In recent weeks, St. Louis County has been scrambling to review and consider potential changes to the value of more than 600 properties, according to Dave Sipila, who heads up the assessor's office.
The majority of that re-evaluation has focused on commercial properties in Duluth's downtown and Canal Park neighborhoods but residential properties also make up a big part of the mix, he said.
St. Louis County took over assessment duties for the city of Duluth five years ago, and County Commissioner Frank Jewell said the uproar to proposed property values in Duluth's downtown commercial district is completely understandable.
"The thing that I think that all of us in leadership are clear about is that a mistake was made. I'm not blaming any of our assessors, but this was a mistake that was blatantly obvious. It had to be fixed, and it had to be fixed fast. So that's what we're doing," Jewell said.
Jewell pointed to the Board of Trade Building, calling it "the poster child" example of an overvalued downtown property. The building sold last year for $850,000, yet it was recently assigned an assessed value of $2.9 million, and it has not undergone significant improvements since the transaction went down.
On Tuesday, the city of Duluth will hear its third day of property value appeals. The appeals are usually heard over the course of a single day, but this year they've spilled into multiple days, due to the large volume of concerns raised.
The city's Board of Appeal and Equalization has authority to make adjustments to a limited extent - up to 1 percent of the city's total property value.
The scope of the overall adjustments to be made is still coming into focus, yet Sipila said: "It's probably in the vicinity of $50 million, but that is less than 1 percent of the total value of the city, which is essentially $6.5 billion."
Sipila said additional changes will be made at the county level after the city appeal process plays out.
"And I don't know how much that will be. That is still being worked on also," Sipila said.
Some downtown property owners already have seen their assessments lowered, including the Duluth News Tribune, which had initially been informed that its downtown building had more than doubled in value from the previous year. Now the proposed increase has been reduced to 5 percent.
Other property owners who have filed appeals remain in a holding pattern, including Steve LaFlamme, CEO and president of Oneida Commercial Real Estate Services.
"We're just waiting to get the modified numbers, and then we will respond accordingly," he said.
The assessor's office is responding to a large number of questions it received, particularly from downtown property owners, after initial notices went out, said Mary Garness, St. Louis County public records and property valuation director.
"So after that occurred, like we always do, we did research. We double-checked our numbers and we determined that we were off the mark," she said.
"So we immediately started reviewing and determining where changes needed to be made, and that's what we've been working hard to do up until this point," Garness said.
Sipila said revisions are still being made.
"A lot of those property owners will be seeing a notice from the local board with a different number on there. They still have the right to appeal to the County Board if they don't agree with that number," he said. The County Board of Appeals will meet in the commissioners' conference room on the second floor of the St. Louis County Courthouse in Duluth from 10 a.m. to 7 p.m. June 19.
Garness, who has been on the job with St. Louis County for a little more than a month now, said the past few weeks have been "a whirlwind."
"But it's allowed me to learn a lot very quickly and find ways where I can help and get us moving forward toward finding solutions so that we don't get into this situation again," she said.
"We're in the process of reviewing our organizational structure, staffing levels and quality control measures. So we're doing a number of things," Garness said.
Some of the sticker shock is a result of the county catching up on assessed values that have not kept pace with the market, Jewell said. He recalled consternation about increased valuations for properties on London Road a few years ago.
"The jump was amazing because they had not been reassessed in 20 years. So people were startled, but the fact was their property really was worth a lot more than it had been 20 years ago," he said.
David Ross, president and CEO of the Duluth Area Chamber of Commerce, voiced his appreciation for the county's willingness to re-examine downtown property values. He suggested the process could create an opportunity for property owners elsewhere - such as in Spirit Valley or on London Road - to also revisit their assessments.
"It has illustrated that there is a process and a possible recourse and hopefully a solution available to them, where they did not have that same awareness and confidence a year or two or three ago, when their assessed values occurred," he said.
The timing of the increased property assessments sting especially for downtown businesses, Ross said.
"I've talked to a lot of our members who are feeling overwhelmed and frightened by this confluence of different challenges coming at them," he said, pointing not only to a growing tax burden but also reduced downtown traffic, with the reconstruction of Superior Street. Ross noted that local business owners are concerned about shouldering the cost of an earned sick and safe time ordinance now before the Duluth City Council, as well.
"So it's a cumulative negative effect of all that is happening, and these increased taxes related to increased assessed values come at an extremely challenging time for our downtown businesses and for all businesses," Ross said.