A silver lining for homeowners

Legislator says property-tax committee is coming up with 'tame' reappraisal numbers

by RICHARD HANNERS

Sometimes timing is everything. Montana's six-year property-tax reappraisal cycle is coinciding with a nationwide housing slump, paradoxically lumping together the prospect of higher taxes with falling home prices.

But a legislative committee may have good news for homeowners, who could have a serious shot at tax reform this legislative session.

A bill introduced in 2007 by Rep. Mike Jopek, D-Whitefish, authorized the joint Revenue and Transportation Interim Committee to study the state's property tax system. Jopek said the bipartisan committee has met three times.

Statewide, property values appear to be equalizing on their own, Jopek said. Traditional low-growth areas are growing faster, and high-growth areas are slowing down.

"From a reappraisal point of view, it's a good time — it's easier to be equitable," he said. "However, it makes it harder to change the system."

The recent housing slump is also making it harder to justify capping property values, something Jopek says he advocates.

At this point, the committee is considering using appraisal numbers from 2003 and looking at other state tax systems. Growth for certain districts is factored in, and the numbers are run through a computer.

"The early numbers from the Department of Revenue are not bad," Jopek said. "They're pretty tame."

Some states cap property values by district, not statewide, he said, and it's possible to cap property values by counties or even school districts.

"Some areas grow like mad, while others not at all," Jopek said. "In Montana, the 95 mills that go to education mean high-growth areas tend to pay for low-growth areas."

He noted that some states use a sales tax to fund education, something that is not likely to happen in Montana.

"I sympathize with the seniors and fixed-income folks, especially in high-growth areas," he said. "We need to find a solution."

If the committee sees property taxes doubling, they will likely take a second look at the homestead exemption or other mitigating factors, he said.

"The consensus is that it's time for homeowners to move up front for tax reform," Jopek said. "Historically, they've come in toward the bottom."

Among the options — increase the homestead exemption, which currently exempts about one-third of a residential property from taxes, lowering the tax rate or creating new "circuit breakers," such as a cap on appraisals based on the homeowner's income level.

Jopek said the revenue department is trying something new this year called "neighborhood modeling."

"The idea is to compare traditional homes together," he said. "McMansions are done against each other. Like homes are appraised together."

Jopek couldn't say for sure how much tax-shifting might take place locally. Conventional wisdom is that taxes on lakeshore and view properties will increase significantly more than other locations.

"But if they're second homes and the owners are not paying state income tax, then they're not contributing to higher education, mental health and other state expenditures," he said. "So it's a mixed bag."

With the legislature typically looking at more than 2,000 bills when it meets in January, and "powerful lobbyists" roaming the halls in Helena, now is the time to study the situation and come up with a solution, Jopek said.

He also noted that the committee would likely call for delaying new reappraisals next year if the numbers indicate too many homeowners will be affected.

In the meantime, a Kalispell man who estimates his property taxes could double in the next reappraisal cycle is collecting signatures for a constitutional initiative that would cap property-tax increases for homeowners at 1.5 percent per year.

John McMenamin said his property taxes doubled over the last reappraisal cycle. His proposed cap would apply only to owner-occupied homes and could be transferred to a spouse, child or grandchild.

The Secretary of State's office estimates CI-99 could cost the state an estimated $1.7 million by 2010, but it would have "a greater impact on local governments and school districts." McMenamin, however, said local government would not be hampered because CI-99 does not apply to taxes on commercial property or new development.

A constitutional initiative needs 44,615 signatures to qualify for the ballot. McMenamin said he may not collect enough signatures by the June 20 deadline.