On Dec. 22, the Washington State Supreme Court sided with King County in the city of Snoqualmie’s complaint against the county regarding the constitutionality of a bill that gave tax exemptions to tribal properties not on reservation land.
In 2014, the Washington State legislature passed the Engrossed Substitute House Bill 1287 (ESHB 1287), which expanded the types of tribal property available for property tax exemption, including off-reservation land used for economic development. In exchange for the tax exemption, the property owners make a Payment in Lieu of Tax (PILT) to the county, which then redistributes some of the funds to the city in which the property is located.
This bill came under fire from the city of Snoqualmie, which filed a suit against King County stating that PILT was a nonuniform property tax, and unconstitutional because it delegates the power to specify the rate of the payment to the tribes.
The trial court agreed, but the case was taken to the state Supreme Court by the Department of Revenue. This court reversed the trial court’s decision, saying the PILT was not a tax and the bill did not break tax code.
“We find that the PILT is not a tax at all but, rather, a charge that tribes pay to compensate municipalities for public services provided to the exempt property,” the court wrote in its opinion.
After ESHB 1287 was signed into law, the Salish Lodge and Spa, a property owned by the Muckleshoot Tribe, was registered as a property that could receive the exemption and began paying the PILT to King County and Snoqualmie. Snoqualmie City Attorney Bob Sterbank explained that because the property tax from the Salish Lodge property was no longer collected, the tax burden fell on the rest of the city.
The Muckleshoot Tribe paid approximately $400,000 in taxes 2013, Sterbank said. “That $400,000 is now shifted to everyone else in town and added to their tax bills… by our calculations the effect of this (added) $30 to $40 to the average residential tax bill,” Sterbank said.
Now instead of receiving that sum of money in property taxes, the city receives about $60,000 from the PILT, two-thirds of the total payment, according to Sterbank.
Currently, the bill applies only to properties purchased before March 1, 2014.
“The problem is that date limitation could be quickly and quietly removed by legislature. There was already a bill introduced last year to do exactly that,” Sterbank said.
The city of Snoqualmie filed a motion with the Department of Revenue on Jan. 11, asking for reconsideration because the PILT is “an impermissible delegation of legislative authority” and the court’s “conclusion that the PILT is a ‘fee for service’ is not supported by any citation to the text of ESHB 1287, the legislative record, or to any facts in the record of this case.”
Sterbank said the city does not begrudge tribes for taking the economic opportunity and wants them to be economically successful, but thinks the PILT is the wrong method to achieve that goal.
“We want all of that to happen, but for all of the reasons we mentioned, we think this bill and the PILT is the wrong way to go about it,” he said. “There are still services to be provided and they have a cost. There would be many better ways in working with legislation to facilitate tribal economic development while providing the needed tax base for cities.”
The city has continued to work with the Muckleshoot Tribe and worked in some financial mitigation to the Salish Lodge expansion agreement in case the PILT is still in effect when that project is completed, Sterbank said.
