By Shannon Fiecke, Correspondent

Most farmers in Scott County will be in for a shock when they open up their property valuation notices.

The value of agricultural land is going up — way up.

Although the figures used for taxation purposes won’t rise nearly as much in most cases, farms on average will be worth about 35 percent more on paper, according to the assessor’s office.

“We wanted to be consistent and fair,” said County Assessor Bob Schmitt of the changes that were prompted by a hard look at land sales across the county over the last few years.

What the county found, he said, is zoning is a key factor in the price of farmland and therefore should be considered heavily in assessing property values.

The farmland adjustment is the largest change as the county sets this year’s property values for next year’s tax purposes. A nearly 25 percent up-tick in Prior Lake business values is the other big shakeup.

Meanwhile, despite a slumping housing market, the county’s residential values have only dropped roughly an average of 2 percent from a year ago.

“That’s going to vary upon where you’re at,” Schmitt said.

Residential values

It would be incorrect to paint home values in the whole county as in decline, said lead residential assessor Lance Link, because while some areas have dropping values, others are seeing prices rise or stay flat.

In Shakopee, residential values are down about 5 percent overall. Savage is about 1 percent higher than a year ago. In Prior Lake, values are up about 0.02 percent citywide due to jumps in lakeshore property, which means other homes’ values are probably pretty flat, Schmitt said. 

In Jordan and Belle Plaine, home values dropped over 2 and 3 percent, respectively.

Valuations are down slightly in all county townships, except Spring Lake Township, which again could be due to the lakeshore factor.

One of the first areas of decline the county noticed was the slowing townhome market, due to an overabundance of supply for potential buyers. “This doesn’t mean every single townhome went down in value,” Link noted.

Foreclosures may or may not affect the value of other homes, depending on how many occur in a particular area.

The county uses sales of similar homes in an area to determine the value of each home, taking into account specific information it has on file about that home.

It only uses “arms-length” transactions in compiling its data, so sales between relatives or foreclosure-related sales don’t count.  

However, if a significant amount of foreclosures or “short sales” occur in an area, dragging down the sale prices of other homes, this will factor into the values assigned by the county.

Farmland Before this year, the county assessor’s office was valuing farmland in townships at about $6,000 per acre.

However, most farmers were only being taxed a little less than $3,000 per tillable acre on average, due to the state’s Green Acres program. This program keeps taxable value for agricultural land at what the property is worth for farmland, Schmitt said.

Both the county’s assessed market value and the taxable value under the Green Acres program are going up — sometimes rather drastically.

In some areas, the county’s assessed value will double or even triple. Due to statewide changes to Green Acres, the actual taxable values will rise about $600 in Scott County. Most farmers, but not all, participate in this program.

Whereas the county used to make a straight assessment of farmland countywide (unless property lay in cities), it is now considering sales on a per-township and zone-level. If not enough sales occurred in a particular township, the county will also look at a similar township, to help develop a value. Valuation changes are also occurring in some cities, whose rates depend on whether the land can be reached by urban utilities: + Shakopee, Prior Lake and Savage farmland in 2007 was valued at $30,000 per acre for land inside the Metropolitan Urban Service Area (MUSA) and $18,000 per acre outside the MUSA line. The 2008 assessment has the land valued at $60,000 inside MUSA and $36,000 outside MUSA.

+ Elko-New Market land was $20,000 and $12,000 for 2007 and has increased to $25,000 and $13,000 for 2008.

+ Belle Plaine, New Prague and Jordan’s farmland values are not changing. The values are $20,000 inside the MUSA line and $12,000 outside.

Commercial/industrial

The county is also adjusting commercial and industrial property values in Prior Lake a little more than 24 percent overall.

To try to get rid of inconsistencies, the county inspected every residential and business property in Prior Lake over the last two years, Schmitt said. This past year, it finished looking at all the commercial/industrial and apartment buildings.

Normally, the county attempts to physically assess a building once every five years.

However, determining the values of businesses in Prior Lake in the past was difficult because there were no sales some years. But this past year, there were six sales and one or two in the previous couple years, Schmitt said.

The county also looked at sales of similar businesses in other communities in forming its Prior Lake valuations, while taking into account varying factors, Schmitt said.

Depending upon the type of business, Schmitt said the county may look at vacancy rates, rental income and operating expenses to help determine what an investor would pay for that property.

Business values in Savage and Shakopee are easier to assess due to a greater amount of property sales, Schmitt said.

Still, the county plans to individually assess each business in these cities this year “just to make sure everything is where it’s supposed to be,” he said.

Last year in Prior Lake, the county also finished examining each residential property, which will result in valuation increases for lakeshore property.

“Even though the market for residential is flat, or even backing off a bit, lakeshore properties are a different story,” Schmitt said. “People will still pay premium dollars.”

Appeals

The window of opportunity for challenging a property valuation is now, before government bodies start setting their budgets for 2009.

After first making a call to the county assessor’s office to get an explanation, taxpayers can still challenge a valuation through an appeals process.

Depending on where they live, the first step might be attending a township, city or county meeting. After that, a taxpayer can make an appeal to the County Board of Appeal and Equalization.

The deadline for filing in tax court, if a taxpayer wishes to go that route, is the end of April.

Because the county assessor’s office doesn’t physically inspect each property annually and an owner might not be there when assessors make the rounds, the assessor’s office could have missing information on a property that could change its assessed value.

Sometimes a homeowner never got a permit for finishing off a basement. Or there may have been significant water damage or a garage that was demolished or destroyed by fire. 

Residents should keep in mind that property values lag behind the year when sales occurred.

The 2008 property values are based on an analysis of sales that occurred 12 to 15 months preceding Jan. 2, 2008. Any known physical changes to a particular property before Jan. 2 is also supposed to be taken into account.

Although property valuation notices come out in the spring, many residents, unfortunately, don’t try to challenge the assessed value until the fall, at the time of truth-in-taxation hearings.

The truth-in-taxation notice lists how much a property’s taxes could go up the following year and it allows taxpayers to comment on proposed government budgets and levies at public hearings.

Often the people who attend these hearings are there to protest their property value, not the proposed tax levy. But by then, it’s too late to appeal the property value — unless a glaring clerical error occurred.

The time to challenge the values is now.

“They have to look at those notices and attend as scheduled or they can’t come back to the county at a different time,” County Auditor Cindy Geis said. Shannon Fiecke can be reached at sfiecke@swpub.com.