After receiving direction from the state to look at reclassifying some Vacation Rental by Owner (VRBO) properties for assessment purposes, Morrison County is looking at how it will determine which are businesses and which are just dabbling in the idea.
Land Services Director Amy Kowalzek and County Assessor Jean Popp updated the Board on the issue at Tuesday’s planning meeting.
The state’s Department of Revenue said counties need to look at classifying VRBO properties differently, Kowalzek said.
Currently, the properties are considered non-homesteaded residential or seasonal properties by the county, she said.
There has been a lot of conversation about how VRBOs are classified along with other properties on an annual basis.
“It’s been a hot topic in the assessment world,” Popp said.
Two years ago, Morrison County had about 10 VRBOs listed on the internet, now there are about 40, she said.
Assessors around the area have decided to classify the properties based on two questions — how often it is used and more importantly, when in use, how often is the owner using it and how often is it being rented, Popp said.
The county will be asking these questions of the properties identified via a mailing, which may change their property taxes that will be paid in 2021.
In many cases, people are buying properties and while they might use it a few times a year, it is mostly an investment property, Kowalzek said.
Once the letters are sent out to people who are advertising, the county will probably find out about more VRBO properties through those renting them out, she said.
“We fully expect that after we send out the letters and change the classifications, we’ll get people saying, ‘Well that guy there does it,’” Kowalzek said.
Without a permitting system for VRBOs, this is the best system the county can use.
Commissioner Mike LeMieur asked if having these properties permitted would make staff’s job easier.
The problem is that to permit these properties, the county would have to do essentially the same process as they are about to start, Kowalzek said.
Generally, the county only permits uses if it poses a risk to health, safety and welfare or if it has received a lot of complaints from other residents, she said.
The county has not received complaints about existing VRBOs, Kowalzek said.
Commissioner Greg Blaine asked why properties like this are different from traditional rentals.
“What makes that (VRBO) different from a hotel or a motel?” Blaine asked.
Popp said she believes that is one of the reasons the issue has been brought up. VRBOs pop up and take business from hotels, motels and resorts, but do not pay the same taxes those properties pay.
When the county changes the classifications, Blaine said he believes there will be a push from residents to regulate VRBOs as a commercial property, especially if it is a commercial property in a residentially zoned area.
Commissioner Randy Winscher asked whether the county would check in to verify what the property owners say.
Unless the county receives additional information, at this point it would be taking people at their word, Popp said.
However, if property owners are using these as a business, there are going to be other signs popping up in the tax system, she said.