Nicollet Island Update: Residents Answer, Call B.S.

by Alex Stenback on January 10, 2006

On the way to office today we were kvetching (to ourselves) about not having gotten to the bottom of last week’s Nicollet Island ‘sweetheart deal’ story.  How nice it was to arrive and find a comment by Nicollet Island resident John Chafee (hat tip) that unpacked what appears to the real story for us – we’ve copied his entire, lengthy post after the jump, but here’s a quick summary:

1. Under Minnesota Statute, leasehold property shall be taxed and assessed as personal property.
2. Such leasehold interests “…shall be valued at the market value of such property and not at the value of a leasehold estate in such property, or at some lesser value than its market value.”
3. Rep. Kahn has provided a copy of her tax bill for use as an example. In 2005, she and her husband paid $5099, homestead, on an assessed value of $344,400…

Go read the whole post – it is very good (though we’d like to see a copy of Kahn’s tax bill. Anyone?) As for this being a ‘sweetheart’ tax deal, we’ll invoke the words of the ‘mayor’ himself: B as in B, S as in S.

Originally Posted Here.

"The land under the Island houses is fully taxed, under State law.

Minn. Stats. 273.19 says that tax-exempt property leased for more than one year “…shall be considered, for all purposes of taxation, as the property of the person holding it.” Minn. Stats. 273.11 says that such leasehold interests “…shall be valued at the market value of such property and not at the value of a leasehold estate in such property, or at some lesser value than its market value.” Minn. Stats. 272.01 contains language calling for such leaseholds to be assessed and taxed as personal property.

The Property Tax Administrator’s Manual published by the Minnesota Department of Revenue (available on their website, a rather large download) refers to the above statutes, and gives clear direction to local assessors.

Hennepin County has treated the Island leaseholds as personal property and taxes them on that basis. These taxes don’t appear on their website. The reason for that may have something to do with the County’s computer system. Despite being characterized as personal-property tax, these taxes qualify for state property-tax rebates, depending on the taxpayer’s income. The tax bills include a "State copy" to be sent in with the rebate form.

Rep. Kahn has provided a copy of her tax bill for use as an example. In 2005, she and her husband paid $5099, homestead, on an assessed value of $344,400. The leasehold tax bills do not break down the assessed values as to land and improvements. That information would no doubt be available from the County.

The property values of the leaseholds, which make up about half the dwelling units on the Island, appear to have lagged somewhat behind those of newer condo and townhome units on the opposite banks of the river. This may have something to do with the equity-sharing arrangement mentioned in your post. It may also be related to the legal restrictions on these properties. The ground leases run to about 100 pages, and contain numerous conditions and restrictions aimed at keeping the houses historic for the benefit of the public and the Regional Park, which was the reason for the ground leases in the first place. Also, many of the homes and lots are small, and the homes can’t be enlarged or altered without going through a complicated approval process."

John Chaffee
Island resident

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