12/21/2012 by Ron Brochu

PHOTO: City assessor Greg Swartwoudt, left, answers a question posed by Chamber Director of Policy and Education Roger Wedin.

Despite complaints about a spike in commercial property reassessments, city and county assessors said Thursday that values should have been raised long ago in parts of Duluth.

“I have to apologize. We should have been out there doing incremental increases,” Terry Johnson, a city assessor, said at a forum co-sponsored by the Duluth Area Chamber of Commerce and Duluth News Tribune. He said some properties have been undervalued for years, “but nobody complains when their assessment is too low.”

His explanation didn’t sit well with some in the audience. Bryan Flaherty of Blackwoods Restaurant said the higher valuation caused a sharp tax spike.

“This is a difficult situation right now. I just can’t believe this,” he said.

Jerry Kortesmaki, owner of London Road Rental Center, said bankers believe his property is overvalued approximately 30 percent by city assessors. Property owners, however, can only obtain loans based on the lower equity value as determined by financiers, he noted.

Assessors argued the assessments are correct, based on underlying land values and typical selling prices for commercial properties. Assessments are audited by the state, and localities must justify increases, Johnson said.

Typical selling prices, however, aren’t always an accurate reflection of a commercial property’s actual value, argued Dave Holappa of Holappa Commercial Real Estate Inc. For a variety of reasons, certain parcels will sell at a price that exceeds actual value, he said.

In part, the overarching issue of high property taxes can be blamed on state decisions, said St. Louis County Recorder Mark Monacelli.

“There has been a shift at the state level. They’ve kicked the can down the road and shifted the (tax) burden to the local level,” he said, moving the burden from income taxes to property taxes.

It’s difficult for small businesses to prepare their annual budgets when unexpectedly hit with such tax spikes, said Chamber Director of Policy and Education Roger Wedin, a veteran of the commercial property business. Numerous companies have contacted the Chamber with complaints, he said.

“It’s our goal to have a system that’s uniform, timely and fair. That’s all we can do,” Monacelli said.

During 2013, the city of Duluth and St. Louis County plan to consolidate their property assessment functions in a unified county-administered department that’s intended to be more efficient and cost effective.

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