Maureen O’Phelan, co-owner of Cascade and Solbakken resorts, is not happy with her property tax bill, especially since she successfully testified before the state legislature to amend statutes so she could qualify for homestead credit on both properties. Senator Tom Bakk had gone to bat for her and her husband Michael, but the county’s stance on the changes has left them without relief.
On Tuesday, July 27, 2010, Mrs. O’Phelan spoke with the county board about this issue. County Assessor Mary Black told the board that while the intent of the statute revision was to allow owners of two “Ma and Pa resorts” in close proximity to one another to get homestead credit on both properties, the letter of the law would preclude the O’Phelans from qualifying.
When O’Phelans bought Cascade, they lived there and claimed homestead credit. Then they bought Solbakken and moved there but neglected to file for homestead credit. The county kept giving them homestead credit like the previous owners had received until county employees realized that O’Phelans had not applied for themselves. Then the O’Phelans built a home on Cascade property and moved back there where their homestead credit has continued.
The bill (H.F. 3729, 4th Engrossment) allows homestead credits on two properties to be granted to “an
owner” who ceases to use one property as a residence but continues to operate it as a resort while occupying a second resort. The O’Phelans’ businesses, however, are operating under two different corporations.
Attorney recommends following
“letter of the law”
A July 29 letter from County Attorney Tim Scannell to commissioners, Auditor- Treasurer Braidy Powers, and Assessor Black states, “…The two issues that are creating this problem – the need to file for homestead on Solbakken and the need for common ownership – can be rectified by the O’Phelans with relative ease. If they were to take the steps to rectify those issues, then I believe they would fit the legislative language and receive the benefit created by the legislation, such as it is.”
Scannell had written to the O’Phelans on July 12, saying, “I understand that this situation is frustrating to you, and I appreciate your concerns. I hope you understand that we have to apply legislation as written, at least when the language is as it is in this instance – plain and clear.”
Assessor Black said the Minnesota Department of Revenue directed her to follow the “intent” of the statute amendment rather than the “letter” of the law in this case. Except for this case, they always tell her to follow the letter of the law, she said. TheJune 14 letter, from State Program Administrator Andrea Fish, says, “This language was specifically directed to a property in Cook County: Solbakken Resort in Lutsen. …The language as we understand requires that both resorts have identical ownership, which is not the case for these specific properties. However, because we have the background knowledge that this language was intended to address that situation, we strongly urge that the two resorts be granted a single class 1c tier [allowing them both to be homesteaded]. …We will pursue clarifying legislation if necessary; however, we believe that this can be done administratively.”
Senator Bakk agreed in a July 22 letter to Board Chair Fritz Sobanja. He asked Sobanja to meet with Assessor Black “to see if this matter can be resolved in accordance with the original intent of the legislation.”
In his July 29 letter, Scannell expressed concern over the potential consequences of not following the letter of the law. He said that a Department of Revenue official acknowledged to him that the statute only addresses properties under the same ownership. “I do not believe it is appropriate or wise to stretch the language to fit the facts here,” he wrote. “That approach could open up issues for other property owners who want this benefit but also do not actually have common legal ownership. If we are willing to ignore the ownership issue for O’Phelans, we could not in good conscience fail to do so for others.”
The issue is how this was handled at the legislative level, said Commissioner Jim Johnson. The legislators should be informed that the legislation was not written adequately, he said.
Commissioner Jan Hall was not concerned that this could “open up a can of worms,” she said, because the O’Phelans’ situation is unique.
Black said either the legislative language should be changed so that their two businesses qualify as being under common ownership since their directors are the same or the O’Phelans should combine their businesses.
Several board members wanted to table the issue since they it had not been on the agenda and they had not had time to read the relevant materials or learn more about the issue. Commissioner Bob Fenwick said it was not an issue for them to decide. He suggested that Black should do as the Department of Revenue directed her to do, although the intent of the law is bound to be “clouded” over time. “I don’t see a role for us here,” he said. “I really don’t.” Assessor Black said that classification issues are under the purview of the board of equalization, which has already met for this year.
Commissioner Fritz Sobanja told Mrs. O’Phelan she would be notified if the board plans to discuss this further at another county board meeting.
Resort owners respond
After the county board meeting, Michael and Maureen O’Phelan responded to some questions posed by the News-Herald.
They said the board had previously directed them to appeal to the state to get the legislation changed. “We followed their directive,” they wrote, “did so, and now we get a “NO” from them. It seems this board is quite anti-business and unable to follow through with their commitments even when they directed them!”
” Regarding whether the language of the bill called for common ownership, O’Phelans wrote, “The business and corporations are under the same ownership. While the language of the bill could have been more specific, the intent is perfectly clear and was made so by the Department of Revenue [whose] advice has never been ignored by our county until now. …Due to various business agreements that differ between the resorts,” they wrote, “we are bound to keep the businesses separate.”
When asked what they believe the county’s obligation is to local businesses, they said, “We think the county should be interested in businesses that are contributing to the economy and the local business climate here in Cook County. We not only do all the things that are expected, like pay our taxes on time and so on, we also contribute to many local causes and purchase much of our necessary items from local suppliers – even when it hurts! Thecounty itself has an obligation to all of its citizens to be fair and to promote the well-being of its citizens.
“…It is a very sad thing for us that the people we voted into office do not support our business and are choosing to ignore the clear direction of our legislature and the state Department of Revenue,” they said.
The O’Phelans told the News-Herald
that their property taxes have quadrupled in the span of four years. “Basically we are no longer a profitable entity due to these increases, and our staff, customers, and ourselves personally have all suffered as a result.
“…It is hard to keep on fighting these battles within the context of our existing commitments and even harder when you feel you are unwanted by the very people who one would think would be most supportive of local business persons who live in Cook County.”
The O’Phelans said they would be pursuing changes in the language of the legislation “to make it clear to the county that we are entitled to the provisions of this law.”
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