Big hit for taxpayers and agencies they fund

Now that the Skagit County Assessor’s Office has crunched the actual numbers, it is apparent that the federal court’s tribal land tax ruling would hit La Conner worse than originally thought.

Dave Thomas with the Assessor’s Office said that if the ruling stands, there will be a total of 931 properties taken off the tax rolls with a combined value of about $138 million. That is the number and value of homes on leased tribal land in Shelter Bay and in the Pull & Be Damned neighborhood — the only area in Skagit County that the federal ruling applies to.

People whose homes are built on land held in trust by the federal government for the Swinomish Indian Tribal Community do not pay property tax on the ground they lease to build their homes on. They do, however, pay property tax on the value of their structures — at least until now.

In a case with different circumstances than in the La Conner area, the United States Court of Appeals for the Ninth Circuit ruled last year all structures on tribal land are exempt from property taxes regardless of who owns them.

For nine agencies that depend on the taxes from Shelter Bay and Pull & Be Damned, the ruling would create a revenue reduction of $1.8 million.

Hardest hit is the La Conner School District, which stands to lose about $780,000. Fire District 13 would take a $104,000 hit.

Of course, for the most part, if the tribal land properties come off the tax rolls, it means that the cost of keeping the agencies afloat will fall to a smaller pool of taxpayers — specifically those within the affected districts whose property is not on leased tribal land. When properties come off the tax rolls, the tax burden automatically shifts to the remaining taxpayers.

That means a home assessed at $250,000 in the Town of La Conner would see a tax increase of around $458 per year. For properties on privately owned “fee simple” land on the Swinomish Reservation, and those in the Channel Drive, Pleasant Ridge and La Conner Flats areas east of the Swinomish Channel, the tax bill increase on a $250,000 home would be about $525. Of those amounts, the school taxes account for the lion’s share at $433.

La Conner town taxpayers don’t pay for Fire District 13 or the county roads, though they do pay tax to the town, which would not be affected by the court ruling.

Two affected agencies, La Conner Regional Library and the Medic 1 ambulance service, would lose money even if the costs are spread among remaining taxpayers because the amount they assess on individual properties cannot be raised without a vote. Even if the tax is redistributed to the remaining taxpayers, the library would lose more than $31,000 per year and the ambulance service nearly $52,000.

La Conner Library Director Joy Neal said the impacts will be huge. The library would cut hours and services. But worst of all, Neal said, “If people who live in Shelter Bay aren’t paying taxes, they’ll have to pay for a library card.”

But there is a glimmer of hope that Skagit County can insulate itself against the so-called “Great Wolf” ruling. County, school district and tribal attorneys are studying, interpreting and trying to find a way to chase that wolf away from the door.

There is precedent for private buildings on government property being taxable — an example is right here in La Conner with private structures on leased Port of Skagit property near the marina.

But in this case, said Thomas with the Assessor’s Office, the federal judges were specific in exempting tribal property, not just any government land. If there is a loophole, it might be that the ruling was applied to a situation that does not even remotely resemble La Conner’s.

The Great Wolf ruling pertained to the Great Wolf Lodge, which was built on land held in trust for the Confederated Tribes of the Chehalis Reservation in Thurston County. The lodge is owned by a corporation, of which the Chehalis Tribe holds majority interest.

The tribe challenged Thurston County’s right to collect property taxes on the lodge, and the federal court ruled in favor of the Chehalis Tribe. While Thurston County must adhere to that ruling, Skagit County will not go along with it if its lawyers can find a way out.

That means people will still be expected to pay their property taxes when the second half is due in October.

And even if the properties come off the tax rolls for 2015, chances are good there will be another mechanism in place to keep the tax-funded agencies operating without homeowners on tribal land just passing the bill to their neighbors across the channel.

The Great Wolf ruling has given tribes authority to levy taxes, and Swinomish attorneys have already predicted that the tribal government would enact a tax code to fund public services.

Without a solution, the ruling “would be devastating to the school district,” Thomas said.

La Conner School Superintendent Tim Bruce has said he’s concerned, but has not lost hope. He said the county, school district and tribe are diligently working on it. “Everybody is taking a step back and we want to make sure whatever we do is right,” he said.