Hundreds of local homes now tax-exempt

Skagit County government officials are scrambling to figure out how to deal with a huge cut in tax revenue resulting from a federal court ruling that eliminates property tax for every building on tribal land.

That means most of the approximately 900 homes in Shelter Bay, a gated community built on leased land that the federal government holds in trust for the Swinomish Indian Tribal Community, are now exempt from property taxes.

Skagit County Commissioner Ron Wesen said buildings on tribal land will be removed from the 2015 tax rolls.

In the La Conner area, homes in the Shelter Bay and Pull & Be Damned Road neighborhoods contribute the lion’s share of property taxes for La Conner School District and Fire District 13.

While homeowners in those areas do not pay property tax on the leased tribal land their buildings sit on, they do pay tax on the value of the structures.

RC Cavazos, chief deputy with the Skagit County Assessor’s office, said the court ruling means that about $111 million worth of property will be removed from tax rolls in the La Conner area, which will result in about a $1.5 million loss in revenue.

“That could create a huge tax hit for people not on the trust land,” he said.

In Shelter Bay, a house on tribal land with a building valued $150,000 generates $1,974 this year in property taxes. Of that amount, $849 goes to the school district, $361 goes to the state, and the La Conner Library gets $66. Skagit County takes $263 for its road fund and $244 for county government operations, Fire District 13 gets $119, and the rest goes to Medic 1, the Port of Anacortes, and a conservation futures fund.

Voters in the La Conner School District last year passed a $20 million bond to pay for school renovations and reconstruction now underway. According to Cavazos, the district could lose $600,000 to $800,000 per year in property tax revenue.

The federal court ruling “will have huge impacts on the school district,” said La Conner schools Superintendent Tim Bruce.

But the Swinomish Tribe, which values education highly, is not likely to leave the schools stranded.

“I do not foresee a scenario where a tax-free zone results from this decision,” said Steve Lecuyer, director of the Swinomish Legal Department.

“The tribe is aware of the Great Wolf decision and is reviewing its implications, and I anticipate the Tribal Senate will enact a property tax code.”

Should the tribe start collecting property tax, how the money is allocated would be up to the tribal lawmakers.

The so-called “Great Wolf” decision, which gives privately owned non-tribal buildings on tribal land tax immunity, was issued by the United States Court of Appeals for the Ninth Circuit last year.

Thurston County had been assessing property taxes on the Great Wolf Lodge, which was built in 2007 on land held in trust for the Confederated Tribes of the Chehalis Reservation.

Great Wolf was owned by a limited liability company, CTGW, LLC. The Chehalis tribe holds 51 percent ownership of the company. Although tribal buildings on tribal land are not taxed, the county argued that CTGW was a corporation, and, therefore, not entitled to tax immunity.

The case rumbled around in the courts for awhile, with a district court ruling that Thurston County could keep collecting taxes. When the Chehalis tribe appealed the decision, the Ninth Circuit Court of Appeals ruled in the tribe’s favor, striking down the lower court’s ruling.

According to attorney Jane Futterman of the Thurston County Prosecutor’s office, which argued on behalf of that county, the appeal period has run out, and the ruling is now the law of the land.

Last month, officials in Snohomish County removed about $106 million from its tax rolls, and according to a story distributed by the Associated Press, will be refunding about $5 million in taxes collected on buildings in the Tulalip Tribe’s outlet mall and from about 1,200 homeowners in Marysville.

Refunds are not likely in Skagit County, however, Wesen said. “Skagit County doesn’t have that kind of money lying around.”

Besides, the county is essentially the pass-through agency for the entities supported by property taxes, and the money has already been allocated and spent. “The services have been rendered,” Wesen said.

According to Beverly Crichfield, spokeswoman for the Washington State Department of Revenue, individual property owners would have to submit claims in order to have up to three years worth of property taxes refunded.

In Skagit County, however, claiming refunds would likely entail a court battle, Wesen said, since the taxpayers have already benefited from the services the taxes funded.