HELENA — State Revenue Director Mike Kadas on Thursday gave an interim legislative committee an update of Montana’s next reappraisal of residential and commercial property and a preview of some trends.
“We’re closing out this reappraisal cycle and starting a new cycle,” Kadas told the Revenue and Transportation Interim Committee.
The department appraises residential and commercial properties every six years to come up with new values for tax purposes.
In the past, the Legislature often has taken steps to prevent the new values from going into effect immediately. For residential property, it has phased in the new values, tax rates and the homestead exemption deduction to ease the impact of the higher values on homeowners.
After those phase-in calculations, new taxable values are determined for pieces of property. State and local mill levies then are applied to them to determine the property taxes on individual pieces of property.
Kadas said the department intends to get preliminary reappraisal information to the committee in November 2014 and final data to the Legislature in February 2015.
Looking ahead, he said the department has found three different scenarios in housing values over the past six years.
First, Flathead and Gallatin counties saw significant increase in residential property values before the last reappraisal, followed by significant decreases in values since then.
“I think there’s a decent chance we’ll see values climbing back to where they were,” Kadas said. “There might not be much change.”
Next, few changes in residential property values are likely in Cascade, Deer Lodge, Lewis and Clark, Silver Bow and Yellowstone counties in the upcoming reappraisal, Kadas said.
“They will be pretty close to where they were before,” Kadas said.
Missoula County would fall somewhere between these first two categories, Kadas said.
The third trend, he said, is the likely large increase in property values in northeastern Montana, home to the Bakken oil development.
Rep. Roy Hollandsworth, R-Brady, said he had heard reports of people selling houses worth $40,000 to $50,000 for four times higher because of the great demand for houses in the Bakken.
“They’re going to scream,” he said, referring to the likely big increases in property increases.
In response, Kadas said, “Our charge is to equalize the valuations. If the market says your property is worth more, that’s the case.”
The revenue director said if the market values of homes in the Bakken area rise by 50 percent, local governments and school districts have capping methods to hold down property taxes.
“It will be a major point of discussion,” Kadas said. “We’ve done it before, and you have, too.”
Rep. Mike Miller, R-Helmville, asked Kadas if any pending lawsuits would affect the department’s reappraisal schedule.
Kadas said one major case that could is before the Montana Supreme Court, with a decision expected this fall.
The plaintiffs in the case are questioning the legality of the department assessing property above the true market of the property.
The lawsuit prompted the department to ask the Legislature to change the law to switch to a two-year reappraisal cycle from the current six-year reappraisal cycle. However, the bill failed to pass in the 2013 Legislature.
“As we get into the fall, we’ll get a decision,” Kadas said. “It could be, ’OK, start over,’ which would be very expensive, or ‘You did it right,’ or ‘You did it wrong. Get a new cycle and change it.’ “
He said he will keep the legislative committee informed.