Spring 2021

Equal Eyes OFFICIAL PUBLICATION OF THE MINNESOTA ASSOCIATION OF ASSESSING OFFICERS

MNMAAO.ORG

SPRING 2021 VOLUME 43 NUMBER 164

The Case for Market Value Deciphering the Dark Store Loophole

The Dan Franklin Scholarship Classifieds What You Get For Transitions Tax Court

Top 10

Tips for Office Ergonomics

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EDITORIAL COMMITTEE

Executive Officers President

Patrick Chapman, SAMA st 1 Vice President

Joe Udermann, SAMA 2nd Vice President

Tim Bulger, SAMA Financial Officer

Chase Peloquin, SAMA Past President

Daryl Moeller, SAMA

Regional Directors Region 1

Ryan DeCook, SAMA Region 2

Jennifer Flicek, SAMA Region 3

Jean Sowada-Popp, SAMA Region 4

Amber Peratalo, SAMA Region 5

David Parsons, SAMA Region 6

Doug Bruns, SAMA Region 7

Chris Odden, SAMA Region 8

Mary Jo Otten, SAMA Region 9 Joshua Hoogland, SAMA Committee Chairs Agricultural

Mark Koehn, CMA CAMA and GIS

Randy Lahr, SAMA Conference Coordinator

Paul Knutson, SAMA, RES Editorial

Lori Thingvold, SAMA Wright County Managing Editor

Jason Jorgensen, SAMA Wadena County Associate Editor Committee Chair

Jamie Freeman, SAMA Hubbard County

Information Systems

Michael Neimeyer, CMA

Legislative

Mark Peterson, SAMA

Membership Coordinator

Rebecca Malmquist, SAMA, RES

Nominating and Procedures Residential Rules and Resolutions Sales Ratio Scholarship Secretary Site Selection

Nancy Gunderson SAMA Jake Pidde, SAMA Stearns County Clay County

Jason Jorgensen, SAMA

Amber Swenson- Hill, SAMA Polk County

Strategic Planning

Michelle Snobl, AMA

John Conway, SAMA Joe Udermann, SAMA Dell Sanko, CMA Carrie Borgheiinck, SAMA Penny Vikre, SAMA Lisa Clarke, CMA Michelle Moen, SAMA

Summer Seminar Coordinator

Kim Jensen, SAMA, CAE

Ann Miller, SAMA Treasurer

Reed Heidelberger, SAMA U40/10 Troy Halter, CMA Tax Court / Valuations

Educational Workgroups

Assessor Development Course Management Mike Bjork, AMA Washington County

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Missy Manke, CMA Wright County

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Holly Soderbeck, SAMA MN Dept of Revenue

Patrick Chapman, SAMA

Course Curriculum & Standards

Tina Diedrich-Von Eschen, SAMA Sherri Kitchenmaster/Jessi Glancey, SAMA

Education Coordinator/Online Admin.

Emily Squyres

The Dan Franklin Scholarship

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12 The Case for Market Value

INDEX Commissioner’s Comments

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President’s Perspective

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MAAP Update

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Classifieds

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Top 10

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What You Get For

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Out of the Past

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Transitions

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Tax Court

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SBA Meeting Minutes

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* The statements made or opinions expressed by authors in Equal Eyes do not necessarily represent a policy position of the Minnesota Association of Assessing Officers.

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Commissioner’s Comments

By Robert Doty MN Revenue Commissioner

Signs of the Times At the Department of Revenue, we place a high value on our relationship with assessors and by extension the property owners, local governments, and communities we all serve.

Our state is diverse in many ways: racially, geographically, religiously, and economically, just to name a few. Wherever we live and work, whatever our race or religion, and however else we may be unique, we’re all part of something more: a “greater” Minnesota in every sense of the word.

At Revenue, we recently updated our mission statement—Working together to fund the future for all of Minnesota—to reflect this diversity, and to emphasize how equity and inclusion are crucial to our work.

As part of that update, and Gov. Tim Walz’s One Minnesota initiative, we’re looking at our policies, procedures, and statutes. Our goal is to better-understand how they affect various communities, and how we can make them more equitable.

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Legislative Update

Gov. Tim Walz’s budget plan this year aims to increase the fairness of our tax system while helping Minnesotans with low-to-middle incomes. Among other things, his proposals would: • Let property owners qualify for homestead status with an Individual Tax Identification Number (ITIN). Current law requires a Social Security Number, which results in unequal tax treatment. Homeowners with an ITIN cannot receive the lower classification rate – and potential for a Homestead Credit Refund – that homestead confers.

• Expand property tax refunds for veterans and renters. These refunds help make housing more affordable for Minnesotans with low incomes, many of whom lost income – or their jobs – due to the COVID-19 pandemic and its economic toll.

Other bills being discussed would: • Reduce the overall class rate for

class 4d low income housing and manufactured homes and home parks. Advocates of these rate reductions are looking for more incentives for creating affordable housing.

• Create a new funding mechanism for fire service. Several proposals would authorize some local governments to create special tax districts to fund their fire service.

After the final committee deadline (April 9), the House and Senate will vote on their overall Tax Bills. This is typically followed by conference committees to work out any differences before passing a final package before the session ends (by May 17 this year).

Our Journey Continues

As partners, Revenue and MAAO often focus most tightly on property tax laws and how we administer them. The last 12 months have widened our gaze as we—and the rest of our state, nation, and world— have seen many aspects of day-today life altered by the COVID-19 pandemic.

Commissioner’s Comments, continued Now, as vaccines become more available and restrictions ease, it feels like we’re turning a big corner in this journey. Still, it’s clear that we still have a long way to go on the road back to “normal.” For example: • The Legislature is conducting business through a mix of inperson and virtual meetings and floor sessions this year.

• Many assessors – and the Board of Appeal and Equalization meetings that you support – are still fulfilling most of your duties in a socially distanced way.

• For now, most Revenue staff continue to work from home, though we hope to return to the office later this year.

The latest Property Tax Services Report, released in February, shows both the strength of our partnership and the challenges we faced in 2020.

We continue to refine the report to track how the department and counties work together and to help us all improve. This year, we updated two measures: • Assessor Staffing Levels, to more-clearly account for both taxable and exempts parcels • Property Tax Compliance Officer (PTCO) Visits, to include virtual visits due to the pandemic Though 2020 results were mixed overall, we made or maintained progress in some key areas: • Q u i n t i l e R e a s s e s s m e n t compliance for counties climbed slightly to 94.8%, the fourth straight increase • 85 (of 87) counties submitted their Duplicate Homestead files by the July 31 deadline, the highest since we began this report

five years ago • Department PTCOs made four visits to 84 counties, including virtual visits—a slight decrease but still close to last year’s historical high of 86 You can find the full report on our website at www.revenue.state.mn.us; type property tax services report into the Search box to get started.

We also sent a tailored version of the report to each county.

I appreciate how assessors and Revenue staff have navigated this challenging year, and I encourage you to stay vigilant—and healthy— as we move forward.

Finally, I hope you have a fantastic spring and summer. Thank you for working with us on behalf of the Minnesotans we all serve.

Robert Doty is commissioner of the Minnesota Department of Revenue.

You can find the department’s updated mission statement and strategies at www.revenue.state.mn.us/about-us.

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president’s perspective

By Patrick Chapman, SAMA Ramsey County

MAAO President

“Life is ten percent what happens to you and ninety percent how you react to it” – Lou Holtz Wow What a Year!

I am sitting and think about the last year.

It was February of 2020 and I hear there is a virus making its way to the US. Some people on a cruise ship are detained. A friend of mine has parents in China and they are trying to find N95 masks. I think to myself what in the heck is a N95 mask? I look in my garage and I have a package hanging on my peg board. Oh, these are what I use when I am sanding something. I wonder why they need those? I am starting to think about Spring, and I am excited to get tickets for the Minnesota Wild on St. Patrick’s Day. What could be better downtown St. Paul, hockey and green beer. Then March hits.

The virus comes to the US. People start to wonder what is going to happen. The Governor comes on the news and announces that Minnesota will close at 5pm March 17th for fifteen days to flatten the curve. Wow!

Innovation, Adaption and over coming of obstacles. I have seen, in my county, a workforce that has taken on these challenges and modernized our process to meet the new challenge. In MAAO I see an organization that is nimble and can meet all the needs of the members during the most difficult of circumstances. We were able to transition summer seminars to a remote event that was very successful. We gave a mix of classes. in a new, safe expanded environment. We launched a new class Residential 101, and it was a huge success. We had a fall conference that was a hybrid event that was a complete success. People stepped up all throughout the organization. Thanks to all of you that did!

Fast forward to today. I have a truck full of masks, I call sweatpants work pants and my eyes are going crazy from looking at the screen all day. I have most meetings on zoom or teams, and I had no idea what they even were a year ago. I have only been in the office a couple of times in the last year.

When I go in it is a ghost town and there is plexiglass everywhere. The way we do our work is completely different.

Now as we look ahead to the upcoming Summer seminar. We will be offering an event with two parts. One for those who would like the remote experience and a parallel event in person. Both events will offer opportunity for 8 hours of quality education. I am excited to be able to provide the experience that our members want. The committees and coordinators are working very hard to provide a great experience for everyone. As I am writing this, we are offering ALP virtually over a two-week time period. What a great accomplishment. I am so impressed with all the people we partner with. Especially our partners at the DOR.

What is the result of all this you may ask?

Looking forward to the other educational

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offering this year. Advanced ag is looking good and ready to go. MAAO Basic Income is nearing its completion and will be offered this August. We will offer IAAO 112 online in September. A number of excellent educational offerings with a mix of in person and online experiences. A big thanks to all that helped in this endeavor.

I will end on this thought: We have been faced with many challenges over this last year. Some great some small. I am so proud to be part of an organization that seized the opportunity in these challenges to make MAAO a stronger, better and more nimble organization. Thank you to all the members.

Endeavor to persevere!

Patrick Chapman President MAAO

MAAP UPDATE

By Amanda Lee 2019-2020 MAAP President amandalee@co.mower.mn.us

“Where Flowers bloom, so does hope.” — Lady Bird

Johnson

Hello MAAO Members!

Spring is just around the corner! How about the extended periods of zero or below here in the Twin Cities we’ve just experienced? Did you know that in 1912, the same stretch lasted 186 consecutive hours?

At this present time, we experienced 116 consecutive hours!

March is here as we are all approaching valuation notices & tax statements during this busy time of the year. Make sure that you take time out for self-care to help the mind & body. Mindfulness – the practice of being fully present in the moment – noticing thoughts and letting them go, without judgement – can help you make the most of your self – care practices. With this shift in mindset, the benefits of your selfcare routine will be amplified, and you’ll see a boost in your mood as well.

As my time as the MAAP President during this pandemic, it has certainly been a great experience and challenge. Since the pandemic started a year ago this month, the world has different look and feel. As board members, we had decided to put everything on hold during 2020 as we entered the unknown. For 2021, we are looking forward to seeing you all at MAAP Summer Workshop! This year it may be a bit different than what we are used to in previous years as we will be sending out a Monkey Survey the first week in May 2021 to get a feel on those that are able to attend in person or virtual.

There is always beneficial information at our conferences – plus the opportunity to network and build relationships where you feel comfortable to ask questions about work without judgment. We have some great topics for our conference this year – with DOR being our main speaker again. Their knowledge & guidance for us is always beneficial.

The 2021 MAAP Summer Workshop will be held August 19th & 20th, 2021 at the Holiday Inn & Suites in St. Cloud. If you would like to attend, please contact a MAAP Board Member for more information.

No final decisions have been made yet since we are following the CDC Guidelines. I hope to see you there – whether it be in person or virtual!

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MAAP UPDATE

By Jenna Takemoto 2020-2021 MAAP President

MAAP Officers Jenna Takemoto

Secretary/Treasurer 2020-2022 Washington County 651-430-6097 jessica.arneson@co.washington.mn.us

Lisa Hawkins

Debbie Maresch

Lacy Standke

Doris Huber

Conference Coordinator 2020-2022 Olmsted County 507-328-7655 Hawkins.lisa@co.olmsted.mn.us Education Board Member at Large 2018-2020 Steele County 507-444-7438 lacy.standke@co.steele.mn.us

Therese Nelson

Communicator Editor 2018-2021 Goodhue County 651-385-3039 therese.nelson@co.goodhue.mn.us

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Jessica Arneson

President 2020-2021 Vice President 2019-2020 Sherburne County 763-765-4900 Jenna.Takemoto@co.sherburne.mn.us

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Executive Board Member at Large 2020-2022 Carver County 952-361-1963 dmaresch@co.carver.mn.us Education Board Member at Large 2018-2020 City of Marshall 507-537-6771 Doris.huber@ci.marshall.mn.us

Joanne Corrow

Historian Le Sueur County 507-357-8213 jcorrow@co.le-sueur.mn.us

Classifieds Amber Swenson-Hill, SAMA Polk County Editorial Committee Member

625 5TH ST N STILLWATER, MN 55082

$1,400,000 1901 mansion gymnasium completely renovated to spacious home with pool house. Originally designed to replicate details found in the historic ALHAMBRA in Granada, Spain, Approximately 5,426 square feet of living space does not include approximately 2000 square foot pool house with three-quarter bath. Five bedrooms, two full bath, and one three-quarter bath round out this one-of-a-kind home.

Estimated Taxes: $13,356

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The Dan Franklin Scholarship Each year the MAAO Scholarship Committee awards a $1,000 scholarship in memory of Dan Franklin Written by Carrie Borgheiinck, SAMA Hennepin County

Dan Franklin

Dan Franklin

The Dan Franklin Collegiate Scholarship was established by MAAO in 1998. Dan Franklin was known as the “grandfather” of the assessor education system. Dan served as the Grant County Assessor and the Wilkin County Assessor during his career. He also served diligently on the MAAO Education Committee and was President of MAAO in 1963.

Funding

The scholarship is funded from donations of the 9 MAAO regions, the 50/50 drawing which occurs during the summer seminars banquet, and donations from the Dan Franklin family.

Past Recipients

Past recipients have gone onto having successful careers within the assessing field.

• Justin Massmann is the Property Tax Compliance Officer Supervisor at the Department of Revenue.

• Kari Theisen is a Principal appraiser at Hennepin County.

4 of the past scholarship recipients are now County Assessors: • Tina Diedrich-Von Eshen is the Kanabec County Assessor.

• Shayne Bender is the Le Sueur County Assessor.

• Karl Lindquist is the Grant County Assessor.

• Laura Hacker is the Sibley County Assessor.

Laura and Shayne, along with Jonathan Crow (City of Edina) and myself, are now members of the scholarship committee as well.

Requirements

The scholarship is open to all majors, and students can be attending any college or university. The main requirement is the student must be enrolled in at least 10 semester credits. The application period is from August 1 to December 1 each year.

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e Dae Dan Franklin Scholar-

The Dan Franklin Scholarship, continued Selection Process

This years scholarship winner was chosen by the scholarship committee members and MAAO Past President Daryl Moeller. These grading members rated each applicant on their application, connection to Minnesota, community or activity involvement, employment, interest in assessing, and their resume and/or cover letters. There were 25 applicants this year.

Recipient

This year’s recipient of the Dan Franklin Scholarship is Luke Sturm.

Luke is a 2018 Providence Academy High School graduate that currently attends the University of St. Thomas. He has made the dean’s list every semester and will graduate in May 2022 with a double major real estate and finance.

He is the membership coordinator for the University of St. Thomas Real Estate Society and has been a summer intern with Upland Real Estate Group. Luke even flipped a house when he was 20 years old!

Congratulations to Luke! He plans on attending summer seminar luncheon as well where we will all be able to congratulate him.

Luke Sturm

Request for Information If anyone has any information on past scholarship recipients please send the update or information to me so I can add it to my list. Additionally, if you have any information, stories, photos or facts you want to share in regard to Dan Franklin to add it to our history, please share with me as well. You can contact me at carrie.borgheiinck@henneipn.us.

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The Case for

Market Value “The contemporary view of the Court is fee simple as unoccupied (dark); it focuses on the ownership rather than the property. This leads to an inequity between owner occupied and leased property to the point where consideration of the latter is prohibited. This suspends the application of the most applicable(income) valuation approach."

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Deciphering the Dark Store Loophole

By John Keefe, SAMA Chisago County Assessor

THE CASE FOR MARKET VALUE

Press Release The subject property of the Shopko Court

case for the years 2015-2017 sold first in 2015 for approximately $10,400,000, then again in 2017 for $11,250,000 in fair market transactions between investors.

The sales meet every statutory requirement constituting market value transactions, and unquestionably established the market value of Shopko on those two dates.

The property was appraised by a highly qualified independent fee appraiser for the County at $9,400,000. The property was assessed by the County Assessor at approximately $5,200,000 at the time of sale or 50% of market. Shopko sued the County opining a $2,400,000 appraisal (20% of market). The Court decided that the value was approximately $5,500,000.

While this decision more or less affirms the assessed value, its memorandum clearly establishes Minnesota as a “fee simple” as opposed to “market value” State for taxation.

The decisions of the Minnesota Tax Court mean that assessors are not allowed to use sales of, or rental income from, leased single tenant property when valuing leased property. It renders the appraiser’s primary valuation method, the income approach, useless in the valuation of income producing property. It relegates the valuation to nothing more than a liquidation appraisal.

The reason why this decision is so important is that property tax needs to be applied equally to all property so that taxpayers can be assured fair treatment. The crux of the County argument is that valuation emphasis should be on the property (in rem), and not on the ownership (in personam). That way two identical properties would have the same value/tax regardless of who owns or occupies the property.

The Market Value method focuses on the property where its highest and best use (HBU) is the focal point for valuation. The emphasis on HBU is a fundamental purpose of property tax, because it encourages property being put to its most profitable use.

Leased and owned properties sales would be used in kind, because it’s the physical

attributes of the property that give it value.

The contemporary view of the Court is fee simple as unoccupied (dark); it focuses on the ownership rather than the property.

This leads to an inequity between owner occupied and leased property to the point where consideration of the latter is prohibited. This suspends the application of the most applicable (income) valuation approach.

The issue with fee simple becomes what to do with property that only exists in some form of a lease arrangement? As in the multi-trillion-dollar single tenant lease market segment that includes the Shopko and the majority of this nation’s Fortune 500 restaurant, service, and retail property.

These properties occupy the very best commercial real estate locations in North America and are almost exclusively long term leased property.

This issue, also known as the “dark store

loophole”, looms large in the States where their property Tax Tribunals and Courts have abandoned the market value concept and opted for this legal construct. The potential ramifications of this policy are staggering. It potentially results in a tax policy that favors this market segment to an amount of as much as fifty billion dollars ($50,000,000,000) in annual property tax shift to the remaining taxpayers nationwide.

While this decision results in a modest increase (about $14,000 per year) in tax for the years in question for assessment at 50% of market value, there is still a public policy issue why approximately $180,000 of annual tax (assessment at 90% of market) is missed and annually redistributed to the other taxpayers in the County. This amount is significant in itself, but it pales in comparison to the overall tax shift when all properties of this kind are lowered from 50% to a level of 20% of their market value. This is why this case had to be so strenuously defended in Court

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where the term fee simple was modified and its role expanded.

by the County.

I’m pleased that the Court didn’t lower the level of assessment to 20% of market value. I’m disappointed with the decision in that continues to validate the dark store loophole by adhering its fee simple construct.

It is wrong that any property be valued less than its market value for taxation, let alone a class of some of our most valuable properties being systematically valued at a fraction of their value for taxation. This is an intolerable inequity, because the remaining property classes throughout the County and State are valued at full market value.

The next step is how to right this wrong.

I would submit to the Court of Public Opinion that legislation be made to clarify that Minnesota is a market value State for the reasons previously explained.

The State of Wisconsin in response to a potential $700,000,000 property tax shift is addressing this issue with two tax bills introduced, the “Dark Store Bill” (Assembly #386 Senate #292) and the “Walgreens Reversal Bill” (Assembly #387 Senate #291). There is a link to a youtube video: https://www.youtube.com/ watch?v=h7Kurxbd5qE called “Close the Dark Store Loopholes” which was put out by the League of Wisconsin Municipalities that interested readers may find very informative.

History It seems incomprehensible to imagine how such a disparity could exist in the market valuation process. The truth is that there is no real disparity in statute, just a creative and well-orchestrated legal construct played on an unsuspecting public. The statutory market value standard was set aside in favor of a new focus on ownership rights instead of the property.

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Dark Store Theory In 2009 David C. Lenhoff a Member of the Appraisal Institute (MAI) published an article You Can’t Get the Value Right If You Get the Rights Wrong, Appraisal Journal (Winter 2009, p.60-65). This controversial article used the term unencumbered to drive a proverbial wedge between market value and leased property. By stating fee simple is “how For most of history the term fee simple much an informed purchaser would pay for was used to describe ownership as all the property as unencumbered by the lease.” rights that may be owned. In 1984 a publication by the American Institute of He goes on to state “To properly approach Real Estate Appraisers, The Dictionary such assignments, appraisers must suspend of Real Estate Appraisal defined it as reality.” The appraisal assignments to absolute ownership unencumbered by any which he refers are for “condemnation or other interest or estate. At the time most tax purposes.” The logical construct goes appraisers interpreted the change to simply something like this: mean ignoring all encumbrances (mortgage, If, Fee Simple possesses all rights lease, sublease, etc.) on the property. Other that may be owned. dictionaries did not and have not added the word unencumbered into their definition/s

And, a lease conveys of the term.

(albeit temporarily) the right of occupancy to another.

The consensus of the period was that fee simple describes real estate ownership as Then, anything leased can never consisting of basically: fee simple = lease be used to value fee simple. fee + leasehold. That lease fee and leasehold may be a fraction of the fee simple. This sentiment is reflected in a 1994 Court This strict interpretation goes so far as to state decision TMG Life Insurance Company vs “even if the lease is at market rent, the fee County of Goodhue (C9-94-479), where simple does not necessarily equal the leased the owner of the lease wanted his valuation fee.” He presumes fee simple and lease fee reduced because the lease was below market. to describe totally separate markets. When they’re supposed to describe ownership with The Court stated: “The task of the Assessor is to one subordinate to the other. This thinking value the full market value of the assumes that these properties don’t compete entire fee interest of property for with one another in the market. taxation. The property may be divided into different interests and When I first read this article, I thought it estates … but the assessor values absolutely ridiculous because it entirely the whole, not the separate parts.” negates the notion that rental income is relevant in valuing income producing A transformation occurred gradually over property! Also, that he somehow ties time through a series of Court precedents obsolescence, a physical property condition

to ownership rights. Ownership type does not cause a property to become obsolete.

I really underestimated the amount and breadth of mischief this article has caused in the assessment world. It is quite remarkable that he sold the idea that any sale of a leased property can never be used to value it, not even its’ own sale. Also, that the rent associated with said sales cannot be used as market data. So, the known universe of income property sales has disappeared into the “dark store loophole”.

The theory is to appraise leased property with speculation building sales that are vacant (dark) and available for any use, where the renter is found, and rent negotiated after construction. The truth is spec builds don’t exist in today’s market. The only vacant sales available are second and third generation properties that are obsolete or failed for one reason or another.

For example, a Dairy Queen is sold by its owner/operator to an investor for $3 million dollars. The investor immediately leases the

property to a third-party operator and resells it a year later to another investor for $3.2 million dollars.

$2.4 million. In the interest of brevity, I’ll move onto the ramifications of all this, or why this is a big deal.

According to this dark store theory, the subsequent sale and any rent figure associated with it is entirely off limits for fee simple valuation. Even if all market indicators corroborate the $3.2 million sale price. The rent in the second sale can never be used as fee simple rent (even though it is market rent), because there was a lease in place at the point of sale.

THE LAW We need to look at statute to understand what “market value” is.

Many dark store enthusiasts would even go so far as to invalidate the first sale coining it a “value in use”, because the subject was going to continue to be used for the purpose for which it was designed. Imagine a homebuyer wanting to use their house as a home.

There are dozens of reasons why this theory fails to represent market value. Your own common sense should guide you to the answer to the question why would someone pay $11 million for something worth only

Minnesota Market Value Instructions & Definition 273.11 VALUATION OF PROPERTY. § Subdivision 1.Generally.

Except as provided in this section or section 273.17, subdivision 1, all property shall be valued at its market value. … In estimating and determining such value, the assessor shall not adopt a lower or different standard of value because the same is to serve as a basis of taxation, nor shall the assessor adopt as a criterion of value the price for which such property would sell at a forced sale, or in the aggregate with all the property in the town or district; but the assessor shall value each article or description of property by itself, and at such sum or price as the assessor believes the same to be fairly worth in money. The assessor shall take

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into account the effect on the market value of property of environmental factors in the vicinity of the property… All property, or the use thereof, which is taxable under section 272.01, subdivision 2, or 273.19, shall be valued at the market value of such property and not at the value of a leasehold in such property or at some lesser value than its market value.

Market value is defined by Minnesota Statute 272.03 Subdivision 8 “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 arms- length transaction. The price obtained at a forced sale should not be considered.”

The statement “usual selling price” means usual as common, ordinary, customary, regular, or normal price. This nomenclature of “usual” infers some semblance of probability about the price. Other definitions often state that property should be valued at its most probable sale price as it exists on the date of assessment.

As it “exists” means in this context to have being or actuality. It means as it actually was or is. Statute also states a given point in time, “the time of assessment.” There

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is no intent of anything hypothetical or contemplative in the term.

There is no mention of fee simple in Minnesota statute.

Fee Simple Vacant/Dark

In the aforementioned court case, the petitioner’s universe of sales for Minnesota fell into this category, and all 25 of them are included on the above graph of sale price per square foot arrayed along the regression trend value of the sample.

The Court or the Legislature needs to decide if Minnesota is a market value State or a fee simple as vacant State. When using the fee simple vacant and available standard, Assessors are faced with a situation where they cannot accurately appraise any leased property because the only reliable value indicators are banned. The only sales allowed for use are highly variable liquidation sales that are most often unverifiable.

This universe of sales ranges from $8 to $91 per square foot or 1,138% variation.

The average deviation (consistency) from the trend line is 35% for this sample. This sample is simply too small and too erratic to provide a meaningful statistical analysis.

If the sales with deed restrictions and other adverse conditions are removed, then there aren’t even enough sales left to provide a meaningful trend line.

The sales in this submarket are generally vacant because of negative conditions such as deed restrictions, poor location, bankruptcy, etc... This submarket demands a very robust verification of each sale. Most often these profoundly obsolete sales are subject to severe deed restrictions or other conditions that can only be revealed through labor intensive discovery procedures.

The fatal flaw of the as vacant strategy is when appraisers try to apply the income approach. It can’t be done because there is no occupant to pay rent. Appraisers who attempt this “suspended reality” application, resort to rents paid in dissimilar markets such as shopping centers and derive their cap rates (Ro) from the same or the banned single tenant net lease market as was done in the subject case.

The hypothetical premise imposed can’t be overcome by traditional mass appraisal methodology. There is simply insufficient data to establish a statistically significant appraisal for these types of property.

This effort brings the comparable sale ranges from $8 to $210 per square foot or 2,625% variation. The consistency from the trend line is now 93% for this sample, which shouldn’t be considered acceptable in any forum.

Fee Simple Occupied The banned single tenant net lease market is the subject market in this case. It is a serious omission to ignore the most obvious and active market for these types of property. This market consists of property advertised, bought, and sold on the open market from one investor to another with all condition’s requisite to a fair sale. Neither party is a user of the property, so it is a value in exchange, and market rent is the primary focus of the transaction. These are income producing properties for which the income approach to value was designed.

The following graph depicts the average sale prices per square foot over a 450,000-store sample valued at $1,256,564,000,000.

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These are fee simple market transactions indicative of market value in it’s purest sense. The value exchanged is strictly for the real estate.

There are no additional costs, no vacancy, the lessee pays all expenses including property taxes.

Many commercial appraisers consider this market the easiest and most consistent market in the world of real estate to appraise because it’s a large competitive multi-trillion-dollar national market with abundant income and sales information. A market that is unquestionably suitable for mass appraisal.

When you overlay the sales used by the County on the applicable portion (Mid-Big Box) of this Single Tenant Net Lease graph it is readily apparent that the sales are more consistent. More importantly it clearly demonstrates that the subject and the comparisons used are part of and consistent with this market. This universe of sales ranges from $73 to $363 per square foot or 497% variation. The average deviation (consistency) from the trend line is 27% for this sample.

The other benefit of this market is that you have income data to support and verify value. In other words, you can use the income approach to value. The Minnesota Court in this and other cases has repeatedly rejected the use of leased property comparisons, because the Court requires an adjustment to a vacant sub-market that doesn’t exist.

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The Big Picture The graph below details the difference between the occupied and dark markets. It also shows the trend-line where the 2016 assessed values lie in relation to the two markets.

I think it’s been established that the net lease market sets the bar as the relevant choice for market value, and the vacant/ dark submarket represents the bottom of the valuation spectrum.

The 2016 statewide assessment of property in this market stands at approximately fifty percent of market value, because of Court precedent favoring the latter market over the last ten to fifteen years. This has, for the of 2016 sample, resulted in a property tax shift of at least $100,000,000 to other taxpayers throughout the State. The potential for this in the coming years to reach over $160,000,000.

The said estimate is conservative as it was confined only to property in the voluntary survey. A recent article in the Green Bay Gazette puts the number for

Wisconsin at seven hundred million dollars ($700,000,000). The amount could be as much as fifty billion dollars ($50,000,000,000) in annual property tax shift nationwide.

The court precedent has now been maintained even in the face of subject sales to the contrary. Assessors have already lowered values to the fifty percent level. Now that the tax attorneys and their representatives have achieved the 50% level in Minnesota, they’re now going for the 20% level.

is an intolerable inequity, because the remaining property classes throughout the County and State are valued at full market value.

The Court in this case didn’t acknowledge the arguments to value in rem or that subject sale was a relevant value indicator. A disappointment, but a clear indication that Minnesota is a dark store state. A Legislative solution must be pursued if change is to occur.

EE

Shopko Case In the current case the 50% level was defended, but only because the cost approach to value received emphasis by the Court. The cost approach favors newer property because there’s less depreciation. Had it been much older the outcome would have been very different.

It is wrong that any property be valued less than its market value for taxation, let alone a class of some of our most valuable properties being systematically valued at a fraction of their value for taxation. This

Winter 2021 / Equal Eyes

19

THE TOP 10 ten tips for office ergonomics

Jamie Freeman, SAMA Hubbard County Editorial Committee Member

10 Tips for Office Ergonomics There is no doubt that COVID-19 has changed the way we work. As a number of workers are conducting all or a portion of their job from home, it is important to keep office ergonomics in mind.

So what is ergonomics? It is the science of designing a workstation to fit within the capabilities and limitations of the worker.

The goal is to design your office workspace so that it fits you and allows for a comfortable working environment for maximum productivity and efficiency.

Here are ten quick and easy office ergonomics tips to decrease fatigue, discomfort and physical stress while also increasing comfort and safety.

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10 Tips for Office Ergonomics, continued Chair: Choose a chair that supports your spinal curves. You will want to adjust the height of your chair so that your feet rest flat on the floor or on a footrest and your thighs are parallel to the floor. Adjust armrests so your arms gently rest on them with your shoulders relaxed.

Desk:

The height of your desk should be between 25 and 30 inches. Make sure there is clearance for your knees, thighs and feet under the desk. If the desk is too high and cannot be adjusted, raise your chair. Use a footrest to support your feet as needed. In addition, try not to store items under your desk.

Computer:

Ideally, you should use a desktop computer. On their own, laptops and tablets do not allow you to separate the keyboard from the monitor, forcing you to look down at the screen. This will likely place excessive strain on your neck while working.

Monitor:

Your monitor should be placed directly in front of you, about an arm’s length away. When looking at your monitor, the top third of the screen should be at eye level. The monitor should be directly behind your keyboard. It is also recommended to place your monitor so that the brightest light source is to the side.

Keyboard and mouse: Place your mouse within easy reach and on the same surface as your keyboard. While typing or using your mouse, keep your wrists straight, your upper arms close to your body and your hands at or slightly below the level of your elbows. Use keyboard shortcuts to reduce extended mouse use.

Key Objects:

Keep key objects, such as your telephone, stapler or printed materials, close to your body to minimize reaching. Stand up to reach anything that cannot be comfortable reached while sitting.

Telephone:

If your job requires you to frequently talk on the phone and type at the same time, place your phone on speaker or use a headset rather than cradling the phone between your head and neck.

Footrest:

Your feet should not be dangling when you are seated. If your chair is too high for you to rest your feet flat on the floor, or the height of your desk requires you to raise the height of your chair, use a footrest.

Sitting vs. Standing:

Should you sit or stand at your workspace? Research comparing standing and sitting while working at a computer is varied. Some studies indicate that standing may be better, while others show that sitting in the correct position is best. Most experts agree that the ability to spend some time sitting and some time standing while working is optimum.

Make time for exercise: One of the most important things you can do while working at a desk is to make time to exercise. There is a wide variety of exercises you can do while seated at your desk.

Otherwise, simply taking a walk can help elevate your mood, and it may help decrease aches and pains that occur from working at your desk every day.

Winter 2021 / Equal Eyes

21

What You Get For A Celebrity connection

Amber Swenson- Hill, SAMA Polk County Editorial Committee Member

SOLD! 115 King Creek Rd, Golden Valley, MN 55416 What price do you pay for a Minnesota legends mom’s home? $429,000 per the November 2020 sale.

Home is three bedrooms, full bath, three-quarter bath, and half bath.

Originally built in 1985 for Prince’s mother and stepfather. They lived in the house for about two decades before selling.

2021 Taxes: $8,333.52

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out of the past Remembering Yesterday

5 Years Ago—2016 •

•

•

2016 is a bit of a unusual year in one way: No major tax bill was passed the previous year which means the tax conference committee, and its unfinished bill, remain available for action when the Legislature returned March 8.

Lori Thingvold wrote on “Flexibility in the Workplace” including flexible scheduling, telecommuting, and the productivity change different counties have experienced.

Nathan Aakre, City of Moorhead, applied for the CMA license.

10 Years Ago—2011 • •

•

MAAO was exploring the possibilities of a GIS forum.

Lori Thingvold was featured in “Getting to Know The Editorial Committee’s Newest Members” A tornado rips through North Minneapolis destroying many homes.

20 Years Ago—2001 •

•

•

ON March 1, 2006 the Code of Conduct and Ethics went into effect for assessors.

After six days of jury deliberation Enron Chief Executive Jeffrey Skiling was found guilty of fraud and conspiracy.

Tom May accepted an award presented to Hennepin County by St. Cloud State University for support of the Real Estate Program.

A goal of Wayne Haerre, Director of Property Tax, was to pursue a uniform, statewide standard placed on parcel identification.

25 Years Ago – 1996 •

• • •

•

15 Years Ago—2006 •

Amber Swenson-Hill, SAMA Polk County Editorial Committee Member

The Executive Board approved the revitalization of the Assessment Appeals Committee as a subcommittee of the Legislative Committee.

There were a number of items concerning the appeals process that needed to be addressed.

WCMAP celebrated 20 years.

In general, farmland prices remained stable.

IAAO’s internet homepage became fully functional; members were encouraged to take advantage of this new opportunity.

The State Board of Assessors weas in the process of revising the oral interview questions that are asked of accreditation candidates.

•

J. Scott Renne, Washington County Assessor, was installed as a member of the Executive Board of IAAO.

35 Years Ago – 1986 •

Brooklyn Center was named an All-American City in a national contest, and Pete Koole said, “That must mean that I’m an All-American Assessor.”

40 Years Ago – 1981 •

•

Hubbard County taxpayers expressed concerns regarding real estate taxes on various classifications.

The MAAO membership unit chairman said “active” membership is key to any group.

45 Years Ago – 1976 • •

•

MAAO held their 30th MAAO Convention.

The 12 counties comprising Region V accounted for over 9 percent of the area of the state, and the population was 208,033.

Arthur C. Roemer was the Commissioner of Revenue, and he stated that it will be a decade of tax reform.

30 Years Ago – 1991 •

The MAAO President was Don Monk.

Winter 2021 / Equal Eyes

23

transitions Best Wishes Upon Retirement

Nancy Gunderson, SAMA, Clay County Editorial Committee Member

News from Region 9

John Leone

Anoka County

Retired February 5, 2021 Worked at Anoka for 33+ years Congratulations John!

Scott deLambert Hennepin County Retired March 1, 2021 Served in the position of residential appraiser Happy Retirement Scott!

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News from Region 7 Douglas County Assessor, Keith Albertsen is retiring. It is true!

One of the few members of the 60/40 club is calling it quits! (over 60 with 40 or more years in the assessment profession). Last day in the office is March 31.

Keith started out his assessing career in Todd County in 1978 (same year he got married to his high school sweetheart Mandy). In early 1980 he moved over to Morrison County first as an appraiser & then shortly after as chief appraiser. In July of 1985 he moved to Mille Lacs County as County Assessor while still in his 20’s. In January of 1989 he moved to Douglas County as County Assessor, a position he has held for 32 years.

In that time, he has been on the MAAO Membership, Rules & Resolutions, Legislative Committees & the Executive Board

(for Regions 3 & 7). He is most proud of his service on the State Board of Assessors for 21 years (with 12 of those as chairman).

Daughter Sarah lives with her husband Jose` in Mpls as a fiscal analysist for the Mpls Convention Center. Son Andrew lives with his wife Jessica (and daughter Addison) in Starbuck as the District Manager of the Swift County Soil & Water Conservation Service.

Keith & Mandy

For now, Keith & Mandy will split their time between their home & the family farm with their two cats & as much Addison time as they are allowed.

Congratulations Keith!

Peter Doll to Retire from Moorhead City Peter Doll began his assessment career in West Fargo, North Dakota, where he was the City Assessor for 10 years. In 1997, he switched states and became the Moorhead City Assessor. After 10 years, Pete was promoted to supervise the City Assessing Department and a few other Departments. Pete supervised and filled in as City Assessor during turnover until his retirement this April. Pete is looking forward to spending more time with his wife, family, and other interests such as fishing and hunting. His retirement is being coordinated with the birth of his third grandchild. Pete is retiring April 9th.

Peter & Tina

Happy Retirement Pete!

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25

transitions

Winona County Assessor Steve Hacken to retire April 30th

I will be retiring on April 30 after 42 plus years in the assessing profession. I have been a county assessor for 36 of those years.

I have been in Winona County since 1997.

Previously I was County Assessor in Pine County from 1985 to 1997. Before that I was an appraiser in Chisago County starting in 1978. I have also been interim County Assessor in Fillmore County and am currently interim County Assessor in Wabasha County.

I received my college degree from WisconsinRiver Falls with a major in Mass Communications (Journalism).

As a member of MAAO, I was President in 2009. I have instructed Mass Appraisal for the past 11 years.

I have also instructed numerous other classes over the years. I hope I have been a mentor to many of the newer assessors.

I have been a high school and college sports official since 1982. I have been honored to officiate in many state and sectional tournaments over the years. I work high school football, basketball, baseball and softball and NCAA softball for 20 years before retiring from that last year.

I have been married to Debbie since 1980. We

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have two children, Brodie, who is an attorney in Minneapolis and Elizabeth (or Lizard as I like to call her) who works in the banking industry.

My daughter-in-law Dr. Lynn is a college administrator.

We have three grandkids—Madelynn, 9, Izzy, 6, and Connor, 3. We also have our little dog Zoey.

Plans for retirement include spending more time at our cabin on Pokegama Lake in Pine County.

It needs some work and time to do that would be great. Connor says I need to buy a 4-wheeler for the lake to go along with “his” pontoon. I also plan on improving my golf game by finding time to play regularly. I will continue to officiate football, baseball, and softball but I think it may be time to give up basketball. I also plan on continuing to teach Mass Appraisal as well as maybe doing some assessment consulting work.

I have had the wonderful opportunity to work with some great people. My staffs in Pine and Winona County have been great. We always shared in the goal of providing a quality assessment for the property owners in the county. Some of my best friends in the world are/were county assessors. I hope to keep in touch.

Congratulations Steve!

TAX COURT

lowe’s home centers, LLC vs.

Pidde, SAMA, Stearns County village of plover, wi Jake Editorial Committee Member COURT OF APPEALS DECISION DATED AND FILED October 29, 2020

This opinion is subject to further editing. If published, the official version will appear in the bound volume of the Official Reports.

A party may file with the Supreme Court a petition to review an adverse decision by the Court of Appeals. See WIS. STAT. § 808.10 and RULE 809.62.

Sheila T. Reiff Clerk of Court of Appeals

Appeal No.

NOTICE

2019AP974

Cir. Ct. Nos. 2016CV208 2017CV187

STATE OF WISCONSIN

IN COURT OF APPEALS DISTRICT IV

LOWE'S HOME CENTERS, LLC, PLAINTIFF-APPELLANT, V.

VILLAGE OF PLOVER, DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Portage County: THOMAS T. FLUGAUR, Judge. Affirmed.

Before Kloppenburg, Graham, and Nashold, JJ. ¶1

NASHOLD, J.

Lowe’s Home Centers, LLC (Lowe’s), challenges

as excessive the 2016 and 2017 property tax assessments of its store in the Village of Plover.

Following a trial, the circuit court upheld the assessments and

dismissed the claims. We affirm.

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TAX COURT, continued No. 2019AP974

BACKGROUND ¶2

In 2005, Lowe’s completed construction of a big box store in a retail

area on the Village of Plover’s northeast side. The Village assessed the land and improvements (the subject property) for the 2005 tax year at $7,356,600. The Village did not modify the assessed value for any of the subsequent 12 years, and Lowe’s never challenged the assessments in any year between 2005 and 2015. ¶3

On July 1, 2016, Lowe’s filed a complaint, pursuant to WIS. STAT.

§ 74.37(3)(d), contesting the January 1, 2016 assessment as excessive.1 Lowe’s filed another complaint one year later challenging the January 1, 2017 assessment.

The cases were consolidated. ¶4

A four-day bench trial was held in January 2019. The circuit court

heard testimony from Village Assessor Debra Edwards; Lowe’s’ expert appraiser Michael MaRous; the Village’s expert appraiser Dominic Landretti; and Dr. Thomas Hamilton, retained by the Village to present expert testimony in rebuttal to MaRous’s testimony and report.

All three experts also submitted

reports that were entered into evidence. The parties submitted pre-trial and posttrial briefs. ¶5

In April 2019, the circuit court issued a written decision, affirming

the Village’s assessments and dismissing both complaints. The court determined that Lowe’s had not overcome the presumption of correctness afforded to municipalities’ assessments pursuant to WIS. STAT. § 70.49(2). Specifically, the All references to the Wisconsin Statutes are to the 2017-18 version unless otherwise noted. We cite the current version for ease of reference. The statutory language that we apply here has not changed.

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2

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TAX COURT, continued No. 2019AP974

court determined that the 2016 and 2017 assessments were the result of mass appraisals and that Lowe’s failed to show that the mass appraisals did not comply with Wisconsin law. The court then analyzed the assessments under the three-tier hierarchy provided for in Wisconsin statute and case law, as well as in the 2016 Wisconsin Property Assessment Manual (Property Assessment Manual).2

See

WIS. STAT. § 70.32(1); State ex rel. Markarian v. City of Cudahy, 45 Wis. 2d 683, 685-86, 173 N.W.2d 627 (1970); see also Bonstores Realty One, LLC v. City of Wauwatosa, 2013 WI App 131, ¶14, 351 Wis. 2d 439, 839 N.W.2d 893. ¶6

Because there was no recent arm’s-length sale of the property to

enable a Tier I analysis, the circuit court first addressed the parties’ analysis of the Tier II comparable sales approach. See Markarian, 45 Wis. 2d at 686. The court determined that there were no reasonably comparable sales to facilitate an analysis under the Tier II approach, rejecting the proposed comparable sales offered by Lowe’s’ expert, MaRous.

The court found that all of MaRous’s proposed

properties differed from the subject property in that they “were either vacant stores or stores in transition/distressed,” whereas the Lowe’s store had been in continual operation since its construction in 2005. The court also found that MaRous’s proposed comparable properties differed from the subject property in exposure to the market and location. ¶7

The circuit court relied on the Tier III cost approach, crediting the

cost approach analysis of the Village’s expert, Landretti, over that conducted by Lowe’s’ expert, MaRous. Using the cost approach, Landretti estimated that the

All references are to the 2016 edition of the Wisconsin Property Assessment Manual unless otherwise noted.

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TAX COURT, continued No. 2019AP974

subject property’s market value for 2016 was $8,500,000, after rounding from his calculations of $8,539,000. He arrived at this amount by estimating the cost of a replacement building to be $8,216,000, making a $2,347,000 deduction for depreciation based on the building’s age and economic life—an approximately 29% deduction that included depreciation due to functional obsolescence—and then adding $370,000 for the depreciated value of site improvements and $2,300,000 for the value of the land.

Using the same approach, Landretti

estimated a market value of $8,700,000 for 2017. Landretti’s report explained that his

“economic

age-life”

depreciation

method

accounted

for

“physical

deterioration, functional obsolescence, and external obsolescence.” ¶8

The circuit court noted that MaRous’s analysis under the Tier III

cost approach most deviated from Landretti’s in its inclusion of a 50% deduction for functional obsolescence of the building.

Under MaRous’s cost approach,

which included the 50% deduction for functional obsolescence, MaRous estimated the market value of the subject property to be $4,620,000 for 2016, after rounding from his calculations of $4,616,340. MaRous arrived at this amount by estimating the cost of a replacement building to be $7,865,361, making a total 75% deduction for physical, functional, and external depreciation, and then adding $650,000 for the depreciated value of site improvements and $2,000,000 for the value of the land. Using this same approach, MaRous estimated a value of $4,500,000 for 2017. The court determined that MaRous’s functional-obsolescence deduction was unfounded, as MaRous had determined the highest and best use of the subject property was continued use as a big box retailer,3 yet he made a substantial MaRous specifically concluded that the highest and best use for the subject property was continued use as an operating Lowe’s. Landretti likewise concluded that the highest and best use was its existing use as a big box retail store.

3

4

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TAX COURT, continued No. 2019AP974

functional-obsolescence deduction because the property was single-tenant instead of multi-tenant. The court found that Landretti’s estimate under the Tier III cost approach was the “most credible,” and “provide[d] the best estimate of the fee simple value of the property,” “the fairest value of the property,” and the “least amount of speculation.” ¶9

The court affirmed the Village’s assessments, and dismissed both of

Lowe’s’ claims. Lowe’s appeals. ¶10

In addition to the parties’ briefs, amicus briefs were filed by the

League of Wisconsin Municipalities and Wisconsin Manufacturers & Commerce.

DISCUSSION ¶11

This is a review of the circuit court’s decision rejecting Lowe’s’

claims of excessive tax assessments under WIS. STAT. § 74.37. “The question on appeal in a Wis. Stat. § 74.37 action is not whether the initial assessment was incorrect, but whether it was excessive.”

Metropolitan Assocs. v. City of

Milwaukee, 2018 WI 4, ¶40, 379 Wis. 2d 141, 905 N.W.2d 784. ¶12

Pursuant to WIS. STAT. § 70.32(1), “[r]eal property shall be valued

by the assessor in the manner specified in the Wisconsin property assessment manual.” A municipality’s assessment is presumed correct upon entry of the assessed value into the assessment roll and submission of the assessor’s affidavit: The value of all real and personal property entered into the assessment roll to which such affidavit is attached by the assessor shall, in all actions and proceedings involving such values, be presumptive evidence that all such properties have been justly and equitably assessed in proper relationship to each other.

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TAX COURT, continued No. 2019AP974

WIS. STAT. § 70.49(2).

Here, it is undisputed that the subject property was

assessed at $7,356,600 in the challenged tax years. Thus, the assessments are “entitled to a presumption that [they were] ‘justly and equitably’ made, giving rise to a presumption of correctness.” Metropolitan Assocs., 379 Wis. 2d 141, ¶50; see also Bonstores, 351 Wis. 2d 439, ¶10 (“Because both parties agreed that the property was assessed at $25,593,300, the City has met its burden of establishing the presumptive fair market value of the property.”). ¶13

“The presumption can be overcome if the challenging party presents

significant contrary evidence,” Metropolitan Associates, 379 Wis. 2d 141, ¶50, or shows that the assessment does not comply with Wisconsin law or the Property Assessment Manual, see Regency West Apartments LLC v. City of Racine, 2016 WI 99, ¶¶3-4, 22, 71, 73, 372 Wis. 2d 282, 888 N.W.2d 611; see also Bonstores, 351 Wis. 2d 439, ¶5.4 ¶14

“Whether a city has erroneously failed to follow statutory

requirements in making an assessment is a question of law that we review de novo.” Walgreen Co. v. City of Madison, 2008 WI 80, ¶17, 311 Wis. 2d 158, We acknowledge that our appellate courts have also expressed the rule regarding when the presumption attaches in a slightly different way—for example, that “‘[n]o presumption of correctness may be accorded to an assessment that does not apply the principles in the Property Assessment Manual.’” Walgreen Co. v. City of Madison, 2008 WI 80, ¶17, 311 Wis. 2d 158, 752 N.W.2d 687 (quoted source omitted). The precise language on this point may be of little practical consequence but, consistent with WIS. STAT. § 70.49(2) and other precedent from our appellate courts, we employ the language indicating that the presumption exists upon the assessment being entered into the assessment roll, and that the taxpayer may overcome the presumption by showing significant contrary evidence or that the assessment does not comply with Wisconsin law or the Wisconsin Property Assessment Manual. See, e.g., Metropolitan Assocs. v. City of Milwaukee, 2018 WI 4, ¶50, 379 Wis. 2d 141, 905 N.W.2d 784; Regency West Apartments LLC v. City of Racine, 2016 WI 99, ¶¶3-4, 22, 71, 73, 372 Wis. 2d 282, 888 N.W.2d 611; Bonstores Realty One, LLC v. City of Wauwatosa, 2013 WI App 131, ¶¶5, 10, 351 Wis. 2d 439, 839 N.W.2d 893.

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6

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TAX COURT, continued No. 2019AP974

752 N.W.2d 687; see also Bonstores, 351 Wis. 2d 439, ¶6 (“[W]e independently review whether a valuation complied with the statutes and the Wisconsin Property Assessment Manual.”). However, “we defer to the circuit court’s findings of fact when resolving conflicting evidence.

We will not upset the court’s factual

findings, including findings involving the credibility of witnesses, unless they are clearly erroneous.” Bonstores, 351 Wis. 2d 439, ¶6 (citation omitted); see WIS. STAT. § 805.17(2). “In particular, it is within the province of the factfinder to determine the weight and credibility of expert witnesses’ opinions.” Bonstores, 351 Wis. 2d 439, ¶6. ¶15

On appeal, Lowe’s argues that the Village is not entitled to the

presumption of correctness for several reasons. First, Lowe’s argues that the 2016 and 2017 assessments were arrived at contrary to Wisconsin law and the Property Assessment Manual because the assessed value for the subject property remained unchanged between 2005 and 2017 and the Village failed to comply with the procedures for a mass appraisal. Second, Lowe’s contends that the circuit court improperly rejected Lowe’s’ suggested comparable sales. Finally, Lowe’s argues that the court’s analysis of the Tier III cost approach was flawed because, among other things, the court did not take into account the functional and economic obsolescence identified by Lowe’s’ expert, MaRous. ¶16

For the reasons explained below, we agree with the circuit court that

Lowe’s has failed to overcome the presumption of correctness, and we affirm the court’s decision upholding the assessments and dismissing Lowe’s’ claims.

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TAX COURT, continued No. 2019AP974

I. Mass Appraisal ¶17

Lowe’s argues that the Village is not entitled to the presumption of

correctness because the Village’s 2016 and 2017 assessments violated the Property Assessment Manual by carrying over the exact market value from the 2005 appraisal for 12 years. Lowe’s relies on the Property Assessment Manual’s statements that “[a]ssessments should not be carried over from year to year with no adjustments” but should instead reflect various trends and factors that affect market value. Wisconsin Property Assessment Manual, at 19-19. Lowe’s argues that, contrary to the circuit court’s conclusion, there was no mass appraisal underlying the 2016 and 2017 assessments.

Lowe’s’ arguments are not

persuasive. ¶18

Our supreme court approved of the use of mass appraisal in

Metropolitan Associates, noting that the practice is “widely used throughout the country.” Metropolitan Assocs., 379 Wis. 2d 141, ¶44. “Mass appraisal is the systematic appraisal of groups of properties, as of a given date, using standardized procedures and statistical testing.” Wisconsin Property Assessment Manual, at 7-39; see also Metropolitan Assocs., 379 Wis. 2d 141, ¶29 (using same definition from 2009 Property Assessment Manual). ¶19

The Property Assessment Manual explains that “[t]he purpose of

mass appraisal is the equitable and efficient appraisal of all property, in a jurisdiction, for ad valorem tax purposes.

Mass appraisal is the underlying

principle that Wisconsin assessors should be using to value properties in their respective jurisdictions.” Wisconsin Property Assessment Manual, at 7-39-7-40.

The Property Assessment Manual further explains that “[a] mass appraisal system is comprised of four interdependent subsystems”:

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(1) a “[d]ata management

TAX COURT, continued No. 2019AP974

system,” (2) a “[s]ales analysis system,” (3) a “[v]aluation system,” and (4) an “[a]dministrative system.” Id., at 7-40. ¶20

The circuit court determined that valid mass appraisals occurred in

2016 and 2017. Specifically, the court found that “[t]he Village Assessor, Deb Edwards, testified that mass appraisal was performed for the January 1, 2016 and January 1, 2017 years of value. The mass appraisal included a sales ratio analysis through use of a computer-assisted mass appraisal program that identified properties that needed adjustment from the prior year.” The court continued: A review of the evidence shows that the Village contracted with Dan McHugh, Jr. of Affiliated Property Valuation Services, LLC. to perform commercial assessments in 2016 and 2017. WIS. STAT. § 70.055 specifically allows municipalities to retain expert assessment help.

Lowe’s failed to demonstrate that the mass appraisal performed by the Village for the January 1, 2016 and January 1, 2017 years did not comply with Wisconsin law.

As we explain, the record supports the circuit court’s determination that valid mass appraisals occurred. ¶21

Edwards testified that the Village did not simply carry over the

assessed value without analysis but instead performed a mass appraisal each year from 2006 through 2017 and that the evaluation resulted in no change to the assessments. Edwards further testified that Dan McHugh, of Affiliated Property Valuation Services, was responsible for creating the computer-assisted mass appraisal models for the Village’s commercial properties, which identified properties needing adjustment. Despite McHugh’s role in the mass appraisals, Lowe’s did not call McHugh as a witness and instead questioned only Edwards on the mass appraisals, including with respect to the four “subsystems” of mass 9

Winter 2021 / Equal Eyes

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TAX COURT, continued No. 2019AP974

appraisal. Edwards testified regarding the subject property’s record card, which contains data about the property. She also testified to the Village’s use of a sales ratio study, which, according to the Property Assessment Manual, is “the primary product” of a sales analysis system and “generally provide[s] the best available measures of appraisal performance.” Wisconsin Property Assessment Manual, at 7-41. The sales ratio analysis was conducted through use of a computer-assisted mass appraisal program that identified properties that needed adjustments from the prior year. Edwards agreed that a valuation system includes a “cost approach” and testified that, although she did not personally perform a cost approach analysis for the mass appraisals for 2016 and 2017, McHugh may have. Edwards also testified to having produced annual assessor’s reports. Edwards’ testimony provides a basis for the circuit court to determine that valid mass appraisals occurred. ¶22

Lowe’s contends that the Village relied on Annual Assessment

Reports (AARs) to prove the execution and propriety of mass appraisals for the 2016 and 2017 assessments. Lowe’s states that “[t]he 2016 and 2017 Village AARs were presented at trial as if they constituted the ‘mass appraisal’ pertaining to 2016 and 2017 assessments of the subject property.” Lowe’s asserts that the AARs do not suffice as evidence of mass appraisal. ¶23

Lowe’s relies in substantial part on the Village’s discovery response,

which referred Lowe’s to the AARs “for more information on the mass appraisal performed in years 2016 and 2017.” However, this response does not convey that the AARs constituted the mass appraisal. Moreover, the circuit court did not mention the AARs as a basis for its determination that a valid mass appraisal occurred, nor does the Village argue on appeal that the AARs constitute the mass appraisals at issue. Lowe’s fails to show that the AARs constituted the Village’s mass appraisals.

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State Board of Assessor’s Meeting Minutes Meeting StateWebex Board of Assessors Meeting Minutes 12, 2021 Tuesday, January Webex Meeting ReportedJanuary

by Bobbi Spencer, MN DOR Tuesday, 12, 2021

Chairperson Gregg Larson convened the meeting at 8:45am.

Board members in attendance: Gary Amundson Andrea Fish Matt Gersemehl Jane Grossinger

Joy Kanne Gregg Larson Mike Reed Lori Schwendemann

Charlie Blekre was unable to attend.

Introduction of new Board member, Matthew Gersemehl.

Agenda for the January 12, 2021 meeting was reviewed. Mike Reed moved to approve the agenda. Joy Kanne seconded the motion. The motion carried.

Minutes of the November 19, 2020 meeting were reviewed. Andrea Fish moved to approve the minutes.

Jane Grossinger seconded the motion. The motion carried.

Election of Officers •

Nomination for Vice Chair: Gary Amundson made a motion to nominate Joy Kanne for vice chair.

Mike Reed seconded the nomination. The motion carried. Joy Kanne is the vice chair for 2021.

•

Nomination for Chair: Jane Grossinger made a motion to nominate Gregg Larson as chair. Lori Schwendemann seconded the nomination. The motion carried. Gregg Larson is the chair for 2021.

Grading Committee Appointments •

Form Report Grading Committee: Matt Gersemehl made a motion to reappoint the following form report committee members: Tammy Anderson, Tom Brandt, Pat Chapman (Chair), Kyle Holmes, Keith Kern, Judy Lazar, Rebecca Malmquist, Ann Miller, Dave Parsons & Tina Diedrich-Von Eschen.

Mike Reed seconded the motion. The motion carried.

•

Narrative Grading Committee: Matt Gersemehl made a motion to reappoint narrative committee members Rebecca Malmquist and Bob Wilson as chair. Mike Reed seconded the motion. The motion carried.

Patrick Chapman, MAAO President, joined the board meeting at 9:00 am.

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Board of Assessors January 12, 2021

Meeting Minutes Page 2 of 6

Updates •

Form Report Update Submitted Reports

Approved Reports

Rejected Reports

July 1, 2013 – December 31, 2013 January 1, 2014 – December 31, 2014 January 1, 2015 – December 31, 2015

6 24 27

6 24 27

0 0 0

January 1, 2016 – December 31, 2016 January 1, 2017 – December 31, 2017 January 1, 2018 – December 31, 2018 January 1, 2019 – December 31, 2019 January 1, 2020 – December 31, 2020 January 1, 2021 – January 12, 2021

57 26 24 28 41 5

57 26 24 27 37 0

0 0 0 1 4 0

Passed Reports (7/1/2013 – 7/14/2020)

Received AMA

Received SAMA

Received CMAS

228

181

14

5

Dates

Reports being Graded 0 0 0 0 0 0 0 0 5 Have not applied for AMA 30

•

Minnesota Campaign Finance Board: A letter was sent in late December notifying board members of the requirement to recertify. The annual recertification must be filed after January 1, 2021, but no later than January 25, 2021.

•

MAAO Class Surveys: Emily Squyres, MAAO Education Coordinator, sent over the 2020 MAAO course evaluations. There are 17 course evaluation documents. Gregg Larson volunteered to review the evaluations and report back to the board at the March meeting.

•

Complaint Summary: Since November 2020, the Department of Revenue has received no new complaints. At this time all investigations have been closed, and no new cases have been opened.

•

Intern Assessors: Per the board’s internal discussion at their November 12, 2020 board meeting, the following statements were added: o On the Trainee Registration page on the Board of Assessors website: “Note: Individuals working for an assessor as an intern for a short time are not required to be registered with the board as a trainee.” o MAAO December newsletter: “Trainee Registration Update: Individuals working for an assessor as an intern for a short time are not required to be registered with the board as a trainee. Individuals who do full-time assessment work for an assessor’s office are required to register with the Board within 30 days of hire to help us track the progress of meeting the requirements necessary for licensure within 3 years of first hire.”

A reminder email will be sent out to all 87 County Assessors at the beginning of February.

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Board of Assessors January 12, 2021

Meeting Minutes Page 3 of 6

Updates (cont.)

•

MAAO Curriculum & Assessor Standards Committee Update: Gary Amundson reported the following updates: o Advanced Ag course moved onto phase 2 of development. The content is being sorted into modules and formatted. o Assessment Administration course is now owned by MAAO; the committee is working with the steering committee and the instructors/facilitators on updating this course. o Completed the development of the Basic Residential course. o Reviewing the Basic Income course that MAAO has developed. o Working on SAMA and CMA standards and would like someone from the board to help with this project. Joy Kanne and Andrea Fish volunteered.

•

Online Course Standards: Joy Kanne presented the online course standards document that was created with the help of the MAAO’s Curriculum committee. Joy explained that these standards need benchmarks added to the online course strands, and that a rubric could be created to show what the board requires for all online courses. The board’s CEH committee will use the online course standards for future requests and to add benchmarks and will bring back their recommendations to the March board meeting.

•

MAAO’s Conference Content Committee Meeting: Jane Grossinger reported that the committee met on November 19, 2020 and discussed the Basic Ag and Basic Income courses that are being developed. Their main project right now is getting courses ready for summer seminars. Each region and committee has been asked to submit a course or topic. They also discussed how summer seminar courses may be held – virtual, in person, or both.

Discussion Items •

Mission & Vision Statement: With the help of Julie Rapacki (from the Department of Revenue’s Property Tax Division), the board narrowed down the wording options for a mission & vision statement. Gregg Larson & Matt Gersemehl volunteered to work together on finalizing the mission statement, and they will send the board members their final suggestion to review prior to the March board meeting.

•

Law Changes: Andrea Fish explained that if the board wants to change or add new law this needs to be discussed at a board meeting, ideally at the May board meeting for subsequent year changes. This would give the board, its attorneys, and stakeholders plenty of time to prepare the law to present to Legislature at its next regular session, which normally starts in January or February.

•

CMA/AMA 7/1/2022 discussions: Andrea Fish reported that a meeting with MAAO, MAAP, and DOR will be held in February, to look globally at those people that are licensed but not assessing.

The goal of this first meeting will be to discuss considerations for licensed individuals who are not assessors, to proactively determine avenues forward if those licensees do not receive their AMA license by statutory deadlines. The group will plan for additional meetings to discuss next steps as needed.

3

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Board of Assessors January 12, 2021

Meeting Minutes Page 4 of 6

Discussion Items (cont.)

•

Licensure Course Review: o Jane Grossinger volunteered to review the Fundamentals of Real Property Appraisal course sponsored by IAAO. o Matt Gersemehl volunteered to review two IAAO courses: Assessment Administration and Course 312: Commercial/Industrial Modeling. o Lori Schwendemann volunteered to review two Property Type Specific courses sponsored

by Kaplan: Residential Market Analysis and Highest & Best Use, and Residential Site Valuation & Cost Approach.

o Joy Kanne brought to board’s attention that while she is the instructor at the Mass

Appraisal Basics course, she receives feedback from the students on how frustrating it is when taking Principles and Procedures. The students have a hard time connecting the class to what their job is. She would like to look at the courses, to determine whether they are meeting the board’s standards, how to make it a meaningful education, and to help new assessors who are not connecting the appraisal course to their assessment work. Joy volunteered to look for other options for these two required courses. Matt Gersemehl and Lori Schwendemann volunteered to assist Joy.

Approved Continuing Education Hours Requests •

2021 Minnesota Commercial Real Estate Road to Recover & Economic Forecast Summit: Ashley Gunderson requested the board review this summit, sponsored by MN Real Estate Journal, that was held online on January 7, 2021 for continuing education. The board’s continuing education committee approved this summit for 3 continuing education hours.

•

McKissock Online Courses: Joy Kanne requested the board review nine McKissock online courses for continuing education hours. The board’s continuing education committee approved the following nine courses for continuing education. o o o o o o o o o

Appraisal of Industrial and Flex Buildings (7 hours) Appraisal of Industrial Incubators (7 hours) Appraisal Subject Matter Electives (20 hours) Expert Witness for Commercial Appraisers - Subject Matter Electives (15 hours) Intro to Expert Witness Testimony for Appraisers: To Do or Not to Do (4 hours) New Construction Essentials: Luxury Homes (3 hours) Residential Market Highest and Best Use Analysis (15 hours) The Basics of Expert Witness for Commercial Appraisers (7 hours) The Fundamentals of Appraising Luxury Homes (4 hours)

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Winter 2021 / Equal Eyes

Board of Assessors January 12, 2021

Meeting Minutes Page 5 of 6

Request for Licensure Course Approval •

Strategic Effectiveness for Aspiring Leaders: Jesse Larson requested the board review this course sponsored by Minnesota Management & Budget Enterprise Talent Development, as an option for the Management and Leadership course and 30 continuing education hours. Lori Schwendemann made the motion to approve the Strategic Effectiveness for Aspiring Leaders course as recommended. Joy Kanne seconded the motion. The motion carried.

• Management Certificate: The board reviewed this certificate program, sponsored by Normandale Community College, as an option for the Management and Leadership course and 30 continuing education hours. Matt Gersemehl made the motion to approve the Management Certificate as recommended. Mike Reed seconded the motion. The motion carried.

Application for Certified Minnesota Assessor Andrea Fish made a motion to award the Certified Minnesota Assessor license to the following individuals.

Amie Davis, Dakota County Jolene Devitt, Todd County Steve Hanson, Crow Wing County Christopher Joelson, St Louis County Jessica Laue, Martin County Tichaona Majiwa, City of Minneapolis Tyler Swanson, Lake of the Woods County Jane Grossinger seconded the motion. The motion carried.

Applications for Accredited Minnesota Assessor Andrea Fish made a motion to award the Accredited Minnesota Assessor license to the following individuals.

Jeff Bjerk, Mahnomen County Lisa Glass, Minnesota Department of Revenue Mike Reed seconded the motion. The motion carried.

Applications for Senior Accredited Minnesota Assessor Mike Reed made a motion to award the Senior Accredited Minnesota Assessor license to the following individual.

Mark Buysse, Lyon County Lori Schwendemann seconded the motion. The motion carried.

Joy Kanne made a motion to award the Senior Accredited Minnesota Assessor license to the following individual.

William Hilback, Itasca County Gary Amundson seconded the motion. The motion carried.

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Board of Assessors January 12, 2021

Meeting Minutes Page 6 of 6

The chairperson set the next meeting date as Tuesday, March 9, 2021 as a virtual meeting and will begin at 8:30 am.

Jane Grossinger made a motion to pay the expenses for the meeting. Mike Reed seconded the motion. The motion carried.

Lori Schwendemann made a motion to adjourn the meeting. Matt Gersemehl seconded the motion.

The motion carried.

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Winter 2021 / Equal Eyes

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Official Publication of the Minnesota Association of Assessing Officers mnmaao.org

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Winter 2021 / Equal Eyes