During the campaign for the 2011 Legislature, many of the Flathead’s candidates said amending Montana’s property value reappraisal process would be one of their top priorities. Now, with over half of the session completed, it is unclear whether a major reappraisal overhaul will survive the session.
And while there are still several active bills that could change certain aspects of the reappraisal process – including a possible Constitutional amendment – a group of landowners is not convinced lawmakers’ efforts go far enough to alleviate the tax increases brought on by the 2008 reappraisal and intend to sue the state.
Reappraisal is a constitutionally mandated process that takes place every six years. By law, reappraisal must be a revenue-neutral endeavor for the state.
The 2008 reassessment brought little change for most state residents due to a mitigation law passed by the 2009 Legislature. On average, property values increased by 55 percent. In Flathead County, however, property values increased by 73 percent.
Waterfront property owners in recreational areas such as Whitefish and Flathead lakes saw major jumps in their market values, which meant spikes in property taxes.
The new valuations also came as the economy tanked and property values dipped. Lawmakers held several town hall meetings in the interim, during which property owners offered suggestions on how to help with the drastic tax increases.
One of those suggestions was to sue the state for lack of equal protection by placing a large tax burden on a small portion of the population. This is an angle the Montana Residents for Fair Property Taxation intends to pursue, according to Whitefish member Dud Mahler.
The group’s biggest concern is for landowners who have lived on their properties for years and are now facing property value increases of 400 percent or more. Many cannot afford the accompanying tax increase, Mahler said.
“The people on the lake, the old-timers, they have to pay up or move,” he said.
Mahler said his organization will wait to see the final results from lawmakers before filing suit, but none of the bills still alive in Helena address the 2008 revaluation numbers.
“None of them are real tax reforms, they’re Band-Aids,” Mahler said. “The problem is that the tax increases due to reappraisal are just so high for us that we don’t have any alternatives.”
Rep. Mark Blasdel, R-Somers, said Flathead lawmakers have made some progress dealing with the complicated reappraisal process, but it has been a tough road for many of the bills.
One of the biggest hurdles the legislation faces is the size of the hardest-hit population, he said.
“One of the issues is, first, that there’s such a small sector of the Legislature that had this issue happen to them,” Blasdel said. “Even if you take a look in the Flathead, there’s certain areas that weren’t really affected, but the recreation areas were – drastically.”
“Major changes in the Legislature are very difficult, especially when you’re discussing such a minor segment (of the population),” he added.
Blasdel said the state Department of Revenue has also come out against most of the bills attempting to adjust the reappraisal process.
One of the major measures, House Bill 308, would present Montana voters with the option of changing the state’s Constitution to make reappraisals based on acquisition value instead of market value.
This change, sponsored by Rep. Pat Ingraham, R-Thompson Falls, would also limit valuation increases to 2 percent or the rate of inflation, whichever is less.
HB 308 is still in the House Taxation Committee, which Blasdel chairs. He said the committee is working on giving the bill wider appeal to lawmakers, since two-thirds of the Legislature must approve it before it could appear before voters.
Another of the live bills, House Bill 463, would force the Revenue Department to prove that its market value reassessment is correct. Currently, if property owners believe their reappraisal was incorrect it is up to them to prove the state is wrong, Rep. Scott Reichner, R-Bigfork, said.
HB 463 made it out of the taxation committee and passed second reading in the House, but was then sent back to committee.
Reichner also sponsors House Bill 333, which would force the Revenue Department to take foreclosure sales into account while assessing residential market values in an area if such sales constitute more than 5 percent of that area’s market.
The House gave final approval to HB 333 with a 71-27 vote, transferring it to the Senate. Blasdel noted that HB 333 has a $300,000 price tag attached to it, which could make it a tough sell during a budget-cutting session.
Another reappraisal bill, Senate Bill 295, sponsored by Sen. Bob Lake, R-Hamilton, would allow annual informal reviews of classification and appraisals. It received unanimous support from the Senate Taxation Committee.
Both Reichner and Blasdel said the reappraisal bills have also taken an uncharacteristically partisan turn this session. Reappraisal tends to pit lawmakers from eastern and western Montana against each other, Blasdel said, since the revaluation process usually has little negative affect on the east side.
But that seems to have changed this year, Blasdel said.
“What has happened is actually the east was affected but they were affected through the agricultural end,” he said. “They have some of the same issues just in a whole different realm.”
Reichner’s House Bill 567, however, received bipartisan support with a unanimous vote of approval in the taxation committee. The bill would allow extended assessment reviews for reappraised properties.
Montana Residents for Fair Property Taxation helped draft a bill that would have removed the six-year phase-in process, which Mahler contends is unconstitutional, and capped taxable value increases at around 2 percent.
The bill died in the drafting process.
“We decided that we didn’t have any alternative but to sue because we’ve got to have that tax reform,” Mahler said.
Blasdel said he had hoped the group would file suit before the legislative session began so lawmakers would understand the gravity of the situation these property owners face.
“I have to point out that there’s nothing equitable when people are losing their homes,” he said.
Reichner said lawmakers would continue to work to get the remaining bills through, despite the tough road so far.
“Overall, we’re working hard for our people and trying to make some changes,” Reichner said.
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