By Marcy Stamper
Washington has set up a work group to review the way the state compensates counties for nontaxable land, which may help resolve a long-standing issue for Okanogan County.
The county has received less than a third of what the state owed in each of the past two years. The issue has been a point of contention for the Okanogan County commissioners for years, because the county relies on payments in lieu of taxes (PILT) from both the state and federal governments for the large amount of public land in the county.
While the majority of Okanogan County’s public land is managed by the U.S. Forest Service, the county also receives PILT monies on the 80,000 acres managed by the Washington Department of Fish and Wildlife (WDFW). The rest of the state land, more than 300,000 acres, is managed by the Department of Natural Resources for the school trust and does not qualify for the PILT program.
The state formed the work group after Gov. Jay Inslee vetoed the part of the state budget that covers PILT. He directed WDFW and the state’s financial agencies to review the methodology used to calculate the payments and to look at how other states and the federal government do it. He asked them to recommend a revised method for calculating the payments by Dec. 1.
“I believe a comprehensive review of PILT for game lands should be conducted without any predetermined outcome,” wrote the governor in his veto statement, which gives the agencies two extra months for the review. Both the original budget and the veto refer to finding a way “to provide supplemental payments to these counties.”
Several ways to calculate
State law currently provides four ways for counties to calculate PILT: the rate paid for private land under the open-space tax program; 70 cents per acre; or the amount of PILT paid on the parcel in 1984, when the payments were first authorized. Counties may also choose to retain game-violation fines collected within their borders instead of PILT.
For years, Okanogan County, like most counties, was compensated at 70 cents per acre. But three years ago Scott Furman, the county assessor, recalculated the payment based on the open-space classification – 50 percent of market value. That boosted the county’s bill from $93,500 to $422,000 in 2010 and to $485,000 this year.
WDFW paid the higher amount for two years but, as other counties also began to use the open-space formula, the Legislature cut the appropriation for the 2011-13 biennium. As a result, Okanogan County billed the state for $485,000 this year but received only $151,000.
When the subject of PILT came up at a WDFW public forum on overall agency activities last week in Brewster, Okanogan County Commissioner Ray Campbell conveyed the county’s position when he joked, “We’re about to foreclose on some of them.”
“It has a very negative impact on the essential services we’re required to provide,” said Okanogan County Commissioner Sheilah Kennedy at the meeting. “How can we work with you to make the legislators understand the negative impact when they keep acquiring land?”
WDFW director Phil Anderson explained that money for the acquisitions comes from federal grants and a special account, and is separate from the PILT funds.
“It’s trickle-down – the state has gone against state law and said, ‘We’re not paying our obligation to the counties,’ presumably to balance the budget,” said Yakima County Assessor Dave Cook, who represents county officials on the work group, in an interview last week.
At the work group’s second meeting last week, Furman was asked to sit in on the conference call for Cook. Participants discussed some legislators’ perceptions that there are “winners and losers” under the current PILT system, and said they wanted a simple formula that could be applied statewide, said Furman, who had not heard about the work group until then.
Okanogan is one of 14 counties that receive PILT as compensation for nontaxable land. It has the third-highest acreage in the state eligible for PILT, after Kittitas and Yakima counties. About 20 percent of the money goes into the county’s general fund and the rest is divided among all the taxing districts, said Furman.
In many cases the PILT payments are higher than the tax paid on these lands, which were often in one of the county’s special classifications for agriculture, which is taxed at rates below the market value, according to Furman. For example, ranchland is taxed at “pennies on the dollar,” and most agricultural lands are not taxed at more than 10 cents on the dollar, he said.
WDFW does not pay PILT on any buildings or structures on their land.
More state land, lower payments
The PILT issue is of particular concern to the Okanogan County commissioners, who have complained for years that WDFW’s land acquisitions remove properties from the tax rolls. WDFW and the commissioners spent several years in unsuccessful negotiations over a joint approach for an analysis of the economic impact of these acquisitions.
WDFW is continuing a moratorium (begun while the economic analysis was being negotiated) on outright purchases of land in the county, although the agency has continued to pursue conservation easements, according to the regional director.
Unable to agree on the terms of the economic analysis, the county commissioners elected earlier this year to do their own assessment. Planning Director Perry Huston and his staff have selected examples for the analysis, which is being conducted for the county by the National Association of Home Builders, which did a similar study for Wenatchee in 2010. Commissioner Kennedy said last week that they expect the assessment to be completed soon and that they will share it with WDFW.