Consider Action Reduce Interest Charged on Deferred Assessments Due Upon Sale of Tract A, RLS No. 119

Attached is a letter dated October 26, 2020 from the Hamilton and Holasek families requesting a reduction in the interest charged on deferred assessments due upon their recent sale of Tract A, RLS No. 119.  Staff has concluded that the assessment and interest charges are valid and are normal for cities to charge, and does not recommend a reduction.

Generally, deferred special assessments are charged interest from the time of deferral until there is a qualifying event such as the sale of property, or the death of the property owner.  Notably, this property was also designated Green Acres by Anoka County.  The Green Acres designation allows deferral, however does not exempt a property from paying full assessments plus interest upon sale. The assessments also could have been paid without interest at the time they were levied.

The Green Acres tax designation is a policy that lowers the holding costs of active agricultural land.  Under Green Arcres, the property owners benefit by paying nominal property taxes.  For example, in this case, the land is valued at $821,000 today and the tax amount is $492 for 2020.   Anoka County provided the attached recorded certificate of deferred assessments from 2007.  The amount of the deferral and interest charged is not required to be on this document, but it is clear documentation that a deferred assessment was recorded on the property for the 1987 project.  Interest on deferred assessments is allowed by State Statute.

The property owners argue that the interest is high (8,1%) and that they were unaware of the deferral balance with the interest being charged per the City's policy.  These amount would have been made available upon request of the property owners to the City.
 

Staff review and consultation with the City’s City Finance Director, City Attorney, and City Financial advisor concluded that the City's process and policies were are appropriate in this case, and that the full amount of assessments plus interest are due and payable. Our Attorney and Financial consultant have confirmed that it is common practice for cities to charge interest from the time of deferral until payment.   Therefore, it is recommended that the established process be followed, and interest be paid from date of deferral.  It would not be consistent with City policy or past practice to forgive all or a portion of the differed interest, nor would it be a prudent precedent for the City in regard to similar situations in the future.
 
Please note, Anoka County provided the attached recorded certificate of deferred assessments dated March 27, 2007, for the 1987 project (#87-18).  The amount of the deferred assessment of $25,280 is indicated, but interest rate charged is not required to be on this document.  The City's deferral policy with interest charges are allowed by State Statute.
 

Staff recommends denial of this request for the reasons outlined above.  The City Council is able to consider this request and recommend a different approach if desired, however, if it is the decision to reduce the interest payments, consideration should be given to a policy that would cover similar situations in the future (e.g., based upon the length of the assessment deferral, interest rate fluctuation, etc.).

Motion to deny the request of the Hamilton and Holasek families rto reduce the interest charged on deferred assessments due upon their recent sale of Tract A, RLS No. 119, 2020: