When Brooklyn Park business owner Nick Brooks opened the estimate from his landlord explaining anticipated property taxes for 2013, he was shocked. His taxes went up 31.8 percent.
Brooks owns Sammy Perrella’s Pizza & Restaurant in Park Place Promenade, a shopping center located off Zane Avenue, just north of Highway 610. Property taxes on the development overall went up 22 percent.
Brooks owns another restaurant across the river in Coon Rapids. He estimates he pays $3-4 per square foot there, compared to approximately $7 per square foot in Brooklyn Park.
Since Brooks opened his Brooklyn Park location in 2006, Park Place Promenade has experienced high tenant turnover, with several businesses closing. He thinks the high property taxes were a contributing factor, and he’s concerned about the future.
“This last tax hike may be the last nail in the coffin (for some businesses),” he said. “… It’s detrimental to the city to have these types of increases.”
Jeanne Strandin, owner of taj salon & spa next door, agrees.
“I’m all for growing a business, but I’m not for working 70 hours a week and not making a profit or just breaking even,” she said.
Brooks, Strandin and other business owners took their case to the city council, with Brooks appealing to the council for relief during the public comment time at its Jan. 7 meeting. A response from staff was anticipated at the Jan. 22 meeting.
A significant contributing factor in the tax hike is the increased valuation of the Park Place Promenade property by the city assessor. Brooks’ section of the development didn’t undergo any major improvements, but its taxable market value went up 24 percent.
That shocked Brooks.
“We have felt like this property has been overvalued for some time,” he said. “… It’s just not worth what they think it’s worth.”
But the city assessor told Brooks the property was undervalued in the past and this was an adjustment to correct the value. Brooks was told to expect another jump next year.
H.J. Development has unsuccessfully contested the city’s valuation of the property the past few years. The developer and the city are scheduled to go to tax court in June, where a judge will set the taxable value. Because of the pending litigation, a representative from H.J. Development declined to comment on the situation.
Assistant City Manager Mike Sable said he can empathize with the situation of Brooks and other business owners. He said the city wants to be able to address their concerns. But when discussing property taxes, he said, it’s important to remember how the system works.
The state dictates how property taxes are divided among residents and businesses. Sable pointed out that due to many of factors, including state actions and the decline in the housing market, Brooklyn Park businesses are paying the highest percentage of the property tax burden they have paid since 2002. The city can’t do anything about that.
Unfortunately, he said, factors came together to create a “perfect storm for the business owner.”
Sable also pointed out there are other taxing entities, and the city only accounts for about a third of the property taxes levied.
As for the increase in the assessed value of Park Place Promenade, Sable said the assessor sets a value based on the sale of similar properties in the region. But he said it’s not uncommon for businesses or residents to challenge the valuation of their properties.
When the county sought to purchase the property where the new Twins baseball stadium now stands, Sable recalled, the county offered landowners about $13 million. But the owners felt it was worth closer to $65 million. In the end, the parties agreed to a price of approximately $28 million in time to avert a trial.
“Wide variations of opinion happen, and that’s why we have things like tax court to resolve those,” Sable said.
According to Sable, many factors could contribute to Brooks’ lower taxes in Coon Rapids, such as the age of the property and the cost of city services. Coon Rapids, for example, has a substantially smaller police force. Any budget, Sable said, comes down to balancing services and costs.
But Brooks feels the city isn’t taking responsibility for its actions. “In my opinion, every community’s dealing with the same set of rules,” he said. “… Deal with it. Make it work.”
“It’s disheartening,” Strandin said of the tax increases. “I love the city. I support it. … I realize this is a multi-prong issue. … It just has come to the point where we’re having to figure out where we get the revenues to support a 22 percent tax increase being passed on to us.”
Brooks insisted if the city doesn’t want to be known as having extremely high property taxes, it must do something about it, noting that the general fund budget for 2013 went up $1.8 million. He also noted the city’s portion of his property tax bill saw a larger percentage increase than the county or school district portions — and the city’s portion was the highest in the first place.
Brooks added that as a business owner he would never choose to come to Brooklyn Park now. And if something doesn’t change, he’ll have to follow other tenants who have left Park Place Promenade.
“We will have no option but to relocate outside of Brooklyn Park,” he said.
Contact Jonathan Young at email@example.com