Property owners in downtown Duluth were thunderstruck when they opened statements from the St. Louis County Assessor's Office a couple months ago only to discover the estimated market value of their buildings had soared.
Many of the increases were met with incredulity.
For instance, the assessor's office initially valued the Board of Trade Building, 301-307 W. First St., at nearly $3 million, even though it had sold for $850,000 last year. Upon further review, the valuation was reduced to $928,700 - less than one-third of what had been proposed.
County Assessor Dave Sipila said other downtown buildings also have seen substantial reductions.
"We were off the mark there and had to make some corrective adjustments. We had to revisit the values that were originally sent to property owners," said Mary Garness, St. Louis County's public records and property valuation director.
After hearing numerous appeals and completing a thorough review, the county has revised many of its initial valuations, trimming nearly $115.9 million from the city's proposed tax rolls. About 180 downtown properties saw revisions.
Even so, Duluth's property tax base will increase by 4.35 percent from 2017 to 2018. But the growth will be more modest than the 6.24 percent originally proposed.
Property valuations increased by 3.47 percent across the county as a whole.
With the exception of a brief dip in property values beginning in 2008, Sipila said the county has seen fairly steady growth in property values of about 3 to 4 percent annually for the past several years.
But he noted that the scene varies.
"There are parts of the county that are growing at different rates. The city of Duluth and the suburban ring around the city are growing. The values there are increasing at a greater rate than probably the rest of the county," Sipila said.
Through its recently completed appeals process, St. Louis County trimmed total market valuations by more than $133 million, with 87 percent of those cuts coming from revisions within the city of Duluth.
"We did work with property owners to make adjustments. We reviewed the numbers internally and made recommendations at the county board level to make those adjustments. So, that's why you see such a large change in the Duluth area," Garness said.
Steve LaFlamme, president and CEO of Oneida Commercial Real Estate Services, said some of the 43 properties his firm manages in Duluth received significant relief, while others did not.
"We supplied some appraisals on some properties that had been done for financing purposes. And they did some more walkthroughs of buildings. So there was a flurry of activity to revalue at least some of the properties that were clearly way off base," he said.
"I think everybody saw an increase, there's no doubt about that. But I think the whole idea was to get this a little more in the reasonable range," LaFlamme said.
While there were big adjustments on some properties, LaFlamme said that on average most of the revised valuations dropped about 10 to 15 percent from what was originally proposed.
Garness said there was give and take.
"The process has worked like it should. However, we do take full responsibility for our part in the frustration, as well. We've been working hard to improve processes and get additional staffing where needed to take more proactive measures," she said
In describing the difficulties with valuations in downtown Duluth this year, Sipola said: "I don't know if this was really a process issue more than a resource issue - about having enough people to get the work done."
Garness noted that the assessor's office had staffing turnover and a vacant position that wasn't filled.
"Those are part of the equation obviously that made it an extra challenge this year. And properties downtown had not been reassessed for a number of years - 10 to 12 years in some circumstances," she said.
Garness also noted that even in the best of circumstances, appraising unique individual commercial properties is a complicated process.
LaFlamme praised county staff for responding to concerns, saying: "Once they recognized that there were some mistakes, they were very willing to sit down... They were very good to work with."