10.1. SR 11-04-2013 /i
Elk Request for Action
Fiver
To Item Number
Mayor and City Council 10.1
Agenda Section Meeting Date Prepared by
Work Session November 4, 2013 Cal Portner, City Administrator
Item Description Reviewed by
Houlton Property Trunk Utility Assessments
Reviewed by
Action Requested
Discuss and provide staff direction regarding Houlton property trunk utility assessments.
Background/Discussion
In 1992, the city extended sewer interceptor and water/sewer trunk utility improvements west of
downtown,which included the Houlton property (PID #s 75-005-1100, 75-004-1000, 75-133-4200). The
city bonded to finance the project and paid interest for the balance of the outstanding principal.
The total assessment for the property was $142,178.03. At that time,the Council deferred interest on the
principal for three years for all undeveloped properties. The Houltons applied for and were granted a
Green Acres Program deferment for the pending assessments. By law,when the property is sold or
transferred,the assessment and principal are due. Due to the deferment,the assessments have accrued
$204,601.34 in interest as of October 31, 2013, for a total due of$346,779.37.
The Houltons have retained Mr.Jeff Dotseth of Jeff Dotseth and Associates Realty to market their
property. Mr. Dotseth and the Houltons have come to an agreement in principal with The Conservation
Fund for the purchase of the property. The Conservation Fund has submitted a grant request on behalf
of the City of Elk River for the purchase of the property.
The City Council has discussed and passed two resolutions supporting the efforts of the Conservation
Fund on the city's behalf. The city has been assured by the Conservation Fund that the acquisition would
not require a city contribution. The City Council has been informed that future capital and other
improvements, maintenance and security/protection of the property will be the responsibility of the city.
As required by the grant application,the property was appraised by an independent firm. The estimated
market value assumes the seller will pay off the balance of the special assessments. The appraisal is not
public information at this time;however,if the Council so choses, a closed meeting may be called to
review the appraisal.
It is anticipated that the Council will be asked to waive or pay all or part of the deferred special
assessment.
NW- UR
Financial Impact
The Council has been assured on multiple occasions that the acquisition of the property would be at no
cost to the city.
Assessments are levied to the benefitting property owners. Waiving or decreasing the special
assessments,including the interest amount would effectively transfer the cost of the improvements to
water and sewer ratepayers once the trunk funds are depleted.
Utilizing the other city funds to pay off the assessments would shift the cost of improvements to
taxpayers.
Attachments
• Deferred Special Assessment Worksheet
• Letter of Intent from the City to The Conservation Fund
• State of Minnesota Green Acres Factsheet
N:\Pub1icBodies\Agendo Packets\11-04-2013\Final\x10.1 sr Houlton Special Assessments.docx
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City of
Elk - -
River
13065 Orono Parka ai
Elk Rimer,UN 55330
July 1,X13
Richard Erdrnann
Executive Vice President and General Counsel
The Conservation Fund
1655 North Fort Myer Drive, Suite 1300
Arlington, Virginia 22209
RE:Houlton Farm, Elk River,MN
i
Dear Mr.Erdmann:
We have discussed this project with Steve Hobbs and the City of Elk River (City)requests the
assistance of The Conservation Fund (the "Fund") to acquire and permanently protect the above-
referenced property. We believe your help is critical as we assemble all of the necessary�iesources
to obtain ownership of this roughly 340-acre natural resource area (the"Property"). Protection of
the Property is a high priority for the City and our partners as an important regional park and
natural area.
The City is requesting that the Fund provide professional guidance and technical assistance to the
City to facilitate the process of acquiring the Property. Itis anticipated that the Fund will provide
transactional assistance in acquiring the property from the current willing seller and work with the
City to secure funding for the purchase. The City and the Fund understand that it may not be
possible to either secure sufficient funding or complete this acquisition.
The parties acknowledge that a great deal of tune,effort,and risk is required of the Fund to
successfully complete this project, including securing funding,working with the seller, and
completing the necessary due diligence. It is also understood that the Fund may need to pre-
acquire the Property and hold it for a time,at some risk and cost to the Fund, in order to secure
the transaction for the City.
The City agrees to reimburse the Fund, only from grant funds and donations it receives with
the assistance of the Fund, for its costs related to the transaction including: actual expenses for
appraisal, legal,title review, survey,property taxes, environmental survey,staff time of the fund,in
accordance with the billing rates attached hereto as Exhibit"A", (not to exceed$77,000),closing
costs,and interest at 4.25%annually, should we incur such expenses. These costs are only payable
to the Fund upon final acquisition of the Property by the City from the Fund. If the Fund pre-
acquires the Property,but, for any reason, the City is unable to complete its acquisition of the
Phone:763.635.1000 F 0 1 E H E Q 6 Y
Fax:763.635.1090 NATURE
www.E&River li�.goer
property by May 15 2414,the Fund may sell the Property commercially as it deems appropriate to
recoup the resources it has invested without liability or obligation to the City.
The City will provide coordination and the resources of its realty staff and legal department and
cooperate on all contracts required for the successful funding and closing of this acquisition. The
Fund and the City shall work to verify that funds will be available to acquire the property and will
enter into a purchase and sale contract prior to the Fund's acquisition of the property from the
seller. The City agrees to cooperate to this end,to the extent consistent with the City's obligations
under law,including the N innesota Data Practices Act and Minnesota Open Meeting Law.
The City appreciates the Fund's assistance, and looks forward to completing this important
project- Please indicate the Fund's concurrence with the provisions of this letter by signing
below and returning a copy to the City.
Thank you in advance for helping with this wonderful project.
Elk River City,Council
By: -
Title: -
Date: l
Concurrence:
The Conservation Fund
Bv:
Paul F. Hurt
Title: Assistant Secretary
Date: 10/ 17/2013
cc: Steve Hobbs,Minnesota Project Director
MINNESOTA- REVENUE www.revenue.state.mn.us
Green Acres —a
(Minnesota Agricultural Property Tax Law)
Property Tax Fact Sheet 5
The Green Acres Program provides property tax relief for owners of agricultural property in areas where the market value
of land is being affected by development pressure,sales of recreational land,or other non-agricultural factors.
The Green Acres Program When the property is sold,transferred,or no longer qualifies,
This fact sheet provides information to property the deferred tax(the difference between the agricultural tax
owners who currently have land enrolled in and the tax based on highest and best use)for the current tax
Green Acres about the options payable year and the two prior years must be paid to the
available for their land.It also county.
' provides farm owners information
about how to enroll their class 2a What about special local assessments?
agricultural land into the program. Special local assessments may be deferred while the property
qualifies for Green Acres.When the property is sold,
Minnesota law requires assessors to value property at its transferred,or otherwise withdrawn from the program,all
estimated market value_Estimated market value must reflect deferred special assessments are due.
the use of the property that will bring the greatest economic
return to the land(its"highest and best use").For many farm
properties,the highest and best use may be to develop the What is the "agricultural value" of a property?
land for a residential or commercial use. The residential or
commercial value of a property is typically significantly Simply stated,the agricultural value of a property is its value
higher than that of farmland. when used for agricultural purposes. Unfortunately, it is
difficult to find sales of agricultural property that are not
In the 1960s,the Legislature recognized that urban sprawl affected by the non-agricultural factors such as development
was causing valuation and tax increases that had the potential pressure or sales of recreational land. In an effort to develop
of forcing farmers off their land in certain situations. The statewide uniformity,the Legislature directed the
Legislature developed a mechanism that allowed qualifying Commissioner of Revenue to develop a fair method for
farmers to pay real estate taxes based upon the agricultural determining the agricultural values for each county.
value of their land while deferring the higher property taxes
attributable to the land's value as residential or commercial The Department of Revenue studied statewide sales of largely
property.This law,officially known as the Agricultural tillable agricultural property across the state in a time period
Property Tax law,is commonly referred to as Green Acres that was relatively unaffected by non-agricultural market
and is codified in Minnesota Statutes, section 273.111_ influences. Each county's agricultural market was compared
to the state's purest agricultural market,and these
Only class 2a agricultural land can qualify for Green Acres. relationships help determine the agricultural values that the
Class 2b rural vacant land that is part of a property enrolled individual counties use.
in Green Acres may be eligible for enrollment in the Rural Each year,the Department of Revenue reviews current sales
Preserve property tax program. and calculates the counties'base values that are used to
How does Green Acres work? determine agricultural values for all properties enrolled in
For properties enrolled in Green Acres,taxes are calculated Green Acres. The base value is adjusted for each county to
on both the estimated market value(higher value based on determine the average tillable value per acre for that county.
highest and best use)and the agricultural value(lower value). The county assessor then applies this average value to
individual properties. The value may differ on each individual
The difference between the tax calculated on the agricultural parcel due to quality of land, location,or other factors.
market value and the estimated market value is deferred until
the property is sold or no longer qualifies for the Green
Acres program.
Property Tax Division—Mail Station 3340—St.Paul,MN 55146-3340 This fact sheet is intended to help you become more familiar with Minnesota
tax laws and your rights and responsibilities under the laws.Nothing in this
fact sheet supersedes,alters,or otherwise changes any provisions of the tax
law,administrative rules,court decisions,or revenue notices.Alternative formats
available upon request.
Revised 01/12 Minnesota Revenue,Green Acres 7
How do I qualify? How do I apply?
Only property that is classified by the assessor as class 2a Green Acres applications are made to the county assessor.
agricultural land is eligible for enrollment in the Green Acres Proper documentation to verify agricultural production must
program.The property must: be submitted with the application.
■ be at least 10 acres in size or a nursery or greenhouse;and
■ be primarily devoted to the production for sale of Application forms are available at the county assessor's
agricultural products. office and must be filed by May 1 in order to receive
consideration for the next taxes-payable year.
If you have class 2b rural vacant land as a part of your farm
homestead,it will not qualify for Green Acres tax deferral. Your assessor may also require:
However,it may be eligible to receive other benefits under ■ an agricultural use verification form;
the Rural Preserve Property Tax Program. Only lands ■ proof by affidavit or otherwise that the property meets all
engaged in the production of an agricultural product for sale requirements for qualification; and
will qualify for Green Acres. A description of agricultural ■ a copy of the appropriate schedule or form showing farm
land for property tax purposes can be found in Minnesota income has been included in the most recently filed
Statutes, section 273.13,subdivision 23. Your assessor will federal income tax return of the applicant.
be able to assist you in determining which portions of your
farm are considered agricultural and which are considered What else should I know about Green Acres?
"rural vacant land." Green Acres enrollment is limited to If a property enrolled in Green Acres is sold to another person
properties owned by individuals and certain family farm who may qualify for continuation of the program,the new owner
entities. must apply to the county assessor within 30 days of the purchase.
Ownership Requirements: If at any time you sell,transfer, subdivide,or otherwise
To qualify for Green Acres,one of the following must apply: withdraw your property(in part or in whole)from the Green
• The property is the homestead of the owner,or the Acres program,you will be responsible to pay back deferred
owner's surviving spouse,child,or sibling or is farmed in taxes on the acreage withdrawn for the current year plus the
conjunction with the homestead property. two prior years. Once an entire parcel is withdrawn from
• The property has been in possession of the applicant,the
applicant's spouse,parent,or sibling(or any combination) Green Acres,you will also be responsible to pay any
for a period of at least seven years prior to application. deferred special assessments plus any interest accrued.
• The property is being farmed in conjunction with
property within four townships or cities(or any
combination)from property that has been in possession of
the owner,the owner's spouse,parent,or sibling(or any If you have further questions about your
combination)for a period of at least seven years prior to property or Green Acres, please contact
application.
■ The property is in possession of a nursery,greenhouse,or your county assessor's office.
an entity owned by a proprietor,partnership,or
corporation which also owns the nursery or greenhouse
operations on the parcel or parcels.
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