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Points to ponder: inequity, taxes and the 'hobby lobby' | Guest Column
By Hector Cyre
Is there anything more joyous and hopeful than spring?
The weather is warming. New leaves are bursting from the trees. The early season rhododendrons and daffodils splash color across our yards.
My sailboat is nearly ready to go back in the water, carrying dreams of magical days on San Juan Channel. Our first-half county property tax payment is due.
I try not to think about our property tax bill. But with the April 15 deadline for federal income now passed, I am reminded that, soon, we must also ante up our property tax payment to the county.
To say the least, it puts a temporary damper on my joyous and hopeful spring thoughts. And causes me to ponder... Why are my property taxes so bloody high?
“Well, dummy, you’ve got a nice home in paradise. Be grateful.”
Yeah, that’s true. But why is my property tax bill so freakin’ high?
In a practical sense, it is because we demand many services from our local governments. Those services must be paid for. The property tax is the primary source of revenue for many.
Our property taxes pay not only for county services, but for those of important “junior taxing districts” that provide fire protection, libraries, and even cemeteries. All of those are good purposes and services I want in our community. I can even accept that a major chunk of my property tax goes to the state of Washington—supposedly to meet the constitutional mandate to fund basic education statewide. (Come on, legislators, step up to that one.)
Unfortunately, one of the reasons our property taxes are so high is because some of our friends and neighbors are cheating on their property taxes. Strong words—but true. This isn’t just my opinion. Our county assessor concurs.
And don’t blame him for the problem. He has been diligently trying to eradicate or at least reduce property tax cheating in San Juan County for nearly eight years. But the assessor faces a small, crafty, and politically active segment of property owners who think it is not just okay, but even justified, for them to “game” the system. They shift their property tax responsibilities onto other islanders, including me and many of you.
The mechanism they use to do that is an element of our property tax structure in Washington called “current-use taxation."
In San Juan County only 50 percent (yes, 50 percent) of the total land area is taxed at its full value. Of the other 50 percent, more than half (constituting 30 percent of the total land area of the county) is enrolled in one or another of the county’s four current-use property taxation programs. They are taxed at less than full value. (The remaining 20 percent of county land area is in public ownership, and is not subject to property taxes at all).
As a result, the tax rate (millage rate) applied to all properties must be increased to make up for the revenue lost due to the reduced current-use rates on 30 percent of the county’s land area. In effect, the properties taxed at full value are making up for what the current-use program properties don’t pay.
The millage rates across the county vary somewhat due to the presence or absence of various junior taxing entities like fire and library districts, so the impact of the tax shift caused by current-use taxation varies.
The tax shift is significant. According to the county assessor’s own estimate, it exceeds $2 million a year. That figure is probably conservative.
Over $103 million of agricultural property in the county is being taxed at a value of less than $5 million. The figures for open-space timber land show property worth more than $26 million has a taxable value of $160,000. Yes, one-hundred-sixty-thousand-dollars. Accurate figures for the vastly larger Designated Forest Lands aren’t even available.
Why does this exist?
Current-use taxation in Washington state dates from 1968, when a constitutional amendment was approved by the voters. At that time our state’s constitutional foundation for property taxes dictated that each property’s taxes be based on its “highest and best use”, even in a potential or speculative sense. Commercial agriculture (farming) and silvaculture (forestry) were under economic siege, especially near areas experiencing growth. Their property tax burden was too great for farming and logging to bear. Many had little choice but to sell out to developers who could make more money building something than they could growing something.
Property taxes for commercial agriculture and forestry lands based on current land use was a step toward solving the problem. Responsibility for administering the current-use taxation programs was handed to the 39 counties in Washington. County assessors are responsible for local current-use programs. They must comply with the Revised Codes of Washington, the Washington Administrative Code, and directives of the Department of Revenue.
Despite all the rules, the programs are fertile ground for cheating by those who would abuse the system.
I still believe current-use taxation is a good idea. Commercial farming and forestry are not being forced out of business by property taxes that bear no relationship to their current land use. However, it was not intended that non-commercial hobby farmers and small woodlot owners would be relieved of their property tax responsibilities. That has happened because some people are willing to cheat the system.
Three years ago, I went to the county council with convincing proof of the abuse of the current-use taxation programs. Using the county’s own records (and a bit of investigation), I cited specific examples of properties that didn’t meet the requirements, properties of less than five acres with market values of more than $250,000 that were being taxed as if they were worth barely $1,000. The six-member council then in power grudgingly funded increased monitoring and enforcement in the county assessor’s office (activities, incidentally, that are mandated by state law). Some of the most obvious problems were corrected.
Then the "hobby lobby" turned up the heat when they saw their free ride was threatened.
Unfortunately, our present county council members seem to be scared as hell of the potential political consequences of fixing the problem. They don’t want to face a small but vocal group of angry hobby farmers and woodlot owners, so they try to find ways to make it easier for them to cheat the system rather than fix it. During the most recent legislative session, our county council chairperson even testified in Olympia in support of proposed changes to state law and codes that would legitimize the cheating that already exists.
The county council also placed a “proviso” on a portion of the assessor’s budget for 2014. The proviso withheld some of that department’s funding—pending an explanation of what the assessor was doing that had irritated the hobby lobby so badly. Is it just an odd coincidence that the amount withheld from the assessor’s budget through the proviso was very close to the cost of the department’s current-use taxation enforcement programs?
Do you believe in such “coincidences?" I quit believing in them shortly after the tooth fairy flew out of my bedroom window.
A majority of properties enrolled in current-use taxation programs meet the intent and requirements of the law. The current-use taxation problem isn’t with the true commercial farmers and foresters who benefit from reduced property taxes. True farmers and foresters aren’t hobbyists. They work their butts off to make a living.
But some of the properties enrolled in San Juan County’s current-use programs don’t meet the requirements, which they agreed to when they initially applied.
(HOBBYISTS WHO PLAY AT BEING FARMERS OR FORESTERS, AND OTHERS WHO SIMPLY THINK IT IS O.K. TO CHEAT THE SYSTEM AND MAKE THE REST OF US PAY THEIR SHARE OF THE PROPERTY TAXES, ARE THE PROBLEM).
The abuse of the current-use taxation programs must end. Until corrective actions are taken, the property tax shift will continue, with the few cheaters winning and the majority of property owners and legitimate farmers and foresters being taken advantage of.
If abuse of programs doesn’t end, at some point the only option may be to eliminate the existing programs altogether and start over. Or perhaps our favorite California carpetbagger, Tim Eyman, will sponsor an initiative to eliminate this “tax scourge”. Or, some enterprising attorney might file a class-action suit on behalf of property owners throughout the county who are paying more in property taxes than they should.
The financial prospect of such possibilities is what the county council should really be fearing, not the political flashback from hobbyists who lose their tidy little scam.
And so, I ponder further… where might this eventually lead? Will I and many other islanders continue to pay the property tax bill for the hobby lobby, tax cheaters? Or will the county council actually address the problems of our current-use taxation programs?
Perhaps you should also ponder these questions as you write the check for your first-half property taxes. As irrational as it might sound, I am actually still supportive of current-use taxation.
But the abuse of the programs by the few is driving me nuts.
— Editor's note: Raised on Whidbey Island and graduate of U of W, Hector Cyre is a 40-year professional in water resource management and local government, and a consultant in storm water and flood control management, with clients in the U.S., Canada, Australia and New Zealand. He and his wife have been Brown Island homeowners for 28 years, living there full-time the last 16.