The price you pay Property values continue to climb in

BY KRIS BEVILL

Oil Patch

The active construction market and high selling pricesfor properties in western North Dakota continues to impact the value of both residential and commercial properties in the area, some more than others.

In Williston, residential property assessments increased by up to 35 percent this year, while commercial properties values were determined to be up to 10 percent higher than last year.

Meanwhile, Dickinson’s commercial property assessments skyrocketed. The average increase for existing commercial properties in Dickinson this year was 42 percent, according to city assessor Joe Hirschfield. When including new construction, the assessed value of commercial properties in the town increased this year by a staggering 108 percent compared to 2012.

Building permit data illustrates the frenzied rate of growth in Dickinson over the past year compared to other western North Dakota communities, offering an explanation for the jump in property assessments. The value of residential and commercial building permits issued by Dickinson last year topped $400 million, representing a nearly 200 percent increase over the prior year. The city issued 120 new commercial building permits in 2012, triple the number issued in 2011, which accounted for nearly half of the total permit values.

To compare, Williston’s building permit valuations last year came in at $470 million, compared to about $358 million in 2011. The city issued 106 new commercial permits in 2012, valued at about $209 million.

Hirschfield says that because assessed values reflect the previous year’s sales and must remain between 90 and 100 percent of median sales prices, if market values continue to climb, property owners can expect increased assessments again next year. That scenario appears likely as the city prepares for an extended period of growth, driven by oil and gas-related activities. Eighteen new commercial structure building permits had been issued by the city between January and April this year, compared to 14 during the same time frame the year prior. The number of new single-family home permits is down significantly so far this year compared to 2012, however, with 76 permits issued during the first four months of 2013 compared to 209 last year.

The downside of higher property values is seemingly inevitable tax increases, but Hirschfield says he doubts whether assessed values, and potentially higher taxes, will have a negative impact on new business projects in Dickinson. “I anticipate that increased valuations will have minimal, if any, effect on potential business owners,” he says. “Any potential buyer will weigh property taxes as a cost of doing business.”

It’s not yet known how much Dickinson’s commercial property taxes might increase as a result of this year’s higher assessment values. Hirschfield anticipates there will be an increase, which he says is due to commercial properties being undervalued historically, but the actual amount will not be determined until the city undertakes its budget process in the fall. He says the most concerned property owners are those with long-term lease agreements in place because they may not be in a position to increase rental rates in order to recoup additional property tax expenses. PB

Kris Bevill Editor, Prairie Business 701-306-8561, kbevill@prairiebizmag.com