County works through millions in tax receipts

Getting to Adele Krantz’s office takes a bit of navigating.

Among the cubicles and desks outside her office as Flathead County treasurer are boxes of tax bills — paid tax bills — that await processing. Shorthanded in the office, Krantz and her staff are working overtime to get the green envelopes opened and the taxes filed on the more than 60,000 property tax bills that are paid through her office.

Property taxes were due Nov. 30, but because that date fell on a Sunday, taxpayers had until Monday to get their taxes paid. One taxpayer stepped up to the window to pay her tax bill on Tuesday. “I just spaced it out,” she told the clerk at the window, who informed the customer about a 2 percent penalty on late payments.

Inside the treasurer’s office, workers kept their heads down and hands working as they opened the green envelopes.

“It’s a been a wild and crazy tax season,” Krantz, who is in her 34th year in the treasurer’s office, said.

There’s money in those boxes. Some days the treasurer’s office will process $10 million to $15 million in payments. The county sent out $154 million in tax bills this year.

One person at the payment window asked why his tax payment check had still not been cashed. Krantz told the man, politely, “We’re a little overwhelmed right now.”

Most people aren’t angry about their taxes, though. Those people usually show up in the first year of a tax appraisal cycle, which was six years ago. A new appraisal cycle begins Jan. 1, 2015.

Krantz brought in a clerk from the Motor Vehicle Department to help process tax payments. “We’re trying to get everybody to help,” she said.

This year Flathead County had a record low tax delinquency rate. The county logged about $1.5 million in delinquent tax accounts, most of which were purchased by investors who can legally buy the tax deed on the property once the taxes are delinquent. Krantz remembers some years where the delinquency rate was over $10 million.

One man who was particularly angry over his tax bill is Don Abbey, a real estate investor who is disputing the taxes on his $59 million home on Flathead Lake. He is asking the state tax appeal board to reduce the assessed value of his Flathead Lake island home by $32 million.

Abbey of La Mirada, Calif., wants his annual property tax bill of $367,700 reduced by at least two-thirds on his Shelter Island property on Flathead Lake.

 Last week, a dozen attorneys and expert witnesses spent three days before the State Tax Appeal Board in Helena arguing whether the state properly assessed Abbey’s extravagant home and other structures on Shelter Island. Abbey built the home and boathouse in 2011 and has it listed for sale, with an asking price of $59.5 million, which also includes most of the wooded island just off the western shore of Flathead Lake near Rollins.

The state says the 24,000-square-foot, three-story home and other improvements on the island, such as a 5,000-square-foot boathouse and apartments, are worth $41.8 million, and the state is basing property taxes based on that value.

A Missoula appraiser hired by Abbey said the home and other structures should be assessed at $9.8 million.

Once attorneys for both sides submit final, written arguments next week, the two-member board will have 90 days to make a decision — which sources say will be appealed to state District Court, by one side or the other.

Department appraisers compared the property to similar properties outside the state but didn’t make adjustments for its Montana locale, he said.

His lawyers also argued that the agency failed to account for something called “functional obsolescence.” The property has been “overbuilt” to Abbey’s specifications, such as the two-foot-thick stone walls, but those amenities don’t add value to the house because any buyer may not want to pay for that preference, they say.

William VanCanagan, a Missoula lawyer representing Abbey, said Wednesday they also presented expert testimony alleging that “excessive” valuation of homes like Abbey’s will discourage wealthy individuals from coming to Montana and contributing to the local economy.

“If the message to prospective residents of Montana is that they’re not going to be taxed fairly, they’re not going to come here,” he said.

The state rejected the functional-obsolescence argument, saying that whoever buys the property would consider the quality of the construction.

“[We] determined that there is value in high-quality construction and design and architecture, and that there is a market of buyers who understand value, and that there is a market of people out there who want quality,” said Dan Whyte, an attorney for the Department of Revenue. “So, no reduction is necessary.”

The state hired its own experts from Mercer Island, Wash. They disagreed with the appraisal prepared by Abbey’s expert in Missoula.

Abbey has been paying taxes under protest on the island property since 2012, when the assessment was issued. He also owns two other parcels on the lake’s west shore, near Shelter Island, assessed at a collective $2.7 million.

The money that people like Abbey pay in taxes gets distributed to the organizations listed on their particular tax bills. Some money goes to schools, some might go to a weed district, schools, sewer and water, and some might go toward a TV district, like the one near Bigfork.

In Krantz’s small, modest office, an empty box sits next to her desk. That’s the box she’ll take home and work on tonight, processing dozens more tax payments. It’s one less box the staff will have to deal with tomorrow.