Guest Opinion: Fairness of Property Tax System

The Top Three Ways to Improve the Fairness of San Juan County’s Property Tax System

— from Charles Zalmanek, San Juan County Assessor —

The 1889 state constitution recognized that to be effective, uniformity must apply to both assessments and tax rates. Fairness, uniformity and equity are the hallmarks of Washington’s property tax system and assessors and their staffs continually endeavor to maintain that goal. When different portions of the property tax system are not appropriately maintained, fairness, uniformity and equity are compromised. This article focuses on the three top ways to improve the fairness of San Juan County’s property tax system. Each would impact some taxpayers negatively, but each would promote the fairness all taxpayers expect and deserve.

First, the Assessor’s office should continue to monitor all lands enrolled in special tax programs and remove non-compliant lands as required under the law. An appeal process is available for landowners who disagree with the Assessor regarding the removal of their lands from classification.

Second, the County Council should immediately re-rate all properties with outdated Public Benefit Ratings allowing the Assessor’s office to revalue these lands under the current rating system.

Third, the County Council should provide the necessary funding for the Assessor’s office to list and appraise all new construction, not just new construction on ferry-served islands with a value over a certain threshold, each and every year. The additional funding would likely be more than offset by the additional revenues generated.

Most islanders are aware of lands that are enrolled in the Current Use Farm & Agricultural Program where little or no farming is taking place. Most are also aware of lands enrolled in the Current Use Timber or Designated Forest Land Programs where there has been no apparent management of the lands for growth and harvest of trees. When lands were enrolled into any of these programs, agreements were signed, allowing the Assessor to value the lands at their “current use” rather than at their “highest and best use” in exchange for managing the lands appropriately. As a result, the tax burden is shifted away from owners of these lands and onto all other San Juan County taxpayers. When lands are not managed appropriately, the law requires that the Assessor remove them from program enrollment and issue compensating taxes.

In 1990, San Juan County implemented the state’s Open Space Act and developed a Public Benefit Rating System (PBRS) for parcels of land to be enrolled in the Open Space Program, which rewards voluntary resource preservation. The number of PBRS points awarded converts directly into a percentage of reduction in assessed value of the subject land. When the County Council amends a PBRS, all existing open space parcels must be rated under the amended PBRS (RCW 84.34.055(3) and WAC 458-30-330(6)). The Department of Revenue (DOR) recently performed a Review of the Current Use Program in San Juan County. The report stated, “We found that there were existing open space land parcels that were rated under the original PBRS, and had not been rated under the amended PBRS.” The original PBRS allowed for as many as 90 points, which equates to a ninety percent discount in land valuation for tax purposes. The maximum number of points available under the current PBRS is 70. The DOR estimated that approximately 150 parcels are still rated under a prior PBRS. By not re-rating Open Space lands using the amended PBRS guidelines, a significant tax shift continues to exist in favor of owners of lands classified under the old PBRS and away from all other taxpayers. Fairness, uniformity and equity will continue to be compromised until all parcels are rated using the same PBRS.

The Assessor is required to list and appraise all new construction each year. Unfortunately, in the two decades that I have worked in the Assessor’s office, we have never had the necessary resources to accomplish this. This office has omitted new construction appraisals on non-ferry served islands and also routinely omits appraisal of new construction with lower values, due to inadequate staffing. Without adequate resources to appraisal all new construction, all taxing districts including the county are not receiving revenues that could help alleviate funding issues. In the 2011 Assessor’s budget presentation to the county council, the Assessor provided an illustration of the compounding effect of capturing new construction value, but the necessary funding was not granted. As a result, newly constructed buildings are sometimes not placed on the tax rolls for several years. Again, fairness, uniformity and equity of taxation are compromised.

The overall effect of the above deficiencies causes some taxpayers to pay more, while the county and all other taxing districts receive less, creating a serious breach in the notion of fairness, uniformity and equity in taxation.

With assistance and support from the County Council, the Assessor could accomplish the goals outlined above and create a more fair uniform and equitable system of property taxation for all taxpayers in San Juan County.