WADENA — The Wadena County Board unanimously approved a motion to request a “formal investigation” by the Minnesota Department of Revenue regarding 2023 property valuations on Tuesday, May 2.
A formal investigation entails a review of the county assessor’s office data to determine if valuations are accurate. The DOR will see how, and if, the county adjusted property valuations to meet sales ratios required by the state. Minnesota requires that homes be assessed at 90%-105% of market value, based on sales of similar properties.
Sales ratios are determined by dividing the assessor’s market value by the cash equivalent sales price of that property. For example, if a piece of property sold for $100,000 cash and it was assessed at $95,000, the ratio is 95%.
The board’s action comes following pushback from county residents about “inconsistencies” and sharp increases in valuations. Valuation increases could lead to higher property taxes, depending on a number of variables.
According to data in the May 2 agenda packet, Shell River Township saw the biggest increase in total market value, with property valuations jumping up 60% over last year. Sebeka was the only jurisdiction, city or township, to see total market value decrease. Sebeka’s total market value decreased by 9%.
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The median increase in total market value across the county was 21%.
Lee Brekke, Wadena County assessor, said valuations were raised due to higher-than-expected sales prices from October 2021 through September 2022, the date range that must be used for 2023’s valuations.
Entering this year, the median sales ratio throughout the county was far lower than allowed by the state, due to homes selling for higher prices, meaning valuations had to be raised.
“My median ratio was 58%. My median ratio on those sales is supposed to be between 90% and 105%,” Brekke said.
He typically aims for a 95% sales ratio, meaning there’s wiggle room if the state comes up with a slightly different calculation. Brekke explained that if his calculations fall outside the allowed sales ratio range, the state will make mandatory changes that cannot be contested by the property owner.
However, this year, knowing that larger increases were needed to get into compliance, Brekke “just got over the 90%.”
The state already reviews the county’s assessments and typically gives feedback around the end of May or early June. Brekke said he doesn’t anticipate the state will change much following the county-board-requested investigation, but due to his lack of familiarity with the process, is not entirely sure.
County residents spoke to the board during the May 2 meeting in hopes of finding a solution.
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Given Shell River Township’s sharp increase in total market value, several residents spoke at the meeting, one of them being Julie Hudek.
“On my property in the last three years — 2021, ‘22, ‘23 — the assessed value has gone up 130%,” Hudek said.
She stated her house is 15 years old and nothing has changed since it was constructed.
Hudek said the valuation process has been opaque and that she and her husband have struggled to get answers as to why their home value increased drastically.
“How did you get this (value)? Nobody’s going to pay $573,000 for my home. I wouldn’t,” Hudek said.
She expressed concern about being priced out of her property.
“My husband retired two months ago from a law enforcement career of 50 years,” Hudek said. “I retired two days ago. This isn’t how we want to spend our time — defending our right to have fair treatment in our property that we invested in. Our dreams that are being taken away.”
Brekke, who was not able to attend the May 2 meeting due to other obligations, said he will answer valuation questions during board meetings but is also willing to explain valuations outside of those times.
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“I’ll go over it any time,” he said. “I will talk to any taxpayer and go through their field cards — show them everything. I like to have everything as transparent as possible for them. If they have questions, (I) try to answer those questions.”
Verndale Mayor Tara Erckenbrack also spoke to the board on behalf of the city.
“We range in increase from 10% to 46% in value, and the average being 25% within the city itself,” Erckenbrack said.
She also told commissioners empty businesses that “are decaying on our streets” have increased by 10%. The increased valuation makes it challenging to attract businesses to the city, she said.
Erckenbrack levied some of the same complaints as Hudek, particularly that the process and justifications for the valuations have been unclear.
“We are one of the poorest, if not the poorest, county in the state, and we cannot increase property values by 46% yearly. I’ll move, this is ridiculous,” Erckenbrack said.
Commissioner Jon Kangas came to the meeting with a number of valuations to highlight his concerns.
One comparison involved two ag homesteads with small acreage that share a property line, one located in Sebeka, and the other located just north in Red Eye Township.
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In 2022, the Sebeka property was valued at $354,900, while the other was valued at $352,500.
“Very comparable,” Kangas said. “But because of the ‘23 valuations that came out, the Sebeka property was reduced by $53,200, and the Red Eye (Township property) had an increase of $50,000.”
Brekke said that values “are derived by the sales that happen in that jurisdiction.” Red Eye Township and Sebeka may border each other, but they are separate jurisdictions.
“The sales for the city of Sebeka were selling for less than we have on them,” Brekke said. “So, therefore, we had to reduce that city. It all hinges on the sales that are happening within the time period that I have to look at them.”
Commissioners agreed that they were concerned about the 2023 valuations, but admitted their ability to remedy the situation was hampered by their lack of expertise in the subject.
“We know something needs to be done, but what that should be — I don’t think we’re any more qualified than your local town boards, which have struggled with this issue, too, quite frankly,” Commissioner Murlyn Kreklau said.
Kreklau continued, “If we have the option to ask someone of higher authority, so to speak, and (get) the Department of Revenue to come in and do an audit — an investigation — of where we are, I think it’s our best shot to get things equalized and changed.”
County Coordinator Ryan Odden noted during the meeting that there are some downsides to the formal investigation, such as ceding local control to the state.
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In an email following the board meeting, Odden noted that he sees the Department of Revenue as a neutral party and that rising valuations are not a problem exclusive to Wadena County.
The board's decision to request assistance from the Department of Revenue was met with thank yous from speakers who brought their concerns to the board.
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