2009-02-14 / Top News

Island Holding Its Own in Face of National Land Value Decline

By Ryan Schlehuber

Mackinac Island property values may be weathering the declining market better than its mainland neighbors.

"This is the most depressed times I've seen in land values, but the Island is definitely faring better than the mainland, even Bay Harbor," said Bill Borst, owner and broker of Mackinac Island Realty. "What's keeping it afloat is the fact that it's a special place."

Because of its unique character, Mackinac Island attracts property buyers on a national and world scale, said Mr. Borst, and is not solely dependent on regional buyers.

"We have clientele right now from Texas, where the economy is a bit stronger than in Michigan, for example," he said.

The market for second homes has all but dried up, however, he noted, and financing for second homes is hard to come by.

While the values of residential classes of property in the northerm Michigan area are down as much as 30% on the mainland, Mackinac Island is down only about 10%, according to Joe Stakoe, the city's assessor.

Mr. Stakoe, who has been the city's assessor for 20 years and a fee appraiser since 1990, said the Island is seeing some foreclosures and, like mainland properties, it is being hit with the Proposal A problem, where property values decline but taxes continue to go up. But he agreed with Mr. Borst that because the Island's history and horses make it so unique, it continues to be an attractive area for buyers, even in a time of national recession.

"I would not recommend that property owners contemplate selling because the market doesn't appear to be recovering any time soon," said Mr. Stakoe, "but as a buyer, it's a buyer's market, and you're getting great deals on the Island at a discounted value, without a doubt.

"There's much more property available on the market, more than I've seen since being assessor here," he added. "Supply is outweighing demand."

Mr. Stakoe is conducting a reappraisal of commercial properties on the Island, which will be adopted for the 2009 fiscal year.

"The commercial class is a little skewed because many sales, especially in the last couple years, have been from Lake View Hotel's commercial condominiums," he said. "This may not indicate the true picture of the Island's commercial class, thereby, a new appraisal is required."

Condominium sales at the Lake View, when looked at by the county equalization department, imply that other commercial properties are undervalued, resulting in a factor being place on all commercial property. That may not be justified and may not be reflective of what the market is doing now, he said.

The factor for commercial class on Mackinac Island is 1.0517, which would indicate that the commercial class is about 10% undervalued, said Mr. Stakoe.

"Commercial sales recently have been primarily from the Lake View, and to rely on this as an indicator may not be fair or equitable to levy that factor on all of the commercial class," he said. "That is the reason for a reappraisal."

Mr. Stakoe said reappraisal figures can be included for the 2009 fiscal year if he files them by the first week of March.

The city's state equalized value (SEV) was $289,747,557 in 2007 and $283,990,180 in 2008.

This year's SEV, which won't be known until April, is expected to be about the same as in 2008, said Kelly Bean, Mayor Margaret Doud's assistant.

Ms. Bean is working on the city's budget for 2009-10, and, so far, is not expecting any major budget adjustments, despite the recession.

"That doesn't mean it won't affect us in the near future, so we are taking conservative steps to be prepared," said Ms. Bean of the recession.

Now that debt from the construction of the city's firehall is completely paid off, Council is considering lowering the 8.85 mills it receives to 8.35, said Ms. Bean.

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