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Resort's new business model leads to county tax valuation discussion

Little Mantrap Resort got socked with a huge jump in valuation that was hotly debated Monday. (Sarah Smith / Enterprise)

If a resort ownership changes its business model, should the resort's taxable valuation change as well?

That's the issue the Hubbard County Board of Commissioners, acting as the county Board of (tax) Equalization, was asked to decide Monday. And a deeply divided board answered the question thus: If it looks like a duck, walks like a duck and quacks like a duck, its relative value is that of caviar under new ownership.

The case of Little Norway Resort

The owners of Little Norway Resort on Little Mantrap Lake, one of two resorts in the county run by a cooperative association, got a shock when they received their 2011 tax valuation in the mail this spring.

Owner Chuck Brandon presented tax information indicating since 2005, his change in estimated market value for the 21-unit resort has been 323.5 percent. The current valuation is $3.579 million for 2011 payable taxes.

Chuck and wife Sissel say the valuation should be roughly half that. "Its value needs to fall more in line with existing resorts," Chuck Brandon told the board. "One-point-eight million to $2.2 million would be a fair valuation."

The Brandons bought the resort in 1975. They said over the years, Mom and Pop resorts have struggled, especially lately in a tough economy.

The value hikes began when Brandons upgraded half of the cabins. Then they sold the resort to "Little Norway Resort Cooperative." Brandons own 80 percent of the co-op. They sold the remaining portions as investment shares.

"It provides an exit plan for me and my wife," Brandon explained to the board. The co-op board votes on the business plan. "Owners can stay in the units but they have to book them like any other guests," Brandon said.

The co-op employs Brandon Management, the Brandons, to manage the resort.

Do taxes matter?

"Is this a tax shelter?" asked commissioner Don Carlson.

"It's a business," Bradpon replied. "Ours happens top be a cooperative resort."

County Assessor Bob Hansen disagreed.

"It's operated differently than a resort," he said. "Here they can sell off the individual units."

Hansen pointed out a 2008 state law that said if resorts sell shares of ownership, they lose their resort status for property tax purposes.

They acquire the tax status of any common interest community, that of a seasonal recreational classification, not a seasonal commercial resort.

Seasonal recreational classifications do not contribute to excess levy referendums to support local schools and get a decrease in state general tax, Hansen said.

Instead of valuing the resort as a single parcel, it's valued on a per unit basis, Hansen said, according to the law.

"We are not operating a PUD," Sissel Brandon repeatedly told the board.

The township

Clover Township supervisor Joan Bradach accompanied the Brandons to the meeting. "We're aghast at the jump" in valuation, she told the board. The township voted to lop $500,000 off the valuation, and passed that recommendation to the Board of Equalization.

Commissioner Cal Johannsen, whose district encompasses the resort, was bothered that the Brandons were being singled out.

"We didn't increase the land; we didn't increase the buildings," Chuck Brandon told the board.

"It's being used for the same purpose," Johannsen argued. "I have a problem with this."

And Johannsen pointed out many times the board was charged with the responsibility of setting a value for the property, not dealing with its tax status.

Commissioners grilled Bradach as to how Clover Township arrived at the figure of $500,000.

Townships cannot adjust more than 1 percent of the aggregate value of the property in the township, Bradach explained. That was $512,000. The township rounded it down to $500,000.

"Does it (the resort value) go up $1.8 million just because they filed a bunch of papers?" Robinson asked Hansen.

The assessor said on the open market, which is what estimated taxable value it is supposed to mirror, selling Little Norway's units individually makes it twice as valuable.

"We didn't change the use," Chuck Brandon said. "A PUD is changing (a resort) from a commercial to a residential use."

Resort or not?

"Who decides if it's a resort?" asked commissioner Dick Devine.

Chuck Brandon presented his state license decreeing the property as a resort, his insurance documents reflecting the same.

"Most resorts in this county are incorporated in some way or another," Chuck Brandon said.

"When resorts are split into PUDs, CICs or time shares, they have a different value," Hansen said. "It's like owning apartments where you can depreciate each unit." Resorts can be incorporated, but an association is a different breed of animal.

"We can't make new laws," Devine said. "It's a PUD with a different name."

"No it's not," argued Sissel Brandon.

Shareholders "are not buying land or a unit," Chuck Brandon said. "They're buying a piece of the business, the ability of the resort to generate revenue."

"This isn't a little decision," board chair Lyle Robinson said.

"It's not a case where we don't like the law and go around it," Devine agreed.

"The formula for reclassification starts with a value," Bradach said.

"I don't think we can have a fair valuation for this type of property," Johannsen said.

Johannasnen made a motion to accept the township's valuation of $3.079 million. That failed on a 4-2 vote with Robinson and Johannsen in the minority. Robinson argued if the board lops $500,000 off the valuation of Little Norway it must do the same for Eagle Bay Resort Association, the other co-op, to treat both fairly.

Then on a 5-1 vote, the board voted to approve Hansen's valuation of the $3.579 million. Auditor Pam Heeren also sits on the board.

Brandons left the meeting disheartened. Chuck Brandon said if resorts are punished for using creative business models, there won't be many left in the county.

Sarah Smith

Sarah Smith is the outdoors editor. She covers courts, business and breaking news in addition to outdoors events.

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