Property Reappraisal Pushback
Property Reappraisals Illegal? New Lawsuits Say Yes
Property owners charge that steep reappraisal values are “fatally flawed” and illegal.By Dan Testa, Flathead Beacon, 2-02-10
Photo by Lido Vizzutti, Flathead Beacon
Saddled with soaring tax bills, several Montana residents—most of them from Flathead and Lake counties—have filed lawsuits against the Montana Department of Revenue, challenging how the state carried out its property reappraisal.
On Jan. 19, Kalispell attorney Dale McGarvey sued the Revenue Department in Flathead District Court over the reappraisal of two Whitefish Lake properties owned by the McGarvey Family Limited Partnership, Elsie Taylor (formerly McGarvey) and himself. According to the county assessment notice provided by McGarvey, a cabin he owns on Whitefish Lake with 50 feet of frontage was valued at $131,396 in 2003, the previous reassessment cycle. Its 2009 appraisal value was $1.4 million, despite a moribund real estate market due to the financial crisis.
“I think I’ve got a 99.9 percent chance of winning this case because it’s wrong; it’s dead wrong,” McGarvey said last week. “When the economy falls off a cliff, you’ve got to recognize it.”
The same day that McGarvey filed his claim, William Solem and his wife, Ellen, of Chinook, filed suit in Flathead District Court over the tax assessment of property they own in Lakeside, accusing the Revenue Department’s reappraisal process of being “fundamentally flawed in that it is speculative, arbitrary and capricious resulting in the unlawful taking of property.”
A few days later in Lake County District Court, Richard and Kathryn Schreiber filed a lawsuit against the Revenue Department charging that the 2009 tax assessment on a property they own along Montana Highway 35 is “fatally flawed,” making the taxes on their land “illegally and unlawfully imposed.”
In addition, Patty Lovaas, a Missoula-based certified public accountant, filed a lawsuit against the state last month in Beaverhead County, where she owns property. (An earlier federal challenge by Lovaas, in which she argued that Montana’s reappraisal system violated the state and federal constitutions, was dismissed by U.S. District Judge Donald Molloy.)
At the heart of these lawsuits is the assertion that the property reappraisals conducted by the Revenue Department failed to take into account market conditions, namely the plunging property values that occurred during the first half of 2008 beginning in March, and that the state is now taxing these lands at their peak value when today the property is worth significantly less. The Revenue Department used July 1, 2008 as its benchmark date for property values.
In early 2008, McGarvey said his real estate broker wouldn’t even accept listings for his two Whitefish properties when he tried to put them on the market, due to the decline in property value.
“She recognized the bubble had burst and she’s not going to touch it,” he said.
“You can’t take market conditions that existed before things went to hell in a hand basket and use them to value things after you’ve got the worst economy since the Great Depression,” McGarvey added. “You must have comparable market conditions.”
As a result, his lawsuit charges, the property taxes based on these values are illegal.
Under the Revenue Department’s latest reappraisal, property values in Montana increased an average of 54 percent statewide. Property values fluctuated throughout the state, with steep increases in rapidly growing western Montana and declines in areas of the state’s eastern half, where some counties have seen population declines. In Flathead and Lake counties, the issue has become politically charged, with local legislators holding multiple public meetings where angry taxpayers have been airing their grievances.
McGarvey emphasized his legal action was deliberately apolitical, and that he would consider a class action lawsuit if the issues aren’t resolved.
“I am after a nonpartisan effort here,” he said. “I want to make it the law that they would comply with the (reappraisal) standards as I have set forth.”
In an interview last week, Revenue Director Dan Bucks stood by the values assessed by his department in the 2009 appraisal, saying they met or exceeded the standards of the International Association of Assessing Officers and have been proven highly accurate by subsequent reports.
“Our assessments were almost as close to perfect as you can get,” Bucks said. “We’re very proud of these results.”
As for McGarvey’s suit, Bucks said the Revenue Department followed the directives set forth by lawmakers.
“The department is following the dates for reappraisal established by the Legislature. The Legislature set these dates to ensure equal treatment for all Montana taxpayers under our state Constitution,” Bucks said. “Mr. McGarvey’s lawsuit appears to seek to change the Legislature’s valuation date for his property to be different from that which applies to all other property taxpayers in Montana.”
Note: This story has been updated.
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People are loosing their homes left and right. Others have been looking for work for over a year. He's wasting our tax money on a lawsuit because he doesn't want to pay for his frivolous property. The type of property that most Montanans will never have a chance to own. Why doesn't he use that time and money to create a job for someone or help solve the original reasons we are in this crisis.
I have no sympathy for Mr. McGarvey. I wish I could have such lofty concerns as his but I need to figure out how to eat this week. With six exceptional candidates for every job I need to figure out how to stand out. So, pardon me if Mr. McGarvey sounds like a whiner. Why doesn't he do something that benefits all Montana instead of a small demographic that moved from out of state it begin with?
As I understand it, the valuation should be based on what the property would potentially sale for. I have always thought that if the State is willing to put a valuation on a piece of property that they should be prepared to buy it at that price.
A lot of those owners of "frivolous" property are out of work and will be losing their homes too. All the nice spots in Montana are not owned by wealthy out of staters. But this re-appraisal is a great way to ensure the best spots in Montana can only be owned by outsiders with outsider income as it drives locals out of their homes and off their property. The only ones left with the finaincial abliltiy to pay the taxes are those with higher paying jobs....mostly out of state.