Listen: PKG: Property forfeitures (Marohn)
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MPR’s Kristi Marohn reports that in Minnesota, forfeited properties generate millions of dollars that local governments use to run their operations, according to an analysis of public records by MPR News, APM Reports and the APM Research Lab.  Property owners believe it to be an unfair practice.   

The practice is now in question after a U.S. Supreme Court ruling in May. The court ruled that Hennepin County violated the constitutional rights of 94-year-old Geraldine Tyler when it sold Tyler’s Minneapolis condominium for $40,000. Since Tyler owed the county $15,000 in unpaid taxes, interest and penalties, the court ruled she’s entitled to the remaining proceeds from the sale. 

Awarded:

2023 MBJA Eric Sevareid Award, first place in Investigative - Large Market Radio category

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SPEAKER: Some Minnesota counties could face a major hole in their budgets because of a recent US Supreme Court ruling. It centers over how much the government can claim after selling a property that's been seized over unpaid taxes. The ruling has sparked a rash of lawsuits and a scramble to rewrite the law. As our KirstI Marohn reports now, there are millions on the line for local governments.

KRISTI MAROHN: From his farmhouse in Cherry Township, Darren Demers can see the 32 acres the government took from him. The vacant field East of Hibbing was once pasture for his beef cattle. But Saint Louis County seized it six years ago after Demers failed to pay $1,500 in property taxes.

DARREN DEMERS: I was very pissed off. You work all your life, and they take it away.

KRISTI MAROHN: Demers first learned about the tax bill in 2020 when he says he saw a County employee taking photos of the property for auction.

DARREN DEMERS: And I went up and asked him what he was doing, if I could help him. He says, "No, we're putting it up on tax forfeit. And that's when I found out about it.

KRISTI MAROHN: County officials told him it was too late to get his land back. The government sold the property for $33,000, about 31,000 more than what he owed in back taxes. If he'd known he owed taxes, Demers says he would have paid them maybe by selling a cow.

DARREN DEMERS: I haven't stopped trying to figure out a way to get it back.

KRISTI MAROHN: Demers is now suing the County over the land sale and what he says is a cash cow for local governments. An analysis of public records by MPR News, APM Reports, and the APM Research Lab found tax forfeited properties generate millions of dollars for local governments in Minnesota. Saint Louis County collected more than $7 million between 2017 and 2022, an average of more than $1 million a year in proceeds for local governments. Minnesota is one of about a dozen states that allows local governments to keep surplus revenue from tax-forfeited property sales. But the practice is now in question after a US Supreme Court ruling in May.

JIM MANLEY: Everyone realizes that things need to change after Tyler.

KRISTI MAROHN: Jim Manley is with the nonprofit Pacific Legal Foundation which represented 94-year-old Geraldine Tyler before the Supreme Court. Tyler sued Hennepin County for violating her constitutional rights when it sold her Minneapolis condo for $40,000 and kept the proceeds. Tyler owed the government about $15,000. The court ruled in Tyler's favor. Manley says the decision sparked several class-action lawsuits and efforts to fix state's forfeiture laws.

JIM MANLEY: My message to legislators has been fix this problem now because the longer we go on under the current system, the more potential there is for new claims to arise.

KRISTI MAROHN: State lawmakers and Minnesota courts now have to decide how far back counties have to look to pay back former property owners. Another issue is how to handle land abandoned decades ago by timber and mining companies. In Northern Minnesota alone, counties managed nearly 3 million acres of state-owned forfeited properties.

For example, Saint Louis County has a land and minerals department with about 50 employees. They manage nearly 900,000 acres of tax-forfeited lands for timber, minerals, recreation, and conservation. Deputy County Administrator Brian Fritsinger says the lands provide jobs and revenue for local industries.

BRIAN FRITSINGER: When you actually look at the large amount of benefit from an economic development perspective that we see off of those lands that we're managing, it's pretty significant.

KRISTI MAROHN: A group of county officials has been meeting to help craft proposed changes to Minnesota's forfeiture process. Matt Hilgart, a lobbyist for the Association of Minnesota Counties says county officials are debating how tax forfeitures should work in the future.

MATT HILGART: We have a once in a lifetime opportunity to clean things up and make it easier for folks going through this to understand what's happening to them and what are the onramps back to ownership. Let's do that.

KRISTI MAROHN: In Demers' case, Saint Louis County officials say they followed the state's current forfeiture laws that included publishing a notice in the newspaper and sending it to Demers by certified mail which was returned. Demers says he hopes his lawsuit will help spur a fairer system under which counties don't profit from forfeiture.

DARREN DEMERS: It's wrong. It's the people's money, not their money.

KRISTI MAROHN: He thinks local officials should be more willing to work with people who owe back taxes. . And he wants the county to return either the surplus money or the land he once owned. Kirsti Marohn, MPR News, Mountain Iron.

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