County officials reworking housing covenants

By Kevin O’Brien

After concerns were raised about the county possibly putting restrictive covenants on all tax-foreclosed properties it sells, county administrator Lance Leonhard said he and other county officials will work on refining the proposal to minimize any potential liability the county could face if the covenants were to reduce the property values.

“I think we have enough homework for a little while,” Leonhard told members of the Education, Extension and Economic Development (EEEDC), which discussed the covenant proposal at its March 6 meeting. The issue was referred back to the committee after members of Human Resources, Finance and Property Committee (HRFC) questioned how the restrictions would be implemented.

As originally proposed, the covenants would require the buyers of any tax-foreclosed parcels to build owner-occupied homes or long-term rentals on an empty buildable lots and prevent them from using any residences as shortterm rentals for 10 years. The goal is to address a shortage of affordable housing in the county, which is affecting the ability of businesses to recruit new workers.

Supervisor Ann Lemmer, a member of the HRFC, told EEEDC members that her committee had two main concerns about the proposal. One is whether the county should really require all tax-foreclosed parcels to be used for housing, since some of them could be prime farmland or forest.

The other question was whether the county’s ordinance needs to be amended to accommodate a supreme court ruling that came out of Hennepin County, Minn., which requires counties to reimburse the former owners of tax-delinquent parcels for the full value of the property – minus the pastdue taxes, assessments and other county costs. Lemmer said the concern is that adding the restrictive covenants could lower the value of the properties when they’re sold, which could potentially allow the former owners to seek additional compensation from the county. County staff have suggested requiring an appraisal of all seized properties before they are sold to ensure the county is getting the fair market value.

“We just want to make sure that we’re taking the county’s risks and the implication to the taxpayers seriously before we move forward,” Lemmer said.

Leonhard said he recently discussed the issue with county treasurer Connie Beyersdorf and corporation counsel Michael Puerner, and they agreed that Section 3.20 of county ordinances, which deals with the sale of tax-delinquent properties, is “ripe for some updates” due to recent legal cases.

Leonhard said the Wisconsin Counties Association has put out a template ordinance to accommodate the Hennepin County court decision and a new state law dealing with tax-foreclosed properties. He said county staff will be proposing some changes to Section 3.20 based on that template and will also suggest changing the covenants so they are more of a “scalpel” than a “blanket” policy for all seized properties.

“A lot of the parcels you take through tax deed already have housing on them, so housing is already the highest and best use,” he said. “So, the question really becomes, are you negatively impacting the sale price by putting a restriction on short-term rentals?”

Supervisor John Robinson, chair of the HRFC, also noted that the county has historically been very slow in seizing tax-delinquent properties, which means the amount of back taxes owed often exceeds the resale price of the property. However, as the county expedites its foreclosure process, he said it’ll become more likely that the sales proceeds will be more than what is owed to the county.

The committee did not make any recommendations on the restrictive covenants, allowing Leonhard and other officials to work on a more comprehensive proposal.

“We’ll have something for you to take a look at, at the full board level, I would say in the next 60 days for sure,” he said.

Lance Leonhard