As Montanans around the state open their mail to find the new appraisal value for their homes set by the state, and in some cases are met with eye-popping increases, the process has created a lot of questions, confusion and blame.
The state Department of Revenue last November told legislators that residential market values were expected to increase about 43% as part of the two-year reappraisal cycle. That ended up being pretty close to the 45% median increase in values for residential properties statewide determined during reappraisal, according to the department.
The increases are not divided equally around the state, with Granite County seeing the highest spike in median residential value, at 67%, or a jump of $122,561. In total, 27 of the state’s 56 counties saw the median home value jump more than 40%. Only 11 saw single-digit increases.
People are also reading…
Contractors work to build a home in the Highland Meadows Subdivision in East Helena in March 2023.
A spokesperson for the revenue department said in an email Wednesday the increases in appraised value are driven by the spike in real estate prices Montanans have seen since the pandemic.
“The real estate market exploded in 2020 and 2021. Our valuation process is reliant on sales, and the impact of appreciation in the market has a direct impact to our valuation,” the spokesperson said.
A real estate report produced by Altos Research for the Helena market found the 90-day average home listing price went up 52% between January 2020 and January 2022, and DOR determined median home values in Helena went up 45% over the two-year appraisal cycle.
Commercial properties were not left untouched, with rates there increasing 26.79%, more than the predicted 16.7%, according to DOR.
The notices sent this month have caused confusion between higher property values and what property taxes might increase by. That’s because as everyone’s taxable value goes up, the share of tax obligations each home is responsible for will go down. Still, Republican state Sen. Greg Hertz, R-Polson, said people can expect to generally see increases in their tax bills.
“The biggest thing in regards to your appraisal notice is that if your property is up 30%, 40%, 50%, your taxes are not going up that much,” Hertz said. “Unfortunately the letter from the Department of Revenue overstated what people’s taxes are going up because they’re using existing mills, so that has added to the confusion out there.”
Mills can be understood as tax rates, and counties may lower the number of mills they assess to keep their revenues the same given higher property values. The revenue department estimated property tax increases in the letters to owners based on 2022 millage rates, which can change in 2023.
Montana Democratic Party Executive Director Sheila Hogan and Democratic State Rep. Jonathan Karlen held a press conference Wednesday laying the blame on any expected property tax increases squarely at the feet of Republicans, who hold a majority in the state Legislature. Democrats argued they brought bills that would have used some of the state’s $2.5 billion surplus for property tax relief, but the GOP did not support their policies.
“Right now is a period of a lot of uncertainty and people are scared,” Karlen said.
Karlen said Republicans voted down several bills from Democrats, such as House Bill 280, a so-called “circuit breaker” bill that would have created an income tax credit based on the amount of property taxes paid or rent equivalent. The program would have cost $82 million a year and about 87,000 households would have qualified, according to legislative records.
“We saw this time and time again, that every structural reform we made that would have provided Montana’s homeowners with really a historic level of property tax relief, they shot that down,” Karlen said. He also accused the GOP of not heeding the information from DOR foreshadowing the appraised value hike, saying the GOP is now shifting blame onto local governments and the portion of property taxes that come from their budgets and voter-approved levies that fund things like schools, fire departments and more.
Hertz, of course, has a different view on it than Karlen.
“The Montana Constitution requires the state to value properties across the state, so there’s nothing the Legislature can do to stop those valuation increases. They are what we are,” Hertz said.
While lawmakers could reduce how much of the valuation is taxable, Hertz said doing so for one class of property would only mean having to raise rates on a different class or reduce services.
The November 2022 report from DOR estimated that the current taxable value rate for residential property of 1.35% would have to drop to 0.94% to keep a neutral tax bill for residents.
Karlen said he also felt that adjusting those rates was just a “short-term fix to a broken system.”
Hertz said lawmakers passed other relief options for Montanans using the surplus, pointing to the income tax rebates that are expected to reach people in the coming months with $1,250 for individuals and $2,500 for married couples. There’s also a $675 property tax rebate, though it will not be available until later in the year. People will also have to apply for it, Hertz said, and that is because the Department of Revenue will require people to show they are full-time residents who have lived in the state seven months or longer, whereas the income tax rebates are sent automatically.
Hertz said where he lives in Lake County, property taxes are expected to rise between 12-15%, and he attributed 7% of that to a $40 million school levy passed recently.
The GOP senator cited legislation that passed this session like a bill he brought to require local governments to tell taxpayers when setting their budgets how much additional spending would make property taxes go up. A bill Hertz tried but was unsuccessful in passing would have required higher turnout in any election to increase property taxes through levies.
Hertz said he thinks solutions to property tax increases should come from both the local and state level. He cited a failed bill from Rep. Daniel Zolnikov, R-Billings, that would have limited revenue growth from local mill levies to 4.75%. Hertz also pointed to other bills that did things like use marijuana tax revenue to help reduce school taxes, which would lower property tax burdens.
Karlen, however, said voters around the state have not approved any levies adding to the local tax burden since lawmakers gathered in Helena in January. He also took jabs at other tax changes made during the session by Republicans that he said shifts the tax burden onto homeowners and renters. Those include increasing the business equipment tax exemption, a drop in the top income tax rate and cutting the capital gains tax.
Missoula County Commissioner Josh Slotnick also rebutted the notion local jurisdictions are wholly responsible for the jump in tax appraisals.
“I think they’re looking at the wrong side of the equation,” Slotnick said Wednesday. “Our levels of taxation reflect the cost of operating an effective local government, and our economy has changed. Our tax system should match our economy.”
While Slotnick advocates for a sales tax on tourist-specific items, like restaurants, bars, gasoline and hotels, he contends the revenue raised on such a theoretical tax would directly offset property taxes, rather than become a new pot of revenues for jurisdictions to allocate to different services.
Local sales tax options are hardly ever taken seriously by state lawmakers, and any suggestion of expanding population caps to the resort tax afforded to smaller municipalities like Whitefish and West Yellowstone have never gained traction in the GOP-led Legislature.
Slotnick said it is “highly unlikely” Missoula County will levy the same number of mills considering the value of a mill climbed thanks to the increase in home values.
In an effort happening outside the Legislature, Bozeman attorney and former GOP lawmaker Matthew Monforton again tried to bring a ballot initiative that would cap increases to taxable values at 2% unless there’s a change in property ownership. Monforton submitted the text of his proposed constitutional initiative for the 2024 ballot to the Secretary of State in April. On June 5, Republican Attorney General Austin Knudsen determined the initiative language was legally insufficient. In a petition Monforton filed challenging that determination before the Montana Supreme Court, he said the AG found a “nearly identical” initiative in 2021 passed muster. The court has not yet weighed in.
Holly Michels is the head of the Montana State News Bureau. You can reach her at holly.michels@lee.net
/cdn.vox-cdn.com/uploads/chorus_asset/file/25739950/247386_Elon_Musk_Open_AI_CVirginia.jpg "Inside Elon Musk’s messy breakup with OpenAI")
