At the December 3, 2013 County Council meeting to discuss and adopt an annual budget, Lopez Island residents, upset by enforcement of the requirements of the Current Use Agriculture and Farming tax abatement program, called for action against San Juan County Assessor Charles Zalmenak. Suggestions ranged from tar and feathering to replacing him with a "more generous assessor".
The council took a different approach and added provisos that withhold $75,000 from the Assessor Office's budget unless Zalmanek provides them with a series of reports about the Agriculture and Farm Current Use program and about assessments of new construction.
Prosecutor Randy Gaylord said he won't sign the budget as he believes the council did not follow due process. Adding the provisos was a substantive change to the budget and the council should have waited an additional week and had another hearing before adopting the budget.
The Current Use Farm and Ag program allows property owners to pay taxes based on the the land's current use, not on its "best and highest use." The tax benefits are substantial. In 2008 for example, instead of paying $1,047,983 in property taxes, the owners of the 284 properties in the program paid a total of $161,415.
The rest of the property owners in the county must make up the difference. It would be the same as going out to dinner with a group of people and having some say they will only pay for 10 percent of their meal, the rest of the group would have to make up the difference.
In 2007, Zalmanek unleashed a storm of protest when he asked program enrolees to produce the documentation that justifies their tax breaks. At that time, the county Council put pressure on the assessor to back off.
Action regarding 17 properties where the property owners were reaping the undeserved tax benefits was postponed. Half of one of the properties was wooded despite receiving tax breaks for farming. Another property belonged to a county Council member who claimed he forgot he was supposed to farm to gain the tax break. Almost all of these properties ended up in the reconfigured Farm Conservation Current Use program for land that while not farmed now is taxed at a lower amount because it may be farmed in the future.
One person at the meeting said, "Zalmanek came up with his own little rules that leased land doesn't qualify."
The current Council illustrated their belief in the importance of the tax break program by reducing the application cost by half. Previously the land use fee had been based on the amount of work and time required from county staff.
Those objecting to enforcement of terms of the tax benefit program they requested to join, include people who say they are not able to meet the requirements, or did not know there were requirements or have been given conflicting information despite having signed the program documents. Some object because the rules were not enforced in the past.
"The legislature thought it (the current use program) would preserve small pieces of land," said Greg Blomberg. He noted that on his small farm he also "raises ducks, songbirds and deer and things like that."
Being removed from the program comes at a high cost, property owners must pay seven years of back taxes plus 12 percent interest and a 20 percent penalty. The stiff penalties are supposed to encourage compliance and along with the ongoing tax breaks, are an incentive to remain in the program.
The deal is that to protect agricultural land and activities, the applicants recieve the tax break and to ensure that no one is taking advantage of the system, properites are expected to provide information to the Asessors office proving that they are actively farming. Properties under 5 acres must "must provide documentation that demonstrates gross income from agricultural uses of $1000 or more per acre per year." (If enrolled after 1993 $1,500 per acres. )
For farmland five acres but less than 20 acres the requirement is documentation that demonstrates gross income from agricultural uses of $100 or more per acre per year if enrolled before 1993. $200 per acre if enrolled after.
The Council turned its attention to redressing the tax code violations by attempting to stifle the Assessors enforcement actions. An act that was broadly supported by those garnering thousands of dollars in tax breaks at everyone else's expense. The council sent a letter to state Senator Kevin Ranker requesting changes be made in state law.
Debbie Young, owner with her husband of Lopez Island Farm, said, "I'm here to encourage the council to support the retention of land in the Ag Open Space program and the addition of Proviso 1 to the annual budget.
"If the land owners, we and other people lease land from, are pushed or intimidated out of the program because they do not farm the land themselves or are not perceived to make enough from farming than those lands cease to become available to us at prices we can affford," Young said.
Alex Clark explained how the farmland on Lopez did not have rich soil like Skagit Valley Farmland. "We have a lot of issues," he said. The clay soil and lack of water make it much harder to make a profit from farming.
"I've never made a profit, I do it for the sport of it." said Dwight Lewis who has farmed for more than 40 years.
In a phone interview, Zalmanek said, "It is not a preservation program, it is a commercial program."
Zalmanek said a team effort including himself, the council, farmers, and taxpayers would have been a better approach. He wasn't asked for any input in the letter. He would also like to see more clarity regarding parcels larger than 20 acres.
The December 3 meeting was the third and final public hearing on the budget. The provisos weren't made public until the day before the Thanksgiving holiday weekend when they were posted on the county's website. They were not printed in the weekly newspaper of record.
In an interview, Prosecutor Gaylord said he won't sign the budget as he believes the council did not follow due process. Adding the provisos was a substantive change to the budget and the council should have waited an additional week for an additional hearing before adopting the budget.
The prosecutor's signature shows approval for from only. The lack of his signature does not affect the budget. The adopted budget ordinance is final, he said.
At the December 3 meeting, Council Chair Jamie Stephens explained how the council was using its budgeting power. He said, "The legislature gives great leeway to the councils or commissions throughout the state and the counties to be in charge of the budget. We have several elected departments and in those elected departments we are equals."
"This year is the first year we have used a budget proviso. Not just passed the budget but put an incentive with the assessor's office to provide information which we, at least you've heard this morning, and we as council members have heard that people are entitled to fair timely and uniform assessments. We've used a proviso withholding funds until we get clarity on what farmers can expect from the Current Use program. And also the other way we get money is through new construction through our property taxes and we want to make sure those are up-to-date also," Stephens said.
"First time in the budget process, San Juan County has used provisos," said Jarman.
In the interview, Gaylord said it's questionable whether the provisos are enforceable.
Rhea Miller, who as a county Commissioner participated in adopting 10 county budgets, said, "One of the things I do when I advise county council member potential candidates is, one of the first things you have to know is you have to be able to say no to your friends. And I know how extreme it is for this council to put in a proviso on. And I consider Charles Zalmanek a friend. But I have to say I believe in the quote by Mark Twain that says. "It's not what you don't know that's going to hurt you, it is what you know for sure that just ain't so. "
"And we know for sure that this law was not put into effect to force small farmers out of business. So I really appreciate and support your work with this proviso and also your work in the legislature to change any law that's neccesary to support farming. Because once the truth of the matter is if you remove this from farmers the pressure to rezone this land will go through the roof and you will have suburbia here."
Proviso 1 PROVIDED THAT:
Of this appropriation, $75,000 may not be expended or encumbered, until the assessor files with the County Council and County Manager a written report on the current use farm and agriculture program which includes but is not limited to the following:
A. The criteria used by the Assessor to determine compliance with the county's current use farm and agriculture program for each of the acreage classes set forth in 84.34.020 RCW;
B. The process used by the Assessor to notify those currently in the current use farm and agriculture program of possible non-compliance;
C. The way that the Assessor notifies property owners of receipt of materials submitted by the property owner;
D. The range of actual amount and the desired amount of time (expressed in working days) for:
1) requesting information from the property owner;
2) conducting additional investigation;
3) and making a determination of compliance;
E. An analysis for the period January 2007 through December 2013 that details:
1) the number of parcels in the current use farm and agriculture program;
2) the number of parcels that have left the program; and
3) the number of parcels that have applied for or transferred to another current use program.
PROVISO 2: AND FUTHER PROVIDED THAT:
The Assessor shall provide a written and verbal report at the last council meeting of each quarter showing the status of new construction valuation since the last report and during the calendar year and indicating the following information:
A. The number of parcels valued;
B. The number of parcels that are known to have new construction and are to be valued;
C. The increase in value of new construction in the aggregate for all parcels;
D. Any information on factors that may affect new construction valuation during the remainder of the calendar year.