Taxpayer group plans litigation over appraisals

Even though there still are several active bills aimed at reforming the state’s property reappraisal system, a taxpayer group intends to pursue litigation because the potential legislative fixes don’t go far enough.

“What we need is protection from very, very large [tax] increases that are forcing some people to leave” their homes, said Dud Mahler, a spokesman for Montana Residents for Fair Property Taxation.

The group recently met with several Flathead Valley legislators, getting an update on the progress of legislation related to changing the Department of Revenue’s system of reappraising properties every six years.

The last reappraisal came out in 2008 and did not adequately account for a collapse in real estate markets. That led to sharply increased values on some properties, particularly waterfront properties, owned by a separate class of taxpayers now referred to as “outliers.”

Mahler said one bill would have provided outliers with significant protections, but it was deemed unconstitutional by legislative counsel. The bill would have established a baseline valuation year of 2008 and imposed a 3 percent cap on annual property tax increases.

Legislative attorneys, however, determined that would conflict with a constitutional provision requiring equalization of taxes, with increased value properties compensating for properties with reduced or stable values.

“They say it’s unconstitutional. We say it’s not unconstitutional,” said Mahler, adding that his group will wait until the end of the legislative session before pursuing the matter in court.

“We have tried to use the system and avoid a lawsuit if it all possible,” Mahler said, adding that his group has a law firm that will take the case.

“We don’t have a tax problem, we have a value problem,” said Mahler, who purchased a Whitefish Lake property in 1997 for $450,000 that will have an appraised value of $2.3 million by 2014.

Rep. Mark Blasdel, R-Somers, said the bill backed by Mahler did not get traction mainly because it was not expected to get past Gov. Brian Schweitzer, who has said he will not support constitutionally questionable bills.

But Blasdel, chairman of the House Taxation Committee, said there are a variety of other bills that will help outliers in the future.

Rep. Scott Reichner, R-Bigfork, has sponsored one measure that would require the Department of Revenue to use foreclosed properties as “comparables” that are used to assign values to other properties, rather than “cherry picking” high-value property sales as comparables.

There is a bill that would require the Department of Revenue to carry out reappraisals every two years rather than every six years, but it could run into difficulties because it would cost the state roughly $4 million more to administer, Blasdel said. Other reform bills come with a fiscal note that will make them harder to pass when the Legislature is geared toward spending cuts.

“They do cost money because the department claims they will need more staff to administer them,” Blasdel said.

Blasdel said he likes a bill that would shift the burden of proof to the Department of Revenue in the appraisal appeals process.

“The Department of Revenue would have to prove how they come up with their values instead of landowners,” he said. “They should have no problem showing the tax appeal board that they did everything right.”

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.

Another bill would require state appaisers to use uniform standards for appraisals that are required of private sector appraisers, which would amount to a significant shift from the current mass appraisal standard.

A bill co-sponsored by Sen. Verdell Jackson, R-Kalispell, has a tough road ahead largely because it is a constitutional referendum that would clear the way for the state to base appraisals on acquisition values with annual percentage increases, currently proposed at 4 percent.

That bill would require two-thirds majorities in the House and Senate as well as the support of Montana voters.

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