In late summer and early fall, many Montanans were unpleasantly surprised to receive notices telling them their property values had skyrocketed. The reappraisals, due every six years from the state Department of Revenue, meant their property taxes would take a big leap forward, too. In areas like Gallatin and Flathead counties, where the 2002-2008 period saw a dramatic real estate boom – followed by a bust – some property values increased 300 percent or more.
But there was hope for people feeling the pain. First, property owners could seek relief by appealing their appraisals, either by asking for informal reviews from the Department of Revenue (DOR) or by appealing directly to their County Tax Appeal Board. Second, local governments could decrease their mill levies, the formulas that actually determine how much property tax residents pay.
Here’s a look at what’s happened on those and other fronts, according to the DOR.
• In Flathead County, almost every local government lowered its mill levy rate or kept it the same as last year’s rate, said Scott Williams, Flathead County DOR regional manager. Mill levies are the dollars owed for every $1,000 of a property’s assessed value; the higher the mill levy rate, the more you actually owe in property taxes.
• Across the state, mill levy rates in high-growth regions similarly declined or remained the same. In Bozeman, for example, the mill levy declined slightly; in Missoula, it stayed the same.
• It will be months before final decisions are made on all the reappraisal appeals and reviews, so it’s not clear yet how many taxpayers will win their case and reduce the amount of property tax they owe. But the DOR has already agreed to change some of the values on reappraisals in Flathead County, Williams said. Some properties, for example, were selling for up to $20,000 per foot of Flathead Lake frontage at the height of the real estate boom, but today are only selling for about $5,000 per front foot. The DOR is taking that into account, Williams said.
• As of October 29, 35,013 taxpayers – about 5 percent of property taxpayers in Montana – had requested an informal review of the reappraisal on their residential, commercial, industrial, or other type of property. Another 437 people appealed their assessments directly with their local County Tax Appeal Board.
• Flathead County had the highest number of people protesting their assessments, or 7,463. Next in line was Gallatin County, with 4,270; Yellowstone County, with 2,447; Lake County, with 2,322; Missoula County, with 1,735; Madison County, with 1,708; and Lewis and Clark County, with 1,628.
The number of people protesting their reappraisal is larger than in previous years – and that’s what the DOR wanted, said Montana Department of Revenue Director Dan Bucks. “We spent a lot of time and effort encouraging people to file appeals or request reviews,” Bucks said. “We gave our Web site over to featuring information about the reappraisal, and saying ‘please call us, please file a request for an informal review.’ So, yes, this is more than we’ve had before, and we wanted more, because more is better.”
There is other bright news, too, according to the DOR. Thankless as the job might be – informing thousands of people that they owe more in taxes – DOR officials say the reappraisal process has gone a lot smoother than one might think. People might be upset at how their property values have increased, but they can also take comfort in how much their property is worth, Williams noted. As an example, he described one property with 200 feet of lake frontage on Whitefish Lake that cost $37,000 in 1972, and today is worth at least $4 million, a more than 100-fold increase in value.
“I hear a lot of people say ‘it’s those darned Californians who made this happen,’” said Williams. “And yeah, your taxes are going to increase. But you’re sitting on an asset that’s probably increased in value more than anyone could ever imagine.”
On the other side of that argument, however, are people who say they don’t want to sell their homes, can’t afford to stay because of the high property taxes, or can’t find buyers because of the economic downturn. Some realtors, meanwhile, say property tax spikes could scare the wealthy away from buying second homes here, which in turn hurts retail and construction sectors and depresses local economies.
One Montanan appears poised to do something about it. Kalispell resident John McMenamin is leading a bid to amend the state constitution in order to limit increases in property values.
The type of tax revolt that McMenamin mentions is reminiscent of California’s Proposition 13, which put strict caps on the allowable increases for property taxes and assessed values. Critics say Prop 13 led to major budget shortfalls that in turn sparked increases in the state’s sales tax; Prop. 13 is also blamed for California’s financial crisis.
Last year, McMenamin tried and failed to gather enough signatures to place a proposed constitutional amendment on the ballot that would have capped homeowners’ property tax increases at 1.5 percent a year. Now, McMenamin has a new idea: capping the annual increases on assessed value to 2.5 percent or 3 percent.
In the meantime, the DOR can only work with the laws it’s been given. And the agency continues to feel optimistic that people will gain more understanding in the months to come. Here’s how Dan Bucks described things in an interview:
• Only a few places in Montana saw large increases in their property valuations; the rest had no problems. For example, Bucks said 99 percent of agricultural-forest landowners were satisfied with their reappraisals and accepted them without protest, even though it was their first reappraisal in 46 years. “The high value of recreational lands attracted a lot of attention, but in overall numbers they’re a very small slice in the population,” Bucks said.
• Some of the shock at reappraisals is due to the fact that Montanans don’t know the actual real estate prices in their neighborhood. That’s because Montana is one of the few non-disclosure states in the country: sales prices go to the DOR, but are not public information. The lack of transparency paves the way for confusion about what’s selling and at what price.
“For example, people are saying there are no sales at all on Flathead Lake,” Bucks said. In fact, 19 sales have taken place on the lake, he said. “Sales are down, but they’re not absent.”
Bucks himself wasn’t immune from a property value spike. “I’m not on a lake. I’m on a typical lot in Helena, and my value was a 2.5-time increase,” he said. “When we see a big increase in our values, we’re going to have a lot of concerns,” he added. But he said DOR employees are offering respect and understanding, and taxpayers are responding in kind.
“I had confidence in Montana taxpayers and in our staff,” Bucks said. “And I think citizens are doing a great job, too.”