Who’s paying now? Public parks, private business and property taxes

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Several for-profit concessionaries and caterers operating on Minneapolis Park and Recreation Board property have had a leg up on the competition because they have not had to pay property taxes.

That’s changing. Tax bills are going out to Mintahoe Hospitality Group (which has its corporate headquarters at the Nicollet Island Pavilion); Twin City Catering (which has its headquarters in the Park Board’s riverfront headquarters building); Schwick, Inc., which runs the Lake Harriet refectory, and others, county tax records say.

The tax bite ranges from $1,818 to more than $67,000 a year. (See sidebar.) That means a financial hit for the businesses themselves, and it appears likely to ding the financially strapped Park Board, too.

The taxes

According to city and county records and interviews, the following six Park Board sites were put on the tax rolls for the first time for taxes payable in 2008, with the exception of Tin Fish and the Lake Harriet Refectory, which started in 2006. [CORRECTION: The story originally reported the years in which Schwick, Inc., which operates the Lake Harriet refectory, and SNP Enterprise, owners of the Tin Fish restaurant, began paying taxes as 2008 and 2007. That was incorrect. Assessments started in payable 2006 for both businesses.]

• Nicollet Island Pavilion (Mintahoe Hospitality Group): 2007 estimated market value $2 million; taxes $67,188,65. Contract began in 2001.
• Twin Cities Catering, 2007 estimated market value was initially assessed at $2 million but lowered to $1.2 million; taxes now set at $39,819.22, but Park Board official says Twin Cities Catering is appealing. Contract began late 2003.
• Lake Calhoun Beach House, SNP Enterprises (Tin Fish), 2007 estimated market value $270,000; taxes $7,983.44. Contract began 2004
• Sea Salt Seafood (Minnehaha Falls): 2007 estimated market value $255,000; taxes $7,471,09. Contract began 2005.
• Lake Harriet Refectory, Schwick, Inc., 2007 estimated market value $240,000; taxes $6,959.53.
• Columbia Golf Course, Prom Catering: 2007 estimated market value $70,000; taxes $1,818.49

Dana Beasley, supervisor of Real Estate Assessment for Minneapolis, said there are three approaches to valuing property and he uses whichever is appropriate to the situation: market, income or cost.

Because the businesses are on government-owned land, they have a personal property tax account. That means any unpaid taxes follow the person, not the property. (The city would not want to take parkland if a business didn’t pay its taxes.)

While most property tax information is available online, the personal property tax accounts for government-leased property are not. A review of county printouts dated Feb. 19, 2008, included the following personal property tax accounts:

• Dunn Bros. (Central Library): 2007 estimated market value $135,000; taxes $3,507.14.
• Federal Café, (federal courthouse): 2007 estimated market value $42,000; taxes $1,091.08.
• Clock Tower Café, (City Hall): 2007 estimated market value $90,000; taxes, $2,338.11.
• Nicollet Tennis Court: 2007 estimated market value $478,500; taxes $15,135.78.
• The Little Wagon: 2007 estimated market value $360,000; taxes $11,081.28
• Goldberg Bonding: 2007 estimated market value $240,000; taxes $6,975.89
• Minnesota Timberwolves Ltd., 600 1st. Ave. N.: 2007 market value, $37,900,000; taxes, $1,295,392.15.

The Minneapolis City Assessor stepped up reviews of all for-profit use of public property, said Dana Beasley, supervisor of real estate assessment for the Minneapolis Assessor’s Office. The directive came from the county assessor.

As it has played out, things got particularly dicey between the city and Park Board, which have a strained relationship. (The Park Board is an independent board in name, but the city exercises considerable control over the parks’ budget.)

Beasley said he had a difficult time getting information from the Park Board about its leases with for-profit businesses. Don Siggelkow, Park Board general manager for administration and development, has questioned whether the city is being fair to Park Board lessees.

Citizen watchdogs are frustrated, too. Edna Brazaitis and Arlene Fried, frequent Park Board observers and critics, have pushed the lease issue. They now question why the city assessor has declined to pursue back taxes. They note that Twin City Catering’s lease started in late 2003 yet the assessor only is asking the company to start paying taxes this year.

In a commentary for the group Park Watch, Fried wrote that the catering company got to avoid paying taxes, “because neither the Park Board administration or Twin City Catering bothered to notify Hennepin County that a corporate for-profit business was operating in a tax-exempt building.”

Brazaitis said the city was leaving a lot of money on the table by not pursuing back taxes.

Asked about back taxes, Beasley said: “Could we have gone back? Maybe so. But we didn’t. You start somewhere and that is where we decided to start.”

Where’s Waldo (and his concession stand)?

If a city or county or library or park property leases space to a for-profit company, who is responsible to tell the assessor?

Apparently no one.

The Park Board discloses to vendors when the lease requires them to pay the property taxes. (That has been the rule of thumb. The Twin City Catering lease says on page 1: “Personal property and property taxes are to be paid by the Tenants.”)

But Siggelkow said the Park Board assumes the assessor’s office will learn about leased property on its own. It could follow Park Board agendas.

“We don’t make it our responsibility to contact the city assessor,” he said. “There is no ordinance requiring us to report that.”

Patrick Todd, city assessor, said he didn’t think statutes addressed the issue. Personally, he would have expected the Park Board to call the city when it leased space to for-profit businesses, he said. In fact, Todd recalled having a conversation with Park Board staff when they bought the new riverfront headquarters, 2117 W. River Road, asking them to inform him of future leases.

In the past, the city hasn’t sat down with the parks, schools or libraries on a regular basis to review new lease agreements, he said. The city plans on doing so in the future.

“There are not many that slip through the cracks,” Todd said, in discussing Twin City Catering. “When we see that happen, we change our business process so it doesn’t happen again.”

Impact coming

The Minneapolis Assessor’s office values Minneapolis property. It sends the information to the Hennepin County Assessor, which uses it to calculate tax bills.

Now that Park Board-related businesses are getting their bills, the repercussions have started. Twin City Catering has asked the Park Board to renegotiate its lease. The company has not returned Daily Planet phone calls, but Park Board staff said the company wants to reduce its leased space to cut its property tax bill.

Twin City Catering’s request is on hold until fall budget talks, but one option floated would reduce rented space by approximately 7,000 square feet, which would cut the rent paid to the Park Board by $80,000-$85,000 a year.

In the latest development, Beasley recently obtained a copy of the Park Board lease with SkipperLiner, the for-profit paddleboat and cruise ship company operating from Boom Island. On first look, Beasley said the property leased by SkipperLiner appears taxable.

The Park Board is reviewing the contract, which runs through 2014 with a 5-year option for SkipperLiner. It will have to sort out who pays what.

According to the contract: “SkipperLiner shall not be responsible for any real estate taxes assessed against any Park Board property utilized by SkipperLiner pursuant to this agreement.” In the next paragraph, SkipperLiner agrees to pay all local, state or federal taxes assessed against its interests or against “personal property of any kind owned or installed on the Boom leased facility,“ including vessels.

Matter of fairness

The tax revenue from these properties does not increase government budgets. The new money effectively reduces everyone else’s tax bill, but it’s such a relatively small amount you won’t see a difference in your tax bill.

Still, for some this is a matter of fairness. One business should not get an advantage over another by not paying property taxes.

Siggelkow raises other fairness issues. He said he thought the city assessed Twin City Catering’s space too high. (The assessor has already dropped the assessment 40 percent and the catering company continues to appeal.)

“When they set the tax so high that it impairs our operators from being able to continue their business, then we definitely get concerned about it,” Siggelkow said.

Siggelkow also questioned whether the city assessed vendors in the Metrodome or the Convention Center the same way it assessed for-profit businesses operating on Park Board land. He sent the city an open records request.

“It is a can of worms,” he said. “That is all I wanted to know. If you are going after us, are you going after everyone else? Let’s be fair about it.”

Data request dust-up

An August 27, 2007 letter from Beasley to Siggelkow is one window into the tension between the two government entities. Beasley wrote an official request for lease documents because: “Our office has requested this information on three previous occasions this year by phone to various park board staff with no reply to date.”

The Park Board eventually provided lease information, with one exception: The SkipperLiner contract.

Citizens later alerted Beasley to the SkipperLiner contract and he got a copy from the Park Board in early July. Asked about the issue, Beasley said: “I can’t go over and take things from them. I can only request and I can only use what they give me. If they want to limit what they give me, that is their decision.”

Siggelkow said he did not provide the SkipperLiner contract earlier because Beasley had asked for “leases” and SkipperLiner has an operating agreement to use the docking facilities. “I wouldn’t call that a lease,” he said.

(The agreement says the Park Board gets a percentage of SkipperLiner’s gross receipts. SkipperLiner does not pay on a square footage basis.)

In further explanation of his decision, Siggelkow said SkipperLiner’s boats are in the water.

“I don’t know if Minnetonka charges their excursion boats [property tax]. That is a good question,” he said. “I don’t think they are paying a property tax for being on water.”

A walk around Boom Island shows SkipperLiner has space on land, too, including a mobile-home sized ticket booth, a dedicated loading/docking area and four dedicated parking spots.

Renegotiating the lease

The Park Board justified buying its riverfront headquarters assuming it could lease out space to help pay the mortgage. Still, it might let Twin City Catering shrink its space.

“We are trying to make sure that his business is successful,” Siggelkow said. “It is like any of our concessionaries, if it is not working, we have to sit down and try to figure out how to make it work.”

The Park Board might take over some of the catering space for its own purposes, he said. It could house the new city-initiated Riverfront Development Corporation in part of the space.

The Park Board also wants to expand its event capacity. It would like to add an event a year, things like the Minneapolis bike tour, which started in 2007. It has a whiffle ball tournament on the drawing board for next year.

And, there could even be more moneymaking ventures, such as admission-based park concerts, he said.

Scott Russell is a journalist. He wrote for the Southwest Journal and Skyway News (now the Downtown Journal) in Minneapolis from 1999-2005. He also wrote for The Capital Times, a Madison Wisconsin daily, from 1993-1999.