Bonner County tax woes laid out for state panel

BOISE – There are big problems with the taxable values being set for land in Bonner County, state tax commissioners heard Monday.

That message came not just from Bonner County officials, who have been trying to roll back this year’s values to last year’s levels. It also came from the Tax Commission’s staff, which has been intensively researching values in the county.

“In analyzing Bonner County data, we found very great differences – in other words, not every neighborhood is at the same proportion of market value,” commission property tax policy supervisor Alan Dornfest told the tax commissioners.

Dornfest added, “Many of the categories are statistically, provably not at market value. Not only that, but some categories in the county are at market value, so there would be an inequity created … and these inequities are large, they are the largest I have ever seen.”

The Tax Commission is scheduled to decide Wednesday how to adjust Bonner County values to make them legal for this year’s tax bills. And that likely will mean substantial, though varying, hikes from 2005 values.

Bonner County Commissioner Karl Dye pleaded with the Tax Commission to give “extra consideration” to county residents, whose home values have been soaring in a hot real estate market. He brought along a tall pile of boxes filled with thousands of Bonner residents’ appeals of their 2006 property tax assessments.

“We just wanted to give you an idea of what we’re seeing in Bonner County,” he told the three-member Tax Commission, which was sitting as the state Board of Equalization. “I’m 39 years old, I’ve lived in seven counties … and I’ve never seen anything like this in our state before.”

About 5,000 of the county’s 36,000 parcels had their taxable values appealed this year, Dye said – up from only about 100 last year. Residents stood in lines around the block and jammed county phones, and many of the appeals came in on the final day. Then, large numbers of the appeals resulted in downward adjustments on the values, raising the question of whether people who didn’t appeal were getting stuck with unfair valuations.

“We had serious concerns about the accuracy and the validity of the 2006 real property assessment,” Dye told the tax commissioners.

Dye said Bonner commissioners were most concerned about “trending,” a process by which values are adjusted upward by various percentages to reflect inflation without a full reappraisal of the property. He said that process overlooked an array of factors, from differences in appreciation between nearby lakefront, secondary lakefront, view property and rural land, to seasonal variations in vacation-home prices.

“When we apply these trends, we’re treating everyone the same, no matter what type of property they have,” he said.

It even overlooks the “flipping” phenomenon, he said, in which people buy up run-down properties, upgrade them and then sell them quickly at a profit. Without reappraisals, Dye said, that phenomenon was interpreted as simple price inflation.

So the Bonner commissioners approved a resolution to freeze residential property values at 2005 levels, figuring that was the last valid number they had, he said. However, that resulted in values that don’t meet the requirements of state law and the state Constitution to tax all property equally based on its current fair market value.

Dye praised Tax Commission staffers who have been working closely with the county and who presented a thick binder of research to the commissioners, including an array of statistics just compiled and put together in long hours over the weekend.

“We understand everything that’s been presented today,” he said. “We are in understanding that we are out of compliance.”

The Tax Commission’s staff report included three alternatives:

“Option A, go with the Bonner commissioners’ freeze.

“Option B, adjust values upward for broad categories of property to better match current market value.

“Option C, make a “stratified” adjustment that varies by neighborhood and area to better match current market value.

Commissioner Tom Katsilometes thanked Dye for his presentation. “It gave us a little clearer picture of what and why you made your resolution the way you did,” Katsilometes said.

Dye said, “The most fair and true thing we can do for our taxpayers … is to cancel the assessment and start over again.”

Both Dye and the Tax Commission staff called for a new, state-supervised reassessment of property in Bonner County, but that couldn’t be done in time for this year’s tax bills.

Deputy Attorney General Carl Olsson told the commissioners that options B and C from the staff report both would comply with state law and the Constitution for this year’s taxes, but Option A wouldn’t.

“You do not have the option to go with A,” Olsson told the commissioners. “You would have to disregard all of this data.”

Under Option C, the 2005 assessed values would be increased by various percentages, depending on how far each group of neighborhoods or each city was off from fair market value. Residential home values in Clark Fork, for example, would go up just over 50 percent from 2005 values, while those in Priest River would go up about 35 percent. But those in Dover, which is far below market levels now, would go up 320 percent.

Dornfest said the tax commission staff did the best it could to develop appropriate percentages for the various areas, but only a full reassessment can fully address all the local factors.

Dye said he’ll be back to watch the commissioners when they reconvene on Wednesday morning.

“I thought we did pretty good until the lawyer started talking,” he said afterward with a chuckle. “We’re not trying to change the procedure or anything else. We just wanted some consideration given to the facts that we are presented with. The board was at least willing to listen and consider – which are good things.”