Governor’s Property Tax Reappraisal Advisory Council
November 21, 2002
MINUTES - DRAFT
Chairman Senator Bob Story
Vice Chairman Kurt Alme
Representative John Brueggemann
Representative Gary Branae
Senator Emily Stonington
Department of Revenue Staff Present:
Judy Paynter, Tax Policy and Research Process Lead
Brad Simshaw, Principal Tax Policy Analyst
Larry Finch, Principal Tax Policy Analyst
Randy Piearson, Property Valuation Specialist
Dallas Reese, Tax Policy Analyst
Ryan Jose, Tax Policy Analyst
Marla Tilton, Administrative Assistant
The information base is the material prepared for the
Council. The only handouts referred to are those given in
addition to the basic Council materials.
Chairman Story opened the meeting and introduced the Lieutenant
Governor Karl Ohs.
Lieutenant Governor Karl Ohs reviewed the Council Charge,
stating that the Council is here to recommend a way to mitigate and
address the property tax changes due to the cyclical reappraisal
cycle for timberland, agriculture land, residential property and
Class 4 commercial property, start working on that solution and
make recommendations to the Governor and the 2003
Legislature. Lieutenant Governor Ohs thanked the Council for
agreeing to participate, and said he looked forward to receiving
Chairman Story introduced himself and provided some personal
background information, then asked the other members to do the
Chairman Story noted that there was an addition to the
agenda. After lunch, Jim Stack from the Whitefish area would
be making a presentation regarding land values inflation.
Chairman Story further discussed the Council Charge.
Department of Revenue introduced their staff.
Brad Simshaw, Department of Revenue, presented the report on
History of Reappraisal. He also handed out and
explained a chart called the Timeline of Reappraisal
(Attachment A). Note: Change on handout – under
First Reappraisal Cycle, ‘The 1997 Legislature’ should
Brad Simshaw explained the table Estimated Taxable Value of a
Residential Property. (Attachment B) The Council asked
questions and discussed points in the reports.
Kurt Alme asked why we didn’t have just two different
classes and adjust the rate.
Chairman Story responded that we have to look historically at
why we have a classification system. It allows you to use
different assessment methods on different types of property; for
example, we have Class 3 agriculture land that is assessed at a
productive value and Class 4 residential land that is assessed at
the market value. The classification system allows the
different assessments. It allows you to apportion the taxable
between the different types of property. Some point in time
it was determined that residential and commercial property would be
in the same class/tax rate so that you wouldn’t shift the tax
burden from homeowners to businesses. Two issues we have
are: Do we want to increase the residential exemption and not
increase commercial exemption and if so, what is the appropriate
level of exemption for each type of property? Should the
homestead exemption be capped so that it only applies to the first
$200,000 or $300,000 in value of the homes? There are three
types of property that are tax rated the same – agriculture
land, commercial property and residential property. The
statue states that the Class 3 tax rate is the same as the Class 4
top rate. The other property classes have tax rates that vary
from 3% to 100%. So when Class 4 moves, Class 3 moves
automatically. If we do nothing and assume that the market
values are what we have seen here today, the taxable value will go
up from 25% to 33%, so we would see a tax increase of about $420 at
Chairman Story asked when we would start seeing some new
Kurt Alme responded that there would be new numbers next week
for the residential side and another week before the commercial
Randy Piearson, Department of Revenue, presented his report on
Agricultural Land Values for Tax Years 2003-2008.
Chairman Story asked how we could have a 15% increase on
productive value when we have been in a depressed agriculture
cycle. How do you determine the value?
Randy Piearson responded that other areas of commodities that
increased were the grazing fees for livestock and the price of
Kurt Alme asked Randy Piearson to give a background about how
these values where determined.
Randy Piearson responded that by statue the Governor must
appoint an Advisory Committee to assist the Department of Revenue
in making policy recommendations on how to value agriculture
land. Governor Martz appointed a committee last fall and they
met for the first time in December 2001 and completed their work in
June 2002. The Advisory Committee recommendations are
reflected in this report.
Randy Piearson presented his report on Timber Land Values for
Tax Years 2003-2008.
Chairman Story asked what percentage of the tax base is
Randy Piearson stated that Montana has one of the lowest tax
rates on timberland and Judy Paynter, Department of Revenue, stated
that timberland taxable value is 42% of the total statewide taxable
Kurt Alme wanted to know what qualifies land for
Randy Piearson said there are two critical items that really
determine commercial forestland. You have to have the first
50 continuous acres of forestland in your ownership and a minimal
production level per year of 25 cubic feet per acre.
Chairman Story asked if forestland was taxed higher than grazing
Randy Piearson noted that the tax level varies between
timberland and grazing land depending on the location within
Jim and Lisa Stack from InvesTech Research made their
presentation of The Impending Montana Property Tax Crisis.
Kurt Alme asked about the way California is moving regarding
Jim Stack of InvesTech Research responded that California has an
acquisition-based tax. It was created by Proposition 13, which did
not go through the legislature but went through voters in
1978. It was a big tax cut, rolling back property taxes three
years and then tying the legislators’ hands by requiring a
2/3 or super majority in order to increase property valuations and
Brad Simshaw, Department of Revenue, presented his report
on Land Cap – SB184. Brad Simshaw introduced
Ryan Jose, Department of Revenue, who assisted in writing the
Larry Finch, Department of Revenue, presented his portion of the
report on Residential Property Tax Relief Programs –
Montana’s Elderly Homeowner/Renter Credit.
Representative Gary Branae asked what percentage of the elderly
population is eligible and how many are using Montana’s
Elderly Homeowner/Renter Credit Program.
Larry Finch responded that they have not looked at this in some
time, but commented that the participation rate is higher in this
program than the Property Tax Assistance Program. Larry Finch
also added that the department did look at the Property Tax
Assistance Program and the participation rate was about
25%-30%. It would be more difficult to obtain information on
how many eligible people participated in the Homeowner/Renter
Credit Program because income information needs to be correlated to
property tax information for each family.
Dallas Reese, Department of Revenue, presented his portion of
the report on Residential Property Tax Relief Programs –
Property Tax Assistance Program.
Ward Ernst asked if the income from an individual’s tax
return was used to qualify for this program.
Dallas Reese responded that an individual would need his/her tax
return and the program application to apply for the property tax
credit. An individual must apply by March 15th of
each year and in January of each year the Department of Revenue
mails applications to all individuals who received the benefit in
the prior year.
Kurt Alme asked if an individual could qualify for both the
Elderly Homeowner/Renter Credit and the Property Tax Assistance
Program. Also, would they have to qualify for one before the
Judy Paynter responded that an individual would qualify for the
Property Tax Assistance Program first and then the Elderly
Homeowner/Renter Credit second.
Nick Hogan asked if the income eligibility ranges had increased
since 1999 or stayed the same.
Dallas Reese responded that the ranges have increased every year
based on inflation. In 1995 the legislature changed the
structure of the income ranges and established the requirement to
update the ranges each year for inflation.
Nick Hogan asked why participation has dropped. Dallas
Reese said he did not know.
Dallas Reese presented his portion of the report on
Residential Property Tax Relief Programs –Disabled
American Veterans Exemption.
John Kershaw, AARP, stated that a worker at the Fort explained
that a requirement of the eligibility states someone has to be 100%
disabled even though they are 100% unemployable. He would
like to see the eligibility requirements changed to include an
individual who is 100% unemployable.
Kurt Alme said this would require a statutory change.
Dallas Reese presented his portion of the report on
Residential Property Tax Relief Programs – Reverse Annuity
Mortgage Loan Program.
Ward Ernst asked why the state offers this program.
Dallas Reese responded that the purpose of state involvement in
this program is to help low-income taxpayers who may not qualify
under a lending institution’s requirement. The interest
rate is lower than commercial institutions.
Kurt Alme asked what is the interest rate for this
program. Dallas Reese said he thought the rate was 5%, but he
was not sure and would have to get this information back to the
Mary Whittinghill, Montana Taxpayers Association, commented that
the state requirements of this program do not include any medical
Chairman Story opened the meeting to public comment.
John Kershaw, AARP, congratulated the Department of Revenue on
excellent reports that were written clearly and thanked the
committee for all their work.
Nick Hogan asked for more research on what has happened in
California with their model and how that has impacted real estate
Lee Heiman, Legislature Services Division, responded that he has
material and would be getting information to committee.
Chairman Story asked if Lee Heiman would present this information
at the next committee meeting.
John Kershaw, AARP, gave some history about Proposition 13 in
California as he lived there during that time and felt this
property tax change was very successful for California.
Chairman Story asked the committee to continue thinking about
some type of land cap idea or a combined land cap and credit.
Kurt Alme commented that the tools are there to shift this tax
burden however we would like to make this shift. The
committee should give some thought to the different ideas and talk
with some people. The important principles are fairness and
stability. How do we keep people from getting caught in a
position where they can’t pay their property taxes?
After Council discussion, staff was asked to bring a list of
advantages and challenges to the acquisition system of valuing
property for tax purposes.
Chairman Story adjourned the meeting at 3:30 p.m.
The next meeting date was set for December 10,
2002.(Note: the meeting date was later changed to