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Fairgrounds lessees turned away by equalization board

Renters of fairground property and the board of the Shell Prairie Fairgrounds will appear in the second act of a continuing saga over a vexing tax situation when they make a last-minute appearance today before the Hubbard County Board of Commissioners.

They were turned away from the county's Board of Appeal & Equalization Monday after considerable discussion, because the board cannot deal with current tax bills; only 2008 valuations payable in 2009.

At issue are several longstanding laws on the Minnesota books stating that if tax-exempt entities such as the fairgrounds rent space to private individuals, a private property tax must be levied upon the renters.

Two such lessees of space, Charlie's Boats & Marine and American Family Insurance, were mailed large tax bills in April when their lease agreements came to light during a routine assessment inspection.

The tax bills nearly equaled their rental payments.

Their situation prompted a heated exchange between city and county assessors, equalization board members, the renters and the fairgrounds board about whether the renters were being treated fairly.

But the larger question was if renters are taxed to the point of vacating their fairgrounds leases, who will ante up the money to pay the fair's operating expenses?

"I had no idea of this until that day in April when I went to the mailbox," protested Charlie Kellner, who uses the facility eight months of the year to store customers' boats. "I'm being taxed on property I don't own."

County Assessor Bob Hansen has put an inquiry into the state revenue department and was told that agency was meeting with attorneys to look into the statutes.

Board chair Lyle Robinson asked for some clarification of those laws. "It's tax exempt as long as they use it for the fairgrounds?" he asked.

Hansen replied that if the fair board rents to another tax-exempt entity such as a church or school, no tax arises. But if a for-profit business rents space, it is taxed under the law.

"We're required to tax the tenant, the lessee," Hansen said. "We can't put the tax on the exempt entity."

Some equalization board members questioned the lack of notice. Others questioned why all tenants of the fairgrounds weren't being taxed.

Hansen and city assessor Loren Tolkkinen said the fair board refused to turn over its list of tenants.

"I don't think he was told he was being taxed," said board member Cal Johannsen of Kellner. "It's an ungodly amount of money. Maybe it's the law but we need to draw a line in the sand and start taxing as of January first, 2010, instead of blind-sighting everybody."

But Tolkkinen said he visited with fair board members about the rentals around 2001 and was told the fair was getting out of the rental business.

"To say they weren't aware of the law is not quite true," he said.

Fair board chair Howard Warmbold asked if a private individual who rents storage space in the building is subject to the tax. He was told yes.

"We gotta treat all the kids the same," Robinson said, explaining the equalization board's position.

"If the fair board is getting the revenue wouldn't they get the tax statement?" questioned Hubbard County Auditor Pam Heeren, a member of the equalization board. "Because the fair board is now a business."

"The fair board caused it by renting the space," Robinson said.

But the equalization board, comprised of county commissioners, appeared inclined to grant the renters a tax abatement, so the issue will be debated once again at today's commission meeting.

And many board members wanted more research by today.

"Are we the only ones doing this?" they asked. "What are other counties doing?"