Endless Summer Farms LLC v. Cnty. of Lake
| Decision Date | 10 October 2022 |
| Docket Number | 38-CV-20-151 |
| Parties | Endless Summer Farms LLC, Petitioner, v. County of Lake, Respondent. |
| Court | Tax Court of Minnesota |
This matter came on for trial before The Honorable Wendy S. Tien Judge of the Minnesota Tax Court.
Gregory J. Lien, the owner and sole member of Endless Summer Farms LLC, represents petitioner Endless Summer Farms LLC.
Molly Hicken, Cook County Attorney, represents respondent Lake County.
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER FOR JUDGMENT
This property tax case concerns the classification of the real property described as Property ID Number 22-7404-04010 located in the City of Silver Bay Business Park 29 &32- 56-7, Lot 1, Block 4, Lake County, Minnesota, as of the January 2, 2019 assessment date. Petitioner seeks a determination that the subject property should have been properly classified as agricultural (class 2a) as of the assessment date.
The court, having heard and considered the evidence adduced at trial and the arguments of counsel, and upon all the files records, and proceedings herein, now makes the following:
FINDINGS OF FACT
1. Petitioner Endless Summer Farms LLC ("ESF") has sufficient interest in the property to maintain this petition; all statutory and jurisdictional requirements have been fulfilled; and the court has jurisdiction over the subject matter of the action and the parties thereto.
2. ESF is a Minnesota single member limited liability company. 3. Gregory J. Lien is the owner and sole member of ESF. 4. ESF is the taxpayer of record for Property ID Number 22-7404-04010.
5. The legal description of the subject property is Lot 1, Block 4 Silver Bay Business Park, 29 &32- 56-7, Lake County, Minnesota.
6. The subject property comprises contiguous deeded acreage, 0.97 acres, situated entirely within the city limits of Silver Bay, Minnesota, and located entirely in Lake County, Minnesota.
7. The subject property is improved land with an 8,565 square-foot building, comprising a 5,280 square-foot aluminum and polycarbonate greenhouse and a 3,285 square-foot adjoining metal clad wood frame structure.
8. The subject property was not dormant, unoccupied, or vacant on the assessment date of January 2, 2019.
9. There is no residence or cabin on the subject property. 10. From 2011 until July 2, 2018, the City of Silver Bay (the "City") owned the subject property.
11. From 2012 to 2016, the City leased the subject property to the University of Minnesota, Duluth ("UMD") as a proof of concept or model for local food production.
12. The subject property stood idle from 2016 to July 2, 2018, but the City maintained the subject property, including securing the building and equipment, providing heat and utilities to the subject property, and maintaining the grounds for food production.
13. During the assessment years 2014 to 2018, the subject property was exempt from property tax pursuant to Minnesota Statutes section 272.02, subdivision 8. The code assigned to the subject property by the County's tax assessment computer system was "Class Code 776 -Municipal - all other."
14. On April 16, 2018, ESF and the City entered into a purchase agreement for the subject property, which included an addendum for the conveyance of all personal property.
15. The Operating Agreement for ESF states that its business is "Aquaponics/Hydroponics." The Business Plan for ESF states that its goal "is to grow and sell high-quality produce and fish in an economically viable and environmentally sustainable manner using a controlled environment agriculture approach."
16. ESF completed its purchase on July 3, 2018. Immediately after taking possession of the subject property, ESF began the work of adapting and fitting the subject property for the hydroponic production of agricultural products for sale.
17. From July 2018 through the end of 2018, ESF engaged in the process of adapting and fitting the following systems on the subject property: deep-water hydroponic grow beds/benches; irrigation and water conditioning; heating, aeration, filtering, sterilization, and nutrient delivery of process water; forced air heating in the greenhouse; a seed germination and plant nursery area; a floating raft system for plants; and data monitoring systems.
18. Although a pre-purchase appraisal of the subject property estimated 30 percent functional obsolescence of the subject property, obsolescence of the facility was greater than pre- purchase inspection revealed and greater than the 30% functional obsolescence noted by the appraiser, necessitating a major replacement of the hydroponic system for more efficient, hygienic, and accessible operation of the hydroponic system.
19. ESF hired an employee on July 17, 2018, to help improve the operation of the subject property. The work of adapting and fitting the subject property in 2018 for the hydroponic production of vegetables for sale was a full-time occupation for ESF.
20. Mr. Lien filed a Schedule F (Profit or Loss from Farming) with a 2018 federal income tax form 1040, reporting a gross income of $107 and total expenses of $29,935. Mr. Lien also filed a Form 4562 (Depreciation and Amortization) for 2018, reporting $25,219 in expenses for aquaponic benches (also known as grow beds).
21. ESF filed IRS Form 943 (Employer's Annual Federal Tax Return for Agricultural Employees), reporting $6,664 for agricultural employees' wages for 2018.
22. ESF did not attempt to engage in aquaculture or aquaponics in 2018.
23. There were no wholesale or retail sales, processing of raw agricultural products or other goods, warehousing or storage of processed goods, or office facilities for the support of these activities on the subject property on January 2, 2019.
24. As of April 30, 2019, the Lake County Parcel Information System listed the subject property classification as Class Code 776.
25. On May 1, 2019, the Lake County Appraiser, the Lake County Chief Deputy Assessor, the Petitioner, and his spouse attended an open book meeting in Silver Bay. Mr. Lien had a discussion at the open book meeting with Noah Mittlefehldt, the Chief Deputy Assessor for the County.
26. On May 6, 2019 (printed on May 3, 2019), Lake County mailed a Valuation and Classification Notice (the "Notice") to ESF for the subject property.
27. The Notice showed the time and location for two meetings. One was the open book meeting on May 1, 2019; the other was a County Board of Appeal and Equalization Meeting, scheduled for June 17, 2019, between 5:00-6:00pm.
28. The Notice also stated that the Assessor had determined the property's classification to be commercial, and that the classification had changed from the previous year's assessment.
29. The Lake County Board of Appeal and Equalization convened on June 17, 2019 (the "Lake County Board Meeting") and reconvened on June 28, 2019.
30. At the conclusion of the Lake County Board Meeting, the classification and valuation set forth in the Notice were sustained.
31. ESF filed its petition on April 29, 2020, challenging the 2019 classification of the subject property.
1. The County timely assessed the subject property before the date of the Lake County Board Meeting.
2. The County did not provide timely notice of assessment at least ten days before the May 1, 2019 open book meeting, but its failure to provide timely notice does not affect the validity of the assessment.
3. ESF submitted sufficient credible evidence to rebut the prima facie validity of the assessment as of January 2, 2019.
4. The subject property consists of contiguous acreage less than ten acres in size and was exclusively used in 2018 for raising or cultivating agricultural products.
5. The proper classification of the subject property as of January 2, 2019, is agricultural (class 2a).
IT IS SO ORDERED. THIS IS A FINAL ORDER. ENTRY OF JUDGMENT IS STAYED FOR 30 DAYS. LET JUDGMENT BE ENTERED ACCORDINGLY.
MEMORANDUM[1]A. History of the Subject Property
The subject property consists of one parcel of real property, identified as Property ID Number 22-7404-04010.[2] Its total square footage consists of 0.97 acres of contiguous deed acreage[3] of improved land, on which is built an 8,565 square-foot building comprising a 5,280 square-foot aluminum and polycarbonate greenhouse and a 3,285 square-foot adjoining metal clad wood frame structure.[4] There is no residence or cabin on the subject property,[5] which was not dormant, unoccupied, or vacant on the assessment date.[6]
The subject property is situated entirely within the Silver Bay Eco-Park.[7] All land uses within the Silver Bay Eco-Park must receive a conditional use permit from the Silver Bay Planning Commission.[8] Before Endless Summer Farms ("ESF") purchased the subject property, the City of Silver Bay (the "City") developed and owned it,[9] starting in 2008.[10] From 2011 through part of 2018, the City owned the subject property, during which time it designed engineered, constructed and equipped the building on the subject property for the production of food.[11] During part of that time, from 2012 to 2016, the City leased the subject property to the University of Minnesota, Duluth ("UMD") as a proof of concept or model for local food production.[12] UMD...
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