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4.8. SR 10-12-1998ity of River MEMORANDUM Item #4.8. TO: FROM: DATE: SUBJECT: Mayor & City Council Lori Johnson, Finance Director October 12, 1998 Discuss Green Acres Deferred Assessments/Request to Forgive Interest on Assessments The city has received a request from Mr. Joe Bickman to forgive interest which has accrued on his assessments which were deferred under the green acres provision of Minnesota property tax laws. At the time the request was made, Mr. Bickman was informed that the city most likely did not have the legal authority to forgive interest on green acres deferred assessments. However, staff indicated that the issue would be researched and presented to the City Council for discussion. Background Agricultural properties meeting certain requirements receive special tax treatment under Minnesota Statute 273.111, Agricultural Property Tax. In summary, to qualify the property must consist of ten acres or more of agricultural property and meet certain homestead, ownership, income, and agricultural use requirements. The provisions' of the green acres statute are administered by the county assessor. The county assessor determines the eligibility of each parcel applying under this provision. Applications for deferment of taxes and assessments shall be filed with the county assessor by May i of the year prior to the year in which the taxes are payable. Once approved as eligible property, the property shall continue to receive green acres tax treatment for subsequent years until the property no longer qualifies. The county assessor may require proof from the property owner that the property does qualify under the provisions as outlined in the statute. The statute also addresses the payment of special assessments which are deferred under this provision by application of the property owner. Subdivision 11 states that the payment of special assessments together with the interest thereon shall be deferred as long as such property meets the conditions contained in Subdivisions 3 and 6. When such property no longer 13065 Orono Parkway · P.O. Box 490 · Elk River, MN 55330 · TDD & Phone: (612) 441-7420 · Fax: (612) 441-7425 qu~lifies, all special assessments plus interest shall be payable in equal installments spread over the time remaining until the last maturity of the date of the bonds issued to finance the improvement for which the improvements were levied. If the bonds have matured, the special assessments plus interest shall be payable within 90 days. The city currently has $1,006,100 of deferred assessments $972,200 of which are deferred under the green acres statute. One of the deferrals dates back to 1974 and will continue to be deferred until the property no longer qu~]ifies. Interest rates on the deferrals range from six percent to 12.24 percent. It is important to know that assessments on green acres parcels are deferred automatically by the county at the time the property owner applies for green acre status, or f a parcel is already green acres deferred, the assessments are automatically deferred when certified to the county. For this reason, property owners often do not realize that there is an outstanding assessment accruing interest on their property. The county does not notify the city each time an assessment has been green acres deferred. Therefore, city staff has no contact with the property owner regarding the deferral. Unfortunately, the green acres application filed with the county does not state that assessments on the property will also be deferred. Several years ago the city requested that a sentence be added to the green acres card indicating that assessments are automatically deferred unless the property owner requests otherwise. However, this notice to the property owner was not added. Conclusion After research and discussion with the City Attorney, it has been determined that the Agricultural Property Tax statute clearly identifies that interest must be accrued on the assessments deferred and that it shall be collected based on the provisions outlined in the statute. Although Chapter 429 does allow for the deferral or forgiveness of interest on assessments, the green acres statute does not contain such a provision. Therefore, the city has no authority to forgive interest on any assessments deferred under the green acres statute. Action Requested This is a discussion only item since Minnesota'Statute 273.111 clearly does not give the city authority to forgive interest on special assessments deferred under the green acres statute.