Hassan, Rogers deal rests on contingencies

by Bob Grawey
Staff writer
It seems a break could be imminent in a deadlock between Hassan and Rogers over hot-button details to the upcoming full merger of the two communities in 2012.
Hassan had asked Rogers for a six-year property tax phase-in for residential and agricultural properties due to Rogers’ significantly higher tax rate. The township also sought a three-year tax phase-in for commercial properties.
Township officials also requested the merger date be moved from Jan. 1, 2012, to July 1, 2012.
Other parts of their sought-after agreement with Rogers was assurances from the Rogers City Council that the town’s two employees are retained through 2012, that Hassan’s dedicated funds will be used for those intended purposes and that Hassan debt is spread over all Rogers property owners, rather than just assessed to former Hassan residents.
Town board supervisors also want to be allowed to sit in and act as an advisory body during city council meetings in case Hassan-related issues arise, and want a joint planning commission to be established to address city codes that may impact more rural Hassan areas.
Rogers countered by agreeing to everything except the tax phase-in. Instead, Rogers offered a tax phase-in of four years for residential and agricultural properties, but a zero phase-in for commercial properties.
The city also rescinded an offer to move the final merger date to July 1, 2012, and reverted back to the Jan. 1 date.
Both governing bodies are attempting to use leverage to get what they want, but in the end each side has contingencies that could unravel months of negotiations.
When the Orderly Annexation Agreement was written and agreed to by Hassan and Rogers officials in 2003, it failed to address pertinent issues such as a property tax rate difference, what to do about Hassan employees and how to deal with Hassan debt once the town is dissolved, as well as other Hassan interests.
The official document outlining a full merger between Hassan and Rogers was amended in 2008 to move the final annexation date to Jan. 1, 2012, from its original 2030 date.
After a joint Annexation Task Force began identifying issues that would need to be addressed by both communities, several things came to light.
One was the Jan. 1 final annexation date. Hassan town administrator Bill Craig says of the many reasons cited, one was timing.
“You suddenly have plow drivers go out in the middle of the winter who have never driven Hassan streets before and you’re going to have trouble,” Craig explains. “Plow drivers go out and drive their routes before the winter season so they get to know their route and what they need to watch out for.”
Craig also points out that a Jan. 1 final merger date would cause problems with conducting the town’s annual audit for the previous year, as there would no longer be a town, and Craig asks, “Who’s going to pay for the audit?”
Representation is yet another reason Hassan views the Jan. 1 date as unacceptable, since residents would not have their specific interests represented by their elected officials.
For these reasons Hassan sought to have the merger date moved to July 1.
It would allow residents to be represented by Hassan officials for six months in 2012 and give residents enough time to file for Rogers offices in a 2012 fall election.
Yet another sore spot with Hassan is over the stark differences in each community’s property tax rate.
Residents and officials in the township claim the Rogers tax rate would be too drastic to absorb at once, and say a tax phase-in is needed to temper that.
In Rogers’ counter offer to Hassan, city administrator Steve Stahmer states Rogers’ city tax rate is 47 percent higher than Hassan’s township tax.
But, Stahmer points out, residents in Rogers pay for police services that add a lot to that tax rate while Hassan residents, on the other hand, pay nothing for Hennepin County Sheriff’s Department coverage.
Based on tax levy per capita, Stahmer contends Hassan pays $454 per person while Rogers’ per capita taxes are $418. Once the police service equation is removed, Stahmer claims the Rogers tax rate per capita drops to $224.
This is based on a larger population base in Rogers, as well as the high percentage of the city budget eaten up by police services, approximately a 40 percent slice of the budget pie, according to Stahmer.
Some residents, and at least one town board supervisor, are suggesting residents should set the town’s annual levy at zero or near zero in order to make up for the difference in the tax rates town residents will be assessed starting in 2012.
By law, residents of a township set the annual levy which determines what the township has to operate on in the upcoming year.
Craig says even if Hassan residents were to give themselves a property tax rebate by setting the levy at or near zero, Rogers would likely find ways to implement fees for Hassan residents to recoup the lost levy amount.
“The difference,” Craig says, “is if you pay property tax, it’s deductible, but if you are paying fees…those are not deductible.”
On a $250,000 property, a near-zero levy would mean a $17 property tax bill. The following year, though, would mean a tax bill of over $1,000 at the Rogers’ tax rate, even if the city kept a completely flat levy.
Craig also points out that those who have mortgages with escrow accounts would receive a check for a refund based on that $17 tax bill since it would look as though the account had much more than needed.
But that next year, when the tax rate would revert to the Rogers rate, an escrow reflecting the much higher tax rate would be needed to satisfy the lender. It would call for a large chunk of money and Craig wonders if residents would be prepared to pay that escrow back as required by the lender.
At any rate, if Hassan follows through on a zero levy, Rogers would also pull any offer for a tax phase-in off the table.
This phase-in and the Hassan 2012 levy along with the final annexation date are sticking points for both sides and the basis for contingencies from both parties.
Hassan will only agree to Rogers’ offer if city officials push ahead that merger date to July 1, 2012.
Rogers will not consider Hassan’s requests unless township residents set the annual levy to at least 95 percent of the previous year’s levy amount.
However, that is out of the Hassan board’s hands. It had no say in setting the town’s levy.
One possible problem with residents setting the town’s budget within Rogers’ perimeters is that Hassan has lost tax base with annexed properties going into Rogers, as well as property devaluations throughout the township.
Hassan is planning an open house to discuss the options before the residents and the town board Aug. 17 from 6 to 8 p.m. at the Rogers Community Room.
Rogers will be represented, too, for those wishing to direct concerns or questions to city officials regarding Rogers or the possible impacts of the upcoming final annexation.
The township’s annual meeting, at which Hassan residents will set the preliminary 2012 tax levy, is Sept. 6 at the old town hall, starting at 7 p.m.