Taxpayer group plans litigation over appraisals
While several bills aimed at reforming Montana’s property-reappraisal system remain active in the Legislature, a local taxpayer group says it intends to pursue litigation because the bills don’t go far enough.
“What we need is protection from very, very large increases that are forcing some people to leave” their homes, said Whitefish Lake resident Dud Mahler, a spokesman for Montana Residents for Fair Property Taxation.
The group recently met with several Flathead Valley legislators and got an update on the progress of legislation related to changing the Department of Revenue’s system of reappraising properties every six years. They also held a public meeting in Kalispell on Feb. 26.
According to the group’s spokespersons, the 2008 reappraisal did not adequately account for a collapse in real estate markets. That led to sharply increased values on some properties, they say, particularly waterfront properties owned by a separate class of taxpayers referred to as “outliers.”
Mahler purchased his Whitefish Lake property in 1997 for $450,000. By 2014, the appraised value will be $2.3 million, he said.
One bill in the legislature would have provided outliers with significant protections, Mahler said, but it was deemed unconstitutional by legislative counsel. The bill called for establishing a baseline valuation year of 2008 and imposing a 3 percent cap on annual property tax increases.
Legislative attorneys, however, determined that would conflict with a constitutional provision requiring equalization of taxes — the idea is that properties with increased values compensate for properties with reduced or stable values.
“They say it’s unconstitutional. We say it’s not unconstitutional,” Mahler said.
The taxpayer group will wait until the end of the legislative session before pursuing the matter in court, he pointed out.
“We’ve tried to use the system and avoid a lawsuit if at all possible,” Mahler said. “We don’t have a tax problem, we have a value problem.”
According to Rep. Mark Blasdel, R-Somers, chairman of the House Taxation Committee, a bill backed by Mahler did not move through the legislature mainly because Gov. Brian Schweitzer was not expected to sign it. Schweitzer has said he will not support constitutionally-questionable bills.
But a variety of other bills have been proposed that will help outliers in the future, Blasdel said.
A bill proposed by Rep. Scott Reichner, R-Bigfork, would require the Department of Revenue to use foreclosed properties as “comparables” to assign values to other properties, rather than “cherry picking” high-value property sales as comparables.
A bill that would require the Department of Revenue to carry out reappraisals every two years rather than every six years could run into difficulties because it would cost the state roughly $4 million more to administer, Blasdel said. Other reform bills have similar problems at a time when the legislature is trying to cut the budget.
Blasdel said he likes a bill that would shift the burden of proof in the appraisal appeals process to the Department of Revenue. That bill, however, would cost an estimated $300,000 per biennium.
Another bill would provide landowners the ability to appeal their appraised values every year. In the past, they’ve been required to appeal in a limited period soon after receiving their appraised values.
A bill co-sponsored by Sen. Verdell Jackson, R-Kalispell, calls for a constitutional referendum allowing the state to base appraisals on acquisition values with annual percentage increases, currently proposed at 4 percent. That bill, however, would require two-thirds majorities in the House and Senate as well as the support of Montana voters.