HomeMy WebLinkAboutCity Council - 04/28/1988 APPROVED MINUTES
SPECIAL EDEN PRAIRIE CITY COUNCIL MEETING
THURSDAY , APRIL 28 , 1988 6 : 00 PM, CITY COUNCIL CHAMBERS
7600 Executive Drive
CITY COUNCIL MEMBERS : Gary Peterson, Richard Anderson ,
George Bentley, Jean Harris, and
Patricia Pidcock
CITY COUNCIL STAFF: City Manager Carl J. Jullie, Assistant
to the City Manager Craig Dawson, City
Assessor Steve Sinell , and Recording
Secretary Jan Nelson
ROLL CALL: Councilmember Harris was absent.
I . APPROVAL OF AGENDA
Mayor Peterson called attention to his memo to John Frane, City
Clerk, calling this Special Meeting for the purpose of discussing
the City' s real property assessment procedures and policies.
He then thanked City Assessor Steve Sinell for his efforts in
putting together the material explaining the City' s assessing
procedures .
MOTION: Bentley moved , seconded by Anderson , to approve the
Agenda as published. Motion carried unanimously.
II . DISCUSSION - REVIEW OF CITY ' S PROPERTY VALUATION PROCEDURES s
City Manager Jullie introduced the City Assessing Staff. He
then reviewed City Assessor Sinell 's memo of April 22, 1988 ,
with attachments, explaining the January 2, 1988 Assessment
and the procedures used in conducting the annual assessment of
properties .
Bentley asked why the median of value was used rather than the
mean. City Assessor Sinell replied that the median is used
because it is less likely to be skewed by extremely high or
low ratios . Sinell said the State and County Tax Boards have
accepted the median as best.
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Pidcock asked what tools are used when property is re-evaluated.
Sinell said every year the Assessing Staff analyzes sales that
have occurred by breaking down the sales into their component
parts, analyzing the trends for different types of sales,
and analyzing the sales figures for old and new housing. He
said they use this information to come up with a mass appraisal
model which is then used as a basis against .-`iich to do the
actual evaluation of properties .
City Council Minutes 2 April 28 , 1988
Sinell then noted that, while the mass appraisal model approach
is a very accurate one, it :4s not perfect and that is why
they rely on the appeal process to check the mass appraisal
approach on an individual basis.
Pidcock asked what the procedure was for cases where there were
no sales for a particular type of property. Sinell said they
will go outside Eden Prairie and compare with the models Hennepin
County has set up for their areas of responsibility. Peterson
asked if they would check back to preceding years to look at
actual purchase prices. Sinell said they would do that by com-
paring how that type sold against another type in a previous year
and then use that ratio to determine what the type without current
sales figures might have sold for this year.
Pidcock then asked if a decrease in property value is taken into
consideration , particularly for property older than five years
which has to compete against the large amount of new construction
in Eden Prairie . She said there are some older properties which
have difficulty competing against the availability of new
property. She said that the first resale of a property purchased
from a builder may well be less than the original purchase price.
Sinell said that they constantly analyze sales of older property
to see how those compare to the sale of new property. If the
spread between such sales is bigger than the previous year, they
will make the spread bigger in their appraisal model . He said
the revaluation process is also used to reflect properties that
haven ' t increased as much as others of a similar type.
Bentley asked if the figures used in the typical adjustments
by property type cited in Mr . Sinell ' s memo was the median in-
crease only rather than an across-the-board increase. Sinell
said the overall increases were very close to the figures listed
in the memo; however , the review of some neighborhoods showed
that there should be a different increase, whether more or less
than the typical adjustment. Sinell noted that the overall
residential tax base will show that typically we are short so
we will have to come up by the typical adjustment to meet the
standard; however, a sales study is done on each property re-
viewed.
Pidcock said her concern is that the average sales price
in Eden Prairie has risen considerably in the last few years
because of the large amount of new construction and that the
percentages used for the adjustments are being heavily weighted
by the increased costs for labor and material for the new
construction rather than by actual appreciation of property
values. She said such a situation is not fair , nor is it
equitable.
Hennepin County Representative Don Monk said that the sales
ratio studies are heavily weighted to existing property, not
City Council Minutes 3 April 28, 1988
new construction. He said the lack of appreciation in the
actual property value has its influence in the market place
and that is what is measured in the sales ratio studies. He
said the process of analyzing the sales in Eden Prairie is
done very carefully and the results are very good, in that
the:• meet the minimum level of assessment and the quality is
better than average.
Pidcock noted that there are a lot of taxpayers in Eden Prairie
who are complaining about this problem and she believed there
seems to be a focus on appreciation across the board with no
depreciation. Mr . Monk said that a focus on appreciation is a
necessary part of market analysis and that the process does include
consideration of depreciation.
Peterson said he wanted to be satisfied that his 14-year-old
house doesn ' t suffer from some escalation factor of the new
construction, and that they are not applying the same criteria
for evaluation on his house as on the new construction. Mr .
Monk said the new housing costs have an influence on old
housing costs by providing a mix of competition in the market
place .
Sinell said there are several different things Eden Prairie does
to ensure that an older house does not have a market value that
is greater than the average. One of those is to break
dawn the City into several hundred different neighborhoods
where houses are likely to be about the same age and then to
study sales in some of those neighborhoods each year. Another
is a price-related differential which tells whether high-priced
properties are being treated differently from low-priced ones .
Don Monk handed out a statistical report of sales ratio figures
for the City (Attachment A) .
Peterson asked Pidcock if her concern was that there is an in-
appropriate correlation between the new and the existing stock,
and that, therefore, the existing stock is overvalued . Pidcock
agreed. Peterson said he thought the actual 1987 sales figures
for older stock illustrated the accuracy of the valuation
for those specific houses. He said he thought the numbers show
that we are close.
Bentley said if the numbers are right across the board , then
the methodology used is valid. He said the function of this meet-
ing then comes in to play where those that are overvalued have the
opportunity to have their values reviewed.
Pidcock said people don ' t usually get involved in the process
until they are selling a house and then discover that they cannot
get what the property is valued at. She said she thought there was
also a fear that the value would go higher if the appraised
valuation is questioned.
Peterson asked what the percentage is of sales that came in at or
less than the assessed valuation. Sinell said for the 1987 values
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City Council Minutes 4 April 28, 1988
only 25 out of more than 800 sales were less than the
valuation.
A discussion followed regarding the meaning of fair market value.
Pidcock said no one wants to pay more than their property is
worth and that ' s where the problem of equity enters in. She said
that people who purchase from builders are often paying more than
the house will sell for on its first resale.
Anderson said we don ' t know if the 25 sales were pressure
sales and that 25 seemed like a relatively small amount.
Sinell noted that the statistical measures that are used in the
City ' s assessment are the same as those used in other communities.
He said that many times those properties that are overvalued are
those that the assessors have not been able to enter and, there-
fore, the assessors have had to do estimates.
MOTION: Bentley moved , seconded by Anderson, to adjourn the
meeting at 7 : 25 PM. Motion carried unanimously.
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