Change would exempt 17 landowners, including San Juan County councilman, from having to pay back taxes

Whether the San Juan County Planning Commission changes its mind remains to be seen. But at the behest of the County Council, the commission will take another look at potential changes to one of the county's open space "current use" programs which, if approved, could spare as many as 17 local landowners from having to pay years of back taxes, including County Councilman Gene Knapp of Orcas Island.

Whether the San Juan County Planning Commission changes its mind remains to be seen.

But at the behest of the County Council, the commission will take another look at potential changes to one of the county’s open space “current use” programs which, if approved, could spare as many as 17 local landowners from having to pay years of back taxes, including County Councilman Gene Knapp of Orcas Island.

Those changes will be considered by the Planning Commission Aug. 20. Together, they would help those with farmland to shift between certain tax-break programs, and to maintain their property as future farmland once it no longer qualifies as a working farm.

Planning Commission Chairwoman Susan Dehlendorf said there’s lingering concern among the group over how the various local tax-break programs are applied, monitored and maintained. She said the commission was nearly unanimous in its decision in June to recommend a full-scale review of all the programs. At the time, the commission rejected a proposal to fine-tune the “public-benefit rating system” which applies to just one of several Open Space categories, known as farm and agricultural conservation land.

“Maybe they’ll be able to explain it a little bit better as to why this is the approach we should take,” Dehlendorf said of the piecemeal approach. “(County staff) may have the rationale fleshed out a little better for us this time.”

Enacted by the Legislature in 1970, the Open Space Taxation Act allows property owner to have their ag land, farm land, open space and timberlands valued at their “current use” rather than their “highest and best use.” The act states it’s in the best interest of the state to conserve and maintain adequate open space for the production of fiber, food and forest crops, and to assure the use and enjoyment of natural resources and scenic beauty.

According to Assessor Charles Zalmanek, nearly all 17 properties were at one time working farms and, as such, received a reduction in the amount of annual taxes each paid by being enrolled in the farm and agricultural land program. He said most no longer meet the criteria for that program, which offers tax breaks for property owners whose land is primarily devoted to the production of livestock and agricultural commodities.

Zalmanek said better monitoring of current-use programs was an area highlighted following an audit by the state Department of Revenue, which was conducted at his request shortly after taking office.

“The one thing the audit was most critical about was that we were not monitoring the current-use programs as well as we could, especially farm and agricultural land,” he said.

In response to the audit, Zalmanek said a questionnaire was sent to everyone in the farm and agriculture land program and, though some failed to reply, others, such as Knapp, acknowledged they had scaled back on farming. Since then, 17 property owners have applied for classification under the farm conservation program, which relies on a rating system to determine whether a property qualifies, the public benefit it provides, and the size of tax-break it deserves.

“I think it’s a good program and I think it has to be fair for everyone, for those in it and those who aren’t,” Knapp said. “It’s also a good thing to have a review every once in a while.”

Turns out, Zalmanek said, none could meet the minimum number of points needed to qualify for the program, largely because of a rating system crafted years ago with other open-space categories in mind. Farmland is less likely to contain natural features, such as rare plants, vistas or water views, that boost the ratings of properties in timber and open-open space categories, he said.

“You need 30 points to even qualify, and nobody qualifies,” he said.

The 17 properties together total roughly 325 acres, the largest of which is an 85-acre parcel on San Juan Island. At 31 acres, Knapp’s property on the east side of Orcas Island is second largest.

According to Deputy Civil Prosecutor Karen Vedder, an overhaul of the entire current use program could not be completed by the end of the year. She said the changes that have been proposed for the public rating system are based on farm and agricultural conservation programs in about a half-dozen counties. If approved by the County Council, she said those changes should make the program a viable one.

Meanwhile, Zalmanek said each of the 17 property owners will likely receive a property tax bill that reflects “market” value if their applications are not approved by the end of the year. Each would be liable for seven years of back taxes — 12 percent interest on each year and a penalty of 20 percent on the total.

“There’s a reward for being in the program,” he said. “But there’s a penalty for coming out.”