HELENA - A Flathead County lawmaker on Monday called for legislation allowing residential property owners to pay a lower property tax rate if they can prove - through a private appraisal - that their property has fallen in value since the state's 2009 reappraisal.
Sen. Bruce Tutvedt, R-Kalispell, presented his proposed bill idea to a subcommittee of the Revenue and Transportation Interim Committee. It will go before the full panel Tuesday.
To qualify for the lower tax rate, Tutvedt said the value of the property must have dropped by 5 percent or $50,000 since the 2009 reappraisal. Those tentative numbers are subject to change, he said.
"There is a lot of angst in Flathead County," Tutvedt said, referring to high property values and taxes.
Sen. Christine Kaufmann, D-Helena, asked Tutvedt whether he would put an "income test" in the bill, or whether someone with a $200,000 income would be eligible for the tax reduction. Tutvedt said he doesn't favor an income test.
Some lakefront property owners on Flathead Lake testified that the values the state set for their property during the 2009 statewide reappraisal failed by large margins to accurately capture the declining values.
However, Alan Peura, the deputy Revenue Department director, disagreed citing a study done for the agency by a prominent national consultant that concluded the reappraisal "was in fact very accurate and most accurate in Flathead and Lake counties."
The Flathead Lake property owners couldn't have disagreed more.
Urban Roth, a retired Butte attorney who lives on Flathead Lake, said lakefront property sales there fell from $61 million in 2006 to $19 million in 2009, demonstrating that the "real estate bubble" there had burst.
He said there were wide disparities in how the Revenue Department came up with values for a lakefront foot of property in the four-home subdivision in which he lives. The values ranged from $10,000 to $5,200 to $4,300 per frontage foot for properties that are essentially the same, Roth said.
He suggested that the state switch to annual reappraisals that could catch shifts in property values and the department visually inspect each property. These changes would help avoid the disparities that have arisen following the 2009 reappraisal, he said.
Gary Wicks, a former department director under two governors who now lives on Flathead Lake, also endorsed changes for how lakefront property is appraised.
"This is a flawed process," Wicks said. "I don't think the process is fair or uniform."
He presented copies of four informal appeals, known as AB-26 appeals, filed by lakefront property owners in Lake County. These four appeals resulted in the Revenue Department significantly lowering the property values for the Flathead Lake property.
Wicks said the value of one property was lowered from $1.7 million to $1.1 million, while another was dropped from $1 million to about $650,000.
Wicks told of one lakefront property on Flathead where the Revenue Department valued it at $1.7 million. Its value was adjusted to $711,000 after an informal appeal. The property sold last month for $326,000.
These results violate the property tax uniformity required by law, Wicks said. It is not uniform when property owner can get his value reduced by up to 50 percent through an appeal, he said, while the neighbor who doesn't appeal must pay taxes based on the artificially high value.
He said up to $25 million of residential property has been taken off the tax rolls by lakefront property owners on Flathead Lake who plant 120 fruit trees on their land. They then receive an agricultural property tax rate and see their values and property taxes fall significantly. Five more property owners planted apple or cherry trees since the 2009 reappraisal to get the agricultural tax break.
"If I could figure out a way to get an orchard on my property, I would do it," Wicks said. "Unfortunately, I live on rock."
Sen. John Brueggeman, R-Polson, also testified, telling the subcommittee: "Government exists to protect people's property. We have become the cheap threat."
Under the current reappraisal system, Brueggeman warned that the only people who will be able to afford to live on lakefront and riverfront property will be "wealthy out-of-staters."
In the 2011 Legislature, Brueggeman said he intends to devote much of his energy on a proposal to base the value of property on its acquisition value, or the price that the owners paid for it.
"If that doesn't work, we're probably going to have a citizen initiative," he said.
Missoulian State Bureau reporter Charles S. Johnson can be reached at (406) 447-4066 or at email@example.com.