adjournment, the Board of City Commissioners reconvened as the 2019 Board of Equalization at 7:30 o’clock a.m., Tuesday, April 30, 2019, in the City Commission Chambers at City Hall, Fargo, North Dakota, to consider the 2019 assessments of property in the City of Fargo for tax purposes.
Members present: Gehrig, Grindberg, Piepkorn, Mahoney.
Members absent: Strand.
Member Mahoney presiding.
Member Mahoney said he appreciates all the work the team has done in completing reviews and noted there are a number of reviews in progress.
402 42nd Street North, 7th Avenue Auto Salvage - Owner Richard Preston:
City Assessor Ben Hushka said Mr. Preston is protesting the value of several parcels, one which has a building on it and four unimproved lots. He said the building shows some deterioration, which he feels is being recognized in the valuation. Price per square foot of similar properties, and the mean and median price per square foot of sales, compare to similar sales, he said. Total value, which includes more land than the comparable sales had, is at $61.92 per square foot and the price on the building is $23.79 per square foot, reflecting the condition of the building. The land was part of the land reappraisal of the parcels north of Main Avenue, he said, and the land is now appraised at $2.34 per square foot. Mr. Preston will provide the Assessor’s Department with a copy of a restricted appraisal report he had done for business value, he said. The land and improved property sales support the value given and staff recommends no change on these properties, he stated.
Mr. Preston, said he met with staff and, while he is not opposed to a property value increase, he is opposed to the dollar amount assessed. He had a land appraisal done by Darrell Mathew Appraisals and submitted the summary, he said, which came up to $1.37 million and the City’s appraisal is roughly $1.6 million with the current appraisal being $1.1 million. He said the City is requesting the full report, so he is asking to delay action until he can meet with the Assessor’s again and submit the full report.
Member Piepkorn moved to include the property at 402 42nd Street North in the list of Rechecks Not Completed.
Second by Gehrig. On call of the roll Members Piepkorn, Grindberg, Gehrig and Mahoney voted aye.
Absent and not voting: Member Strand.
The motion was declared carried.
Terry Schander, 1821 3rd Street North:
Mr. Hushka said Mr. Schander addressed the Board at the initial meeting and staff has put together a list of northside sales, the result being that the value of Mr. Schander’s property is still low comparing sales as similar as could be found. He said if a new market appraisal were run today, it would come up higher.
Member Grindberg moved the value of $383,200 on 1821 3rd Street North be retained for the 2019 assessment.
Second by Gehrig. On call of the roll Members Grindberg, Gehrig, Piepkorn and Mahoney voted aye.
Absent and not voting: Member Strand
The motion was declared carried.
West Winds LLP, 3520 42nd Street South:
Mr. Hushka said this property is in the second 15-year commitment of the Low Income Housing Tax Credit (LIHTC) program. The property was purchased for less than the valuation, he said, and is somewhat unique. He said there are two 52-unit buildings, each with 73,616 square feet of apartments and a 5,500 square foot office building attached. He said two sales were found; one still in the LIHTC program similar to the subject and the other was previously in the program and constructed to similar specifications. He said those sales were at $44.55 and $50.42 per square foot and the City’s total with the office building is at $44.00 per square foot. He said staff recommends reducing the value from $7,607,800.
Member Gehrig moved the value on 3520 42nd Street South be reduced from $7,607,800 to $6,726,000 for the 2019 assessment.
Second by Grindberg. On call of the roll Members Gehrig, Grindberg, Piepkorn, and Mahoney voted aye.
Absent and not voting: Member Strand
The motion was declared carried.
Shoppes at Osgood LLP, 4281 45th Street South:
Mr. Hushka said this parcel contains a retail building and houses a restaurant/lounge. He said the north side of the parcel has a slab poured for another building. He said a representative, Kelly Zander, has not provided any detail; however, he commented that the valuation is higher than what was paid for the property. When the property was purchased, 75% of the retail was vacant, he said, and now it is 100% occupied. He said the construction progression was reviewed and there was more than $2.9 million in building permits taken out, without the electrical and plumbing permits, so staff feels the value is there. He said a rational investor would not put more money into a property than it would be worth and staff recommends the current value of $2,013,000 be retained.
Member Piepkorn moved the value of $2,013,000 be retained for the 2019 assessment.
Second by Grindberg. On call of the roll Members Piepkorn, Grindberg, Gehrig and Mahoney voted aye.
Absent and not voting: Member Strand
The motion was declared carried.
ISCO Company (Buhler), 1330 43rd Street North:
Mr. Hushka said the appeal was received from Larry Backus, an agent of Altus Group. He said that the appeal provided an abbreviated cost approach to the property with no supported depreciation estimate. Some sales were provided which actually indicate a value higher than the City has on the property, he said. There are two
buildings on the site, he said, and related on-site improvements. He said staff recommends retaining the current value of $5,707,000 for 2019.
Member Grindberg moved the value of $5,707,000.00 on 1330 43rd Street North be retained for the 2019 assessment.
Second by Gehrig. On call of the roll Members Grindberg, Gehrig, Piepkorn, and Mahoney voted aye.
Absent and not voting: Member Strand
The motion was declared carried.
Continental Management and Investment, 3826 and 3801 3rd Avenue North:
Mr. Hushka said 3826 is improved with a 7,500 square foot pre-engineered metal building and 3801 is a vacant lot. He said access to both parcels is a dirt and gravel road with access off 39th Street. He said staff feels the value is fair, reflecting the conditions of the access and it is recommended the current value of $290,000 on 3826 3rd Avenue North and $190,000 on 3801 3rd Avenue North be retained.
In response to a question from Member Mahoney about when the property was last appraised, Mr. Hushka said the last time the land was revalued was in 2012.
Member Piepkorn moved the value of $290,000 on 3826 3rd Avenue North and $190,000 on 3801 3rd Avenue North be retained for the 2019 assessment.
Second by Gehrig. On call of the roll Members, Piepkorn Gehrig, Grindberg and Mahoney voted aye.
Absent and not voting: Member Strand
The motion was declared carried.
Value Recommendations on Completed Reviews Approved:
Member Mahoney said he was struck as to how many properties did have their values reduced when the property owners asked for a reassessment. He said that often times involves entering the house to see what is there.
Mr. Hushka said a major reason the number of reassessments is high is due to the City reappraising areas containing several thousand properties. He said there are some refusals of entrance, and then when the property owners get the new value and the increased notice, they ask for reassessment. A reassessment can find reductions or incorrect assumptions, he said, for example, as the City may be incorrect as far as the amount of basement finish or condition of the property. Often, during these reviews, he said, people are surprised to learn the selling prices on properties similar to their property. He said if they are not thinking of selling their property they are somewhat in shock of the selling price of houses in their neighborhood. Those who did not have their value reduced most often come into agreement once they are shown the information, he said. His recommendation is to approve the new values that are in the list as the value for the 2019 assessment.
Member Grindberg moved the recommended value changes on the list of Rechecks Completed be approved as presented.
Second by Gehrig. On call of the roll Members Grindberg, Gehrig, Piepkorn and Mahoney voted aye.
Absent and not voting: Member Strand.
The motion was declared carried.
List of Value Recommendations and Action on Reviews in Progress to be Forwarded to the County Board of Equalization Approved:
Mr. Hushka stated about 90 properties, 91 now with the addition Mr. Preston’s property, his office is still working with. He said most of the properties on the list are apartments represented by the individuals who attended the first Board of Equalization meeting. There are some high-valued properties, he said, some are complex properties with many different breakdowns. He said the current stage with those is that further information has been requested, including that they provide income and expense information, additional lease or any information so that will be at least a starting point. He said because of the timing to get assessment rolls certified with the County Board of Equalization in June, staff recommends approval for no change of value at this time with the condition that work will continue with property owners and the list will be forwarded to the County. He said it is his hope that by the time the list goes to the County there will be recommendations. He said if there are any that are not able to be resolved by the time the County Board of Equalization meets, the same recommendation would be made to the County that it be approved on the condition work continues with the remaining properties. He said that gives the property owner the opportunity to go to the State Board of Equalization. To appear at the State Board of Equalization, the property owner must have had an appeal before the City Board and County Board, he said. He said it is not a unique situation that apartments are overbuilt resulting in high vacancies and the value may be affected. The value of an income-producing property is the present value of anticipated future benefits, and how long reduced income is going to last has to be considered, he said,
Member Gehrig moved the list of Value Recommendations and Action on Reviews in Progress to be received and forwarded to the County Board of Equalization for consideration on the condition work continues on the remaining properties.
Second by Piepkorn. On call of the roll Members Gehrig, Piepkorn, Grindberg and Mahoney voted aye.
Absent and not voting: Member Strand.
The motion was declared carried.
Approve 2019 Assessment Roll Valuations as Equalized:
Member Gehrig moved the 2019 assessments of property in the City of Fargo for tax purposes as prepared by the Assessment Department be approved and that the City Auditor’s Office be directed to certify the 2019 assessments to the County.
Second by Grindberg. On call of the roll Members Gehrig, Grindberg, Piepkorn and Mahoney voted aye.
Absent and not voting: Member Strand.
The motion was declared carried.
Member Gehrig moved the 2019 Board of Equalization adjourn.
Second by Piepkorn. All Members present voted aye and the motion was declared carried.
The time at adjournment was 7:58 o’clock a.m.