Agency, legislators to update reappraisals

Representatives of the Montana Department of Revenue were in Kalispell on Monday, gathering information on real estate market trends for a statewide property reappraisal.

Department Director Dan Bucks and several staffers heard from about two dozen local bankers, appraisers and Realtors as part of an unusual effort to bring the state's property valuations in line with volatile market trends.

Bucks said the effort is aimed at determining whether national housing market turmoil is affecting Montana when the state is nearing the end of a six-year reappraisal cycle.

"The Department of Revenue has never done this before," Bucks said, explaining a five-point plan for producing reappraisals that accurately reflect current market conditions.

The department typically would rely on housing sales data only up to January 2008, but this year the department will collect and use sales data through June 30.

The department will augment its information with external information sources such as multiple listing services. It also is contracting with two housing-market experts to help analyze the information and it is working with other public agencies that can assist.

"And we're holding these meetings across the state to try to get a picture of what the late-breaking markets are doing," Bucks said.

The department's task, he added, is to generate accurate valuations by this fall, before the Montana Legislature convenes in January.

"After we do our job, the Legislature will do its job," Bucks said.

Lawmakers have a head start in that task, with a special interim committee that has been involved in the reappraisal effort for several months. The committee recommended the Department of Revenue's new approach to the reappraisal.

Over the next few months, the committee will develop legislation to mitigate the impacts of higher valuations on taxpayers, and it will attempt to propose property tax reform measures.

The Flathead Valley real estate experts at Monday's meeting confirmed that local market conditions have indeed been dynamic in recent months.

The group came to a consensus that the market has been in a decline, particularly for high-end housing properties. Realtors reported instances of homes selling for prices below their original listing prices.

One Realtor cited the example of a house selling for $265,000 in 2007. But this year, two houses with the same floor plans, in the same subdivision, sold for $250,000 and $251,000.

Veteran appraiser Jim Kelley reported that the Flathead Valley's residential sales volume is down 27 percent this year compared to the first five months of last year.

"The basic message is we're seeing a decline in the real estate market," said Rep. Jon Sonju, R-Kalispell, who sits on the Legislature's interim revenue committee.

Sonju said the Department of Revenue's outreach efforts are a "great start" in developing accurate, up-to-date property valuations.

"I think it's a good-faith effort on the part of the Department of Revenue," he said.

Rep. Mike Jopek, D-Whitefish, also sits on the interim committee, which has six Republicans and six Democrats.

Jopek said he also is confident in the way the department is approaching the reappraisal process.

"But all that basically does is get us to the starting gate," he said, noting that the committee will develop a recommendation to offset the effects of higher property valuations.

The committee could propose continuing current homestead exemptions that prevent property tax rates from being applied to one-third of a property's appraised value. It could recommend raising the exemption, cutting property tax rates, or setting a limit on the amount tax bills can increase.

"There's a lot of us, myself included, who believe in property tax reform," said Jopek, adding that the committee will consider additional measures for long-term changes to the state's property tax system.

The committee is studying approaches taken by several different states.

Florida, for example, provides a homestead exemption and deducts a set dollar value off of property taxes for in-state residents. California bases property values on actual sales prices, with tax increases limited to a low-inflationary rate.

Jopek said the committee represents a considerable political change over the past practice of a majority party deciding on a tax policy after a November election.

He said there is consensus on the committee to come up with a bipartisan tax package that will be presented to the Legislature, and Gov. Brian Schweitzer's administration has indicated it will be receptive to the committee's proposal.

"That's the message I'm getting," Jopek said.

Sonju said he hopes that candidates in the coming election will have incentives to support the committee's proposals.

"Maybe this election year will work in favor of taxpayers," he said. "I don't know of any governor candidate who is going to come out in this stale economy and say I am going to raise your taxes."

But Sonju is wary of the usual forces that lead to political friction in Helena: There will be pressures to increase funding for schools and state agencies, there will be pressure to hold the line on taxes, and he predicts there will not be a record budget surplus like there was last year.

"I think it's a good way to look at these issues," he said of the interim committee's work. "But the fact remains, you have to take your proposal to the full Legislature and that political environment and it's hard to get 150 members to go a certain way."

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com