State property appraisal: Hill Co. farmers pay more, businesses less

While the total should come out to be a wash statewide and in Hill County, state Department of Revenue tax value appraisals could mean some major shifts in taxes in this area.

At a recent meeting in Hill County discussing the results of property appraisals, Revenue Director Mike Kadas said his department expects to have final results of the most recent appraisal to release to the Legislature and the people of Montana in mid-November. Officials from Blaine and Hill counties attended the meeting in Havre to hear an overview of the process and results - including an expected 15 percent increase in taxes on Hill County ag land.

Kadas described the complex procedure of setting taxes starting with the appraisal, followed by the Legislature adjusting tax rates and exemptions to make sure the state rates are the same for agriculture, residential and commercial properties, then the local governments adjusting the number of mills they assess to pay for their budget.

He also noted that the estimates the department is releasing does not include a phase-in of changes, which is something the Legislature could implement.

Statewide, the total percent of the budget coming from each kind of property should stay about the same, Kadas said.

State Sen. Greg Jergeson, D-Havre, said that is statewide - that is not guaranteed for each county or local government.

"Depending on the ratio of each of those property types in any given taxing jurisdiction, it may not be taxable-value neutral," Jergeson said.

Kadas agreed, saying the Legislature only can deal with taxes on a statewide level and cannot adjust for local variations.

Kadas also said that, once the tax valuation comes out after the next legislative session and is sent out to every taxpayer, people have 30 days to contest the valuation. That will be mailed out next June or July, he said.

He said if people have a problem or concern, the first thing they should do is come to DOR, which has an informal review process. He said, last valuation, DOR was able to resolve 90 percent of the problems or complaints people had using that process. It also can help people understand what impact the valuation actually will have on their taxes.

Kadas said people may assume that because the taxable value goes up, their property taxes go up, but that not always is the case. The Legislature can adjust exemptions - such as the homestead exemption - to keep the total taxes in the state approximately the same. Local jurisdictions can adjust how many mills are assessed, which is a requirement to keep budgets at state-mandated maximums in some cases.

Kadas said increases in the value of agricultural land is mainly tied to increased prices for commodities and good harvests in recent years. The value of ag land is based on the revenue it generates.

Jergeson said the six-year rolling average can cause problems. While many local farmers had good years recently, late rain this year has hurt crops for some. That won't be included in the ag land appraisals for another six years, while a shorter period would allow it factor to in more quickly, he said.

Hill County Commission Chair Mike Wendland asked why, if things are changed so the end result is revenue-neutral, the appraisal is held.

"It looks to me like you're just kind of playing a shell game ... ," he said. "You make very little change. Why do it?"

Kadas said he believes having a system that made smaller, more frequent changes probably would require less adjustments and might work better, but the system has a lengthy history and would take significant effort to change.

It also attempts to take into account value changes such as the increase in property values in the Bakken, which would have other areas subsidizing that region if the appraisal did not happen, said Chuck Pankratz, DOR regional manager in Great Falls

DOR has put out an estimate, broken down into market value changes, taxable value, and expected taxes on a local and statewide level, with a final expected total tax change, which is available online at http://1.usa.gov/1DX5Sy3

People can go to http://revenue.mt.gov and click on "Reappraisal Road Show Shedule" and "Preliminary Estimates of Property Tax Changes Due to 2015 Reappraisal - Statewide and By County."

The list the department now has out predicts a total increase in Hill County agricultural land of 15.45 percent, with a 4.63 percent increase in taxes on residential property and a 33.5 percent decrease in taxes on commercial property. The taxes on a median home are expected to go up 2.25 percent, from $1,003 to $1,025.

Expected changes in this part of Montana vary widely.

In Blaine County, the taxes on ag land are expected to go up 1.27 percent, with taxes on residential property going up 15.76 percent and taxes on commercial property going down 13.07 percent. Taxes on a median home are expected to increase 13.07 percent, from $706 to $798.

In Liberty County, the total taxes on ag land are expected to go up 5.43 percent, with residential increasing 7.31 percent and commercial going up 14.41 percent. Taxes on a median home are expected to increase 4.89 percent, from $676 to $710.

Chouteau County is expected to see taxes on ag land to increase 8.39 percent, with residential property taxes increasing 13.97 percent and taxes on commercial property going down 35.43 percent.

The statewide averages are for ag land to see a 4.36 percent decrease in all taxes, with residential property taxes going up 2.18 percent and commercial property taxes going down 1.56 percent. The taxes on a median home in the state is expected to see on average a .28 percent increase in taxes, from $1,291 to $1,295.

In response to a question from the group, Kadas said the counties with higher levels of residential taxes tend to be the more urban areas - with more people, more services are necessary and more taxes are charged to pay for them.

Hill and Chouteau counties are in the second-lowest tier for Tax Year 2015 taxes for a median home, $801-$1,100, with Blaine and Liberty counties in the lowest tier, less than $800.

The Montana counties with the highest level of taxes for a median home, more than $1,500, are Gallatin, Flathead, Lewis and Clark, Missoula.