Lakeside property tax bills declining, land values still rising
Terry and Eileen Cook had plans to retire in a cabin they owned on Union Lake in Polk County in Minnesota.
After purchasing the lot in 1990, the couple built a $129,000 cabin on it four years later.
Rising taxes on the property made them reconsider their dream. When their tax bill for their property — now assessed at about $500,000 in value — reached more than $6,000 in 2011, it was time to sell.
“As long as a fellow is working, it’s not a big deal. But when you retire, it is a big deal,” Terry Cook said. “When you sit back and you look at it, you’re paying over $500 a month for property taxes and you’re going to reassess things.”
The couple now own a cabin half an hour away on Cable Lake, which Cook says is lighter on the pocketbook at about $3,000.
“I think that’s what most people figure: If you can afford to live by the lake, you can afford to pay the taxes,” Cook said. “A lot of times it’s not (the case).”
Lake property owners like the Cooks have been feeling the squeeze from increasing taxes for quite some time, according to Jeff Forester, executive director of Minnesota Lakes & Rivers Advocates.
Data from the Minnesota Department of Revenue indicates total recreational residence land values have doubled in some northwest Minnesota counties in the past 10 years.
While land values and the taxes collected by these counties increased, property tax bills for lakefront residences seem to be on the decline overall in Beltrami, Lake of the Woods and Polk counties after years of increases, according to historic tax data requested by the Grand Forks Herald.
Rising land value
The increase in tax collections coincides with rising market values of seasonal residences and development of lakeside property.
In 2005, Beltrami County collected $2.4 million in property taxes from seasonal, recreational residences.
Fast forward to 2013 and that collection has nearly doubled to $4.2 million.
The total value of these residences rose from $158 million to $358 million during that same timeframe.
The story is similar in Polk and Lake of the Woods counties.
Polk’s tax collection increase trailed Beltrami, climbing from $1.2 million to just under $2 million in that time span. Total value of seasonal property in the county more than doubled, jumping from $77 million to $192 million.
The trend hadn’t gone unnoticed by Polk County residents.
“It just seems like lake property went crazy while other stuff was just standing still or rising at a lesser rate,” Cook said.
Lake of the Woods County’s tax collections also did not see as dramatic of a jump as Beltrami, rising from $1.1 million to $1.7 million — though the total value of recreational residence doubled.
The total increased from $68 million to about $141 million.
Rising land values and the associated tax bills have forced people to sell land held by families often for generations, according to Forester.
“People can’t afford to hold on to undeveloped lakeshore property. The value is just too high,” he said. “So they sell it. And when they sell it, it’s developed. So we’re really looking at a period of unprecedented development.”
Statewide, the total value of recreational properties increased from $13 billion in 2005 to almost $24 billion last year. During that time period, tax collections jumped from $160 million to $234 million.
Every year, property owners who are members of Forester’s association from all over the state send copies of their property tax bill to him.
Over the years, some tax bills reflected increases in the single or double digits, but the biggest annual increase without property improvements Forester can recall was 123 percent.
Forester, who owns property on Lake Vermillion in northeast Minnesota, said this year and the last were the first in a decade that his property tax bill declined.
Some members submitted bills showing an increase, but it was smaller than previous years.
“We saw some increases but there were in the 3 percent, 5 percent range, not like we had been seeing,” Forester said. “We had been seeing … 15 percent, 20 percent increases were almost standard.”
Increased funding passed by the state Legislature for Minnesota’s County Aid Program to the tune of $40 million in 2014 is expected to cut bills even further.
Prior to that legislation, decreases in Beltrami, Lake of the Woods and Polk counties have been steady but not without hitting a few bumps in the past 10 years.
For example, the estimated tax bill for a property valued at $100,000 on the north side of Lake of the Woods was $1,553 in 2005 before special assessments. A decade later, the bill comes to $1,223.
The story is the same on the south side, where the tax bill for a property of the same value decreased by $567 over the course of 10 years.
Mark Hall, Lake of the Woods County treasurer, hears the occasional complaint about property tax bills from residents who are upset about tax increases or bill decreases that weren’t as big as they thought they would be.
“Sometimes people complain and they haven’t even opened the envelope yet,” he said.
Ups and downs
To the east in Beltrami County, Lake Bemidji residents have seen bills fluctuate.
The total bill for a $100,000 seasonal property has declined overall since 2005 when the estimated tax bill would have been more than $1,450,
Overall, that property owner would still be paying $306 less than they would have 10 years ago, though data shows taxes in that township have risen since hitting a low of $1,039 in 2010.
On Maple Lake in Polk County, property owners also have been on somewhat of a roller coaster ride.
The owner of a $100,000 property in all five of the lake’s taxing districts would have seen an estimated bill under $1,000 in 2014 — down an average of $634 from a decade ago.
In the midst of that downward slide was a bump in 2010 that brought taxes back up to 2005 levels for three of the districts.
About half an hour’s drive away on Union Lake, Grand Forks, N.D., couple Don and Rita Kenna own a one-bedroom cabin and consider it their year-round retreat.
The couple have watched the property tax bill climb over the years, but Rita says the costs aren’t unmanageable quite yet.
She grew up spending time at her family’s cabin, and it’s a tradition she’s carried into the present.
“We’re lake cabin people,” Rita Kenna said.
Eventually, she and Don will retire, but not to the cabin.
“I don’t think it will be our retirement home,” Rita Kenna said. “More than likely, I would say within 10 years we’ll probably sell it.”