Lodge owners seek tax relief

Owners of a Baxter hotel and water park sought relief from tax penalties and late fees before the Crow Wing County Board Tuesday.

The Lodge at Brainerd Lakes made an appeal during the board's open forum. The Lodge is delinquent in its tax payments, owing $309,110 to bring the taxes current and $41,540 in penalty and interest. Tuesday, Lodge owners told the board the hotel was overtaxed, putting the hotel at a competitive disadvantage and leading to its delinquency. They asked the board to consider granting them a one-time relief, or tax abatement, for the late fees.

Commissioner Paul Thiede said his heart was with the business to lower the taxes but it would be very difficult for the county to make an exception for a single property.

The Lodge, which opened in 2005, employs more than 100 people.

"Historically, the Lodge has been overvalued and overtaxed which has resulted in an unfair disadvantage for this business," said Rod Osterloh, Lodge owner/partner. "It has put it in a position where it is difficult to compete in this marketplace."

Osterloh said the Lodge has worked with the county assessor's office for the past 36 months regarding the valuation.

Joel Cairy, Lodge managing partner-operations, pointed to the nearby Holiday Inn Express. The two hotels with water parks just off Highway 371 in Baxter opened within three weeks of each other. Cairy said they are similar in size, but the Lodge's valuation continues to be much higher. He compared the Lodge's tax at 3.1 percent to the Holiday Inn Express' at 2.7 percent.

"We are going to pay the tax, the fees are what kills us. We have to make up a lot of room nights to pay those fees," Cairy said, adding the four partners will be paying the tax from other revenue sources and it won't be coming from the business.

After a tax court petition for relief in 2008, the Lodge's estimated market value was reduced from $7.4 million to $5.8 million. The tax court decision came in August. For 2009, the estimated market value went back up to $7.5 million with net tax and special assessments of $235,775.

The Holiday Inn Express has an estimated market value of $4.8 million for 2009 with net taxes and special assessments of $131,315.

Cairy said the Lodge has 102 rooms compared to its major competitor with 98 rooms and yet their competitor's estimated market value was substantially less. It is difficult to bring in the business to pay those taxes, Cairy said.

Jeff Schoenwetter, Lodge owner/partner, said when they look at dividing taxes per room they are paying 50 percent more than the closest competitor.

"That's not fair and that's the exception we are here to talk about," Schoenwetter said. If the Lodge had asked the wrong question for the tax relief, Schoenwetter urged the county to help them find the right answer for the solution. "This is an exceptional situation and does not create a precedent."

The county's standard practice is not to abate penalty or interest. Options exist with the county to set up a payment plan.

A lot of businesses in Crow Wing County, industries and individual taxpayers, can make the same argument as the Lodge regarding economic conditions hurting business and being unable to pay their taxes, Auditor Deborah Erickson said.

"How do we draw the line," Erickson said. "It is difficult for us to say yes to some and no to others."

The Lodge's estimated market value for taxes payable in 2010 was reduced to $5.3 million. Thiede questioned why the Lodge saw the jump from 2008 to 2009. Assessor Marty Schmidt said by the time the tax court case was settled the 2008 assessment was in place. Thiede questioned where that cycle ended.

During the exchange between Schmidt and Thiede, Attorney Don Ryan said the board had no authority to take action during the open forum part of the meeting. The Lodge had the option to appeal the taxes payable in 2009 and didn't do so, Ryan said.

Schoenwetter said their issue comes from the unfairness of the system not for the assessor. The Lodge's 2009 valuation will be reviewed, Erickson said, adding follow-up information will be available at the next county board meeting.

RENEE RICHARDSON may be reached at renee.richardson@ brainerddispatch.com or 855-5852.