Property valuations skyrocketing

St. Louis and Lake County assessors attribute the massive increases to low supply, high demand in real estate market

by Nick Wognum
Call it sticker shock. Area property owners who have received their annual Estimated Market Value notification were likely in for a big surprise.
The real estate market has skyrocketed causing sales prices to greatly exceed the value the county had on the property.
But a higher valuation doesn’t always equal higher tax payments.
“Everybody thinks because their valuation went up 25% that their taxes will go up the same,” said St. Louis County Commissioner Paul McDonald. “It all comes down to what the city or township, school and county levy is set at. That’s what will drive that number.”
Lake County assessor Greg Swartwoudt has been in the business the last 30 years. He said he’s never seen anything like this.
“By the third day after notifications were mailed out we exceeded any previous record for phone calls,” said Swartwoudt. “We had areas up over 50% in Lake County.”
Fall Lake Township property owners are seeing around a 40% increase. There were 28 sales in Fall Lake and the overall ratio was 68.78%.
State law requires that ratio to be between 90 and 105 percent. When property sales don’t fall within the guidelines, across the board increases are put in place.
In the city of Ely there were 81 sales and the assessed value was 76.3% of what properties sold for. In Morse there 47 sales and the assessed value was 70.2% of what properties sold for.
“It comes down to valuation increases when we have low supply and high demand in the real estate market,” said McDonald.
“If you look at the sales books it’s crazy. I saw one where it was on the market for $459,000 and somebody offered $575,000. My phone has been blowing up with this stuff,” said McDonald.
Next up will be local government boards dealing with angry property owners. Known as the Board of Appeal and Equalization, city councils, town board and county boards hear from individual property owners.
McDonald said he hopes people first talk to the county assessor before going to the local board.
“They then can appeal to the county board, but they have to go to the local board first,” said McDonald.
Swartwoudt said Lake County shoots for the middle of the 90-105%, looking to come in at 97%.
“When you talk about 68.78%, you have to increase that by 40% to get to around 97%,” said Swartwoudt. “Statistically the average home had to go up 40% but there are different areas within Fall Lake as well.”
Mary Garness is the public records and property valuation director for St. Louis County.
“We’re still seeing property sales that are above what our current market value is. The market is still in state of supply is low, demand is high and construction costs are high. It doesn’t seem to be slowing at this point,” said Garness. “The sales we are using for our sales study are from Oct. 1, 2020 to Sept. 30, 2021 so there is a bit of a lag.”
In Ely the majority of properties will see a 10% increase on land and a 20% increase on building values.
That number is higher on Shagawa Lake at 25% for land and 20% for buildings.
Garness said commercial property sales in Ely were at 100.09% so no increase was needed.
In Morse, White Iron, Wolf, South Twin, One Pine and Little Long lakes properties will see a 32% increase on both land and buildings.
Burntside is at an 18% increase for land and a 15% increase for buildings.
Garness said off-lake properties in Morse will see a 21% increase for land and 15% jump for buildings.
“There’s a lot of angst with a lot of significant value increases,” said Garness. “A lot of residents equate that to an increase in taxes but it’s too soon to tell. The county doesn’t finalize their levy until December. If they hold the line on the budget and the levy it will have less impact on property owners.”
Garness said in addition to Lake County, other area counties are putting increase in place as well: Itasca 31%, Carlton 30% and Cook 29%.
“We’re in the same boat in St. Louis County,” said Garness.
“My hope is we can see what we can do and everybody will look strong at the levy,” said McDonald. “It will be a difficult year.”
Swartwoudt spent the last 20 years as county assessor and was in mortgage banking for 10 years before that. Seeing property values increase at this rate is a first for him and it has already caused people to call in.
“We’re probably four to five days behind returning calls,” said Swartwoudt. “I’ve never seen anything like it, ever. It’s truly not very believable. One of the great quotes is we’re historians. We reflect what has happened. We’re chasing the market at all times.”
Swartwoudt said he wants people to know assessors don’t generate money for the county.
“This is to get into compliance for what the market already done. Our work is revenue neutral. Nothing we do lets anybody get additional money. If an assessor does their job the values are accurately and fairly assessed. If we do our job it will be fair. Our job is about making it as equal and fair as possible by having a value that’s fair.”
Minnesota law requires that all property - including land, structures, and improvements - be valued at their market value.
Market value for the 2022 assessment is determined as of January 2, 2022, and is used as basis for property taxes that will be due in 2023.
The county, as well as cities, townships, school districts and other jurisdictions with taxing authority do not finalize their 2023 levies and budgets until December. Though this significant increase in residential property values is expected to shift a higher share of the levy to homeowners versus to those owning commercial properties and other classifications.