Snohomish County in dispute with landowner over condemned property

Published 1:30 am Sunday, March 5, 2017

LYNNWOOD — A dispute over a road-widening project has left a property owner more than a half-million dollars in debt to Snohomish County.

Officials took the extraordinary step in February of filing legal paperwork to take possession of homes and land that 70-year-old Kay Kohler owns in Seattle, Friday Harbor and the Lynnwood area.

It’s the latest stage of a condemnation case that started when the county set out to acquire part of Kohler’s land along 52nd Avenue West. The county cut her a check in 2009, to be held while the sides hashed out the land’s value. But a later appraisal came in at just a fraction of the cost.

The county convinced a judge of the lower value and won again in a state appeals court. Kohler had to pay back the difference. Over five years, interest piled up on the debt.

“The Kohler property case is unique,” public works director Steve Thomsen said. “There are approximately 200 property acquisitions every year for public works projects. This project is the only one in at least the last 10 years, if not longer, that was appealed, and the only one that reached this unfortunate stage.”

County officials say they’re not out to pick on the woman, but trying to protect other taxpayers from forking over more than the land’s fair price. They say there’s been no accounting for a $404,000 check they wrote and insist they placed in trust with Kohler’s then-attorney. The county at one point would have been happy to settle the case for that amount. But Kohler instead opted to head to trial. In preparing for the case, the county obtained a new appraisal that determined the value of the land was only $48,000, given the presence of previously unidentified wetlands and a falling real estate market.

The county says Kohler rebuffed or ignored other potential pre-trial settlements on more favorable terms, including offers of up to $200,000.

Kohler views the county’s actions as an unlawful taking of her property. She believes the process has been stacked against her. Her fight against the government made her the subject of broadcast news stories and a cause for the Freedom Foundation, a conservative think tank with offices in Washington and Oregon.

“I’m not usually this skittish, but you need to understand the threat I’m under, especially since I was so careful to save for retirement and I am (turning) 71 without job prospects and will pay around $4,000 in taxes on this created wetland this year,” Kohler wrote in an email.

Her land sits at the intersection of 52nd Avenue West and 152nd Street SW, in a part of unincorporated Snohomish County north of Lynnwood that went from rural to suburban long ago.

Kohler said her father and grandfather bought the land in 1936 to establish a family farm. It helped feed the community during the Great Depression and World War II. A house and barn there were demolished. Kohler, who says she is last of her family, inherited the property.

The land was dry into the late 1970s, when the farmhouse and barn were still standing, Kohler said. After that, she said, nearby sprawl started sending water to her land, ruining its development potential.

Originally 5 acres, there’s a retention pond on the 0.8 acres the county acquired through condemnation. The less than 4 acres that still belongs to her is wooded and, the county’s consultants said, too wet to build anything more than a single house. It’s now assessed at about $350,000.

“Well, after they put in the pond and leveled everything on the land, it wasn’t worth much without being able to get a building permit on it,” Kohler wrote.

The county entered the picture in 2008, as it began buying right of way to widen 52nd Avenue between the Meadowdale and Picnic Point areas. Built in 2013 and 2014, the project added sidewalks, a continuous turn lane and better drainage to an obsolete two-lane road without shoulders.

The county wound up acquiring 42 pieces of property and condemning six others, including Kohler’s. At the time, her entire property was assessed at $718,000.

Unable to agree on a price, the sides entered into a possession-and-use agreement, which allowed the county to move forward. The county wrote the $404,000 check in March 2009 — just months after the nation entered a recession and the real estate market soured. Kohler said she would later be stung by wording in the agreement that read, “value to be determined at a later date.”

The takeaway, in Kohler’s opinion, is that no contract with the county is ever closed. The government can always go to court and recoup its money.

“This is a fine way to acquire private property with the eventual return of the cost,” she wrote.

As the county prepared for court, an in-house reviewer “raised red flags” about the earlier appraisal from two private appraisers and a land-use consultant, Thomsen said. A new appraiser and other experts came back with the $48,000 estimated value for the piece of the property the county acquired through condemnation.

Before trial in late 2011, the county tried to settle for compromise amounts, without luck. At trial, Judge Ellen Fair agreed with the lower appraisal. The county soon entered a judgment against Kohler for $355,250 — the difference between what it paid Kohler and the land’s appraised value. By state law, penalties would accrue at 12 percent yearly interest, or about $116 per day.

As the sides awaited an appeal, the county again tried to negotiate. The appeals court came back in September 2013 with a 3-0 decision: the lower court got it right. The $48,000 value stuck.

A new attorney for Kohler suggested the county waive its judgment with interest and pay his client $135,000 in damages. The county refused.

As the county sought to collect, it was unable to identify any assets other than real estate.

“She rejected the county’s $404,000 offer and elected to take her chances at trial,” Joe Bennett, an attorney who works for the county on condemnation cases, wrote to Kohler’s attorney in 2013. “She has only herself to blame if she spent the money. If she did not spend the money she would be well advised to pay the county in full now and stop the daily accrual of an additional $116 in interest.”

To recoup its money, the county went after Kohler’s homes in Seattle and Friday Harbor, as well as the undeveloped Lynnwood property.

In February 2015, the county offered Kohler the chance to deed the rest of her Lynnwood property and Friday Harbor home to the county. The following year, the county wrote to Kohler’s attorney, suggesting she could remain in her Seattle home after the county took possession of it, through an arrangement called a “life estate.”

This past September, the county offered to negotiate. Kohler wrote back, suggesting that her Lynnwood property was worth more than $1.2 million, based on a conversation she’d had in 2001.

County officials claim Kohler never presented any formal appraisals to refute their values.

With interest, she now owes more than $550,000.

Thomsen said a combination of unusual factors led the county to get the value so wrong at the outset. He attributes it to a group of outside professionals who gave bad advice and a fast-moving real estate market.

“This whole situation was unique,” he said. “This has never happened in the 20 years I’ve been working with property acquisition in the county.”

The county no longer works with the three outside experts who vouched for the higher estimate. They also have an in-house reviewer, which wasn’t the case back in 2008, in addition to other safeguards.

The sheriff plans to put Kohler’s properties up for auction on April 14, Thomsen said.

“We don’t relish taking this action but have been left with no other choice,” he said. “While we will always protect and defend the property rights of our residents, we must also protect and defend the interests of our taxpayers.”

Noah Haglund: 425-339-3465; nhaglund@heraldnet.com. Twitter: @NWhaglund.