Bayview valuations spark appeals

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BAYVIEW — After residents in a waterfront neighborhood saw their property values spike by 300%, some but not all landowners appealed.

In 2022, the Idaho Board of Tax Appeals ruled on 12 cases from one neighborhood in Bayview. Residents who chose to appeal had their property values reduced to their prior 2020 valuations. Those who did not appeal may have to pay significantly more in property taxes.

The property tax tangle involves 27 residents in Cape Horn Estates, a waterfront gated community on the southernmost point of Lake Pend Oreille. Although the neighborhood is located within Bonner County, most of its residents reside within Kootenai County. The Bonner County Assessor's Office increased 2021 property values in the neighborhood significantly — an average of 300% in one year. Kootenai County properties increased an average of 15% in that same time.

Assessors are essential to the checks and balances of government. They determine the expected market value of property in the county, which influences how much property taxes owners pay.

If the assessor’s position did not exist, those in charge of determining the budget, and therefore taxes, would be able to have input on a property’s expected sale value — a conflict of interest.

Property taxes are shared equally by all property owners in the county. Those who have property that is worth more, pay more in taxes.

But some property owners in the Bayview neighborhood were dissatisfied with their property valuations from 2021, arguing that the assessor's office overvalued their properties.

Bonner County Assessor Donna Gow said it’s the first time she has seen property values increase so significantly in one shot during her time in office. However, Gow and staff appraiser Rachel Castor maintained that they did their due diligence based on the information they had to work with at the time.

“I haven’t personally witnessed something that has tripled,” Gow said on May 3. “I know that over nine years, I have seen waterfront properties that have doubled.”

Twelve disputes from Cape Horn Estates worked their way through the ranks of the legal system before coming before the state board of tax appeals in the early months of 2022. These disputes caused Bonner County to have the most Rural-Residential tax disputes before the board, with all besides three disputes coming from the waterfront neighborhood.

Castor mentioned that desirable waterfront properties, like the ones in Cape Horn Estates, see very little turnover.

In 2020, there was a sale in the Bonner County neighborhood, the first reported sale in five years.

The property sold for $1.1 million, approximately $200,000 over previous estimated values by the assessor’s office, according to documents by the state board of tax appeals. The lakefront land featured a newly renovated property, a multi-vehicle detached garage, and a boat dock.

That sale is what caused the Bonner County Assessor’s Office to increase the valuations for the rest of the neighborhood, which sparked the resulting appeals.

Before these disputes went before the state board, they passed through the county’s Board of Equalization.

The Board of Equalization is a legal entity that addresses tax disputes. The three-member board is made from the elected Board of County Commissioners.

The Board of Equalization reduced the 300% increase by 25-30% for the 18 properties that appealed.

Many of the appealing property owners believed that the reduction in their valuations were arbitrary, and appealed once more to the state board. Some of the property owners chose not to appeal to the state level; and of the 27 residents in the neighborhood, nine property owners did not appeal the spike in their property values at all.

Gow and Castor maintain that the assessor’s office did what they could with the information they had to work with at the time.

“The more information we have the better we can do our job,” Gow said. “It’s as if you’re being asked to hit a target with one hand tied behind your back.”

According to state law, assessors are only allowed to determine values based on sales. Because Idaho is a non-disclosure state, those involved with buying, listing, or selling real estate don’t have to report sales information to the government.

Bonner and Kootenai counties are prevented from sharing information with one another because of contracts the counties have with Multiple Listing Services in the real estate sector. However, even if counties were allowed to share information, taxes would differ between residences in the same neighborhood because they are located in different counties.

“We’re hesitant to make changes when we don’t know how much change to make,” Castor said on May 3. “So we can trend areas but we don’t really know how it sits compared to the market until a sale comes in. Basically we did have that one sale. And when they appealed, they brought in all this other information that we didn’t have.”

When the appealing property owners went before the state board, they provided property values from Kootenai County, as well as their estimated valuations of Cape Horn properties.

The Assessor’s Office ultimately agreed with the property owners that the valuations should be returned to 2020 values. However, based on the new data they received, they made a case to the state board that property built on the waterfront parcels should be increased by 75%.

Property owner Sarah Zabel called this a vindictive move by the office.

“It did feel like the Assessor's Office was being vindictive in some cases,” Zabel said on May 2. “It felt like they had something against us.”

Zabel protested the tax increases along with many of her neighbors. Although the property owners become more wealthy on paper, they don’t experience the gains because some do not intend to capitalize by selling their property.

“[The Assessor’s Office] felt it in their bones that the value of our neighborhood has gone up a lot, and they didn’t have a way to prove it until they saw that one property sale,” Zabel said.

The state board of tax appeals agreed with Zabel and the other property owners concluding that one sale was not sufficient evidence to justify increasing the property valuations.

“A general principle in appraisal is the higher the adjustments to the sales, the less reliable the results,” according to a February ruling by the Board of Tax Appeals. “Admittedly, there were few sales in the area, so [the Assessor’s Office] was limited in the sales data available for its valuation model, which is no fault of [the office.]”

The state board modified the property valuations, even after the roughly 25% reduction by the county’s board of equalization.

“We apologize that it was so much,” Castor said. “I know no one wants to see that, and we know it’s a lot. But we explained why it was this way and we appreciated the new information that they brought. … The reality is that we will catch up with the market. But it’s going to look more choppy if the information we are receiving is more choppy.”

Documents produced by the board of tax appeals indicated that each foot of water frontage in Bayview costs roughly $2,099.