Residents say tax system 'broken'

The state's property tax systems is broken, area residents told Montana legislators at a town hall meeting last week at Flathead Valley Community College.

Nine state legislators, all Republican, were present at the session, which gave people a chance to air their concerns and suggest solutions.

This was the second meeting organized by Rep. Scott Reichner of Bigfork held in response to concerns he received about the recent reappraisal cycle that more than doubled some residents' property taxes, particularly for those with lakefront property.

Every six years, the Montana Department of Revenue is required to reappraise properties for tax purposes. Property taxes are used to fund education, local government and other services in the state. The most recent reappraisal cycle ran from Jan. 1, 2002 through July 1, 2008, which some say doesn't take into account the decline in area property values.

PROBLEMS

Taxable property values in the most recent cycle were significantly raised for some residents in Flathead and Lake counties and more than area legislators say they expected.

Rep. Mark Blasdel, R-Somers, said the majority of his constituents, which include the residents of Lakeside and Somers, have been affected.

"Two-thirds of my district got absolutely crushed by this," Blasdel said. "I've definitely heard from folks and am sympathetic. I did not suspect this big of an increase to happen when we worked on the bill."

Legislators attempted to mitigate the effects of the reappraisals through House Bill 658, which gradually builds up to the full increase over six years.

Many of the more than 100 residents present expressed concerns that this bill does not seem to do enough to help.

"It looks like you're putting chrome wheels on an old truck. You still have an old truck," John Fuller of Whitefish said.

Sen. Ryan Zinke, R-Whitefish, said it came down to choosing the bill he hated least. If it didn't pass, he pointed out, residents would have had to pay the whole increase up front rather than gradually building up to it.

"The bill is bad," Zinke said. "I think there wasn't a bill on the floor that was better. At the end of the day, you swallow it so you can fix it later."

Part of the problem, Sen. Verdell Jackson, R-Kalispell, said, was that the numbers and graphs legislators had to go by from the Department of Revenue were inaccurate. The graphs showed the bell curve of the change in property tax liability in the reappraisal to be more in the middle. The actual result shows more outliers and more people with increases in property taxes, he said.

Several legislators expressed frustration with the department.

"We don't represent the Department of Revenue," Rep. Janna Taylor, R-Dayton, said. "We are as angry with the Department of Revenue as all of you."

Several people pointed out that state appraisers aren't required to follow the same procedures or be licensed like private, independent appraisers.

Residents asked what the legislators would do to hold the Department of Revenue accountable.

Sen. Bruce Tutvedt, R-Kalispell, who sits on the revenue and transportation committee, said the committee already met with Director Dan Bucks and went over concerns. They plan to continue to work on it, but progress is slow.

Another problem locally has been that features like power lines or roadways running through property and unbuildable portions of the land weren't taken into account in the reappraisal process. It was up to taxpayers to realize that and go in to get those recognized.

At the last meeting, Scott Williams, regional manager of the Department of Revenue, said he recognized there were problems, which partially had to do with a new computer system.

Several residents also expressed concerns with the navigation of the property tax system.

West Glacier resident Jim Malone said he initially didn't file the informal review form because he was under the impression his taxes would only be going up 9 percent a year; when he got his bill, it was 20 percent.

Zinke said that if residents weren't able to read what their tax bills were going to increase that it was a problem.

Adele Krantz, Flathead County treasurer, said her office is required to follow what the Department of Revenue gives them, but she sympathizes with those who are struggling with their assessment amounts.

"I feel for you. I'm in the same situation," Krantz said.

Others suggested that the system puts too much on property owners who have the burden of proof to demonstrate their reappraisals are inaccurate.

Legislators were optimistic that solutions to these problems could be found.

"What man breaks, he can fix," Zinke said.

SOLUTIONS

Several residents shared their plans to take the situation into their own hands. Dud Mahler, a Whitefish resident representing a group called Montana Residents for Fair Property Taxation, said he made presentations to legislators without success in 2005, 2007 and 2009 on a bill that could change the system.

"I think the system is broke unless we do something to make it impossible to use the same mitigation techniques," Mahler said. "What we've decided to do is sue the state."

The goal is to get the bill canceled, he said.

"If we can go to court and get a good ruling, it will open the door to you to put in what you think is the right solution," Mahler told legislators at the meeting.

Mahler, along with resident Bruce Tate, passed around clipboards at the meeting for people to sign up for more information about the suit or if they were interested in getting involved.

Gridlock in the legislature may prevent a solution, Tate said, which is why he is on board with finding a good constitutional law attorney for a class-action lawsuit.

Plans are also in the works by residents for a ballot initiative for a constitutional amendment, Reichner said.

Another resident encouraged those in attendance to send their assessments and tax calculator print outs to legislators and the governor's office. A lot can be said for education, Debbie Biolo said.

Biolo herself went to Helena and testified before an interim committee recently along with some of her neighbors. She said members were receptive and "flabbergasted" by the appraisals. She brought packets and presented information for those present to contact the committee and different government officials.

Other suggested solutions included an exemption for residents of Montana and following the examples of other states like Proposition 13 in California, which established base years, a set rate and only reassesses when there is a change of ownership or construction.

Bob Depratu, a former state legislator, said he had a rough time when he proposed options for changing the property tax system. A proposal for taxes based on acquisition prices was killed by the Montana Association of Realtors, he said. And a bill that tried to set a cap on increases met resistance from the east side of the state after attorneys said it would also have to set a cap on decreases. At the time, eastern Montana was seeing significant decreases in property values.

"It was a no-win situation at that point in time," he said.

Some residents suggested adopting a sales tax, but a former legislator in the crowd said proposing a sales tax would be an "albatross around any political person's neck."

Rep. Bill Beck, R-Whitefish, said the state constitution allows for a 4 percent sales tax that the legislature could enact.

"I'm not sure if anyone's brave enough to bring it forward," Beck said.

Jackson said he has Legislative Services working on an amendment to the Montana Constitution to strike a line that requires equalizing value in property taxes. He said he is also looking at taking the mill levy for education off of the backs of taxpayers and subsidizing it elsewhere.

"We all agree that what happened shouldn't have happened and it did," Beck said. "It isn't going to be any quick fix. We need to go into the next session with a plan."

Reichner said the legislators will look to meet with other officials in the state whose districts experienced similar problems and build a contingency to propose solutions. He said they would push for a special session, since the legislature is not slated to meet again until 2011, but the governor may not grant it.

"We've got your message," Reichner said. "We have heard you. What we hope to do is move forward. We are going to do our part on the legislative side. We can't wait until 2011. We want to do it now."

Reichner said all of the other area representatives of both political parties had been invited but had scheduling conflicts. Representatives of the Department of Revenue had also been invited to the meeting but could not attend.