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Land bank committee seeks to renew excise tax: history, pros and cons

Graphic showing land bank holdings throughout the county. Orange squares mark purchases; grey triangles indicate conservation easements made on privately held lands.  - Graphic courtesy of the San Juan County Land Bank.
Graphic showing land bank holdings throughout the county. Orange squares mark purchases; grey triangles indicate conservation easements made on privately held lands.
— image credit: Graphic courtesy of the San Juan County Land Bank.

By Journal of the San Juans and Islands' Sounder staff.

It’s not the existence of the Land Bank itself that voters are being asked to decide upon.

Rather, it’s the fate of San Juan County Land Bank’s primary founding source – a 1 percent tax on local real estate sales – that hangs in the balance of the Nov. 8 election.

There’s no other like it in Washington state, dedicated solely to land conservation and open space preservation. Not that others haven’t tried.

“Five other counties put it on the ballot back in 1990,” said Land Bank Commission chairman Tom Cowan. “All of them were defeated. Except here in San Juan County – and by wide margins.”

More recent efforts have failed elsewhere as well, according to Land Bank Director Lincoln Bormann.

“I think it’s now 12 counties where it hasn’t passed,” Bormann said of efforts to implement a voter-approved real estate excise tax, or REET, similar to San Juan County’s. “Six or seven counties have tried it since 1990.”

Not only are they unique, the county Land Bank and its real estate excise tax have proven popular among islanders as well. In 1990, roughly 70 percent of local voters supported the creation of both. Nine years later, just over 73 percent of voters agreed that the REET should remain in place.

For Cowan, who 20 years ago helped lead the campaign for a change in state law that would usher in the Land Bank’s “enabling legislation,” the longevity of the Land Bank’s wide-spread support is firmly rooted in a long ago, determined effort to bring as many people on board as possible, realtors in particular, and in the art of compromise.

“There was a broad constituency and compromises on all sides,” Cowan said of the campaign in support of that enabling legislation. “It wasn’t difficult for people to support it up here [mainly because] the whole concept was designed in San Juan County.”

Cowan recalls that it took some give-and-take, however, before those who weighed in on the REET’s blueprint were satisfied. It was hashed out over a series of Saturday breakfast meetings in Friday Harbor that drew nearly 25 people representing various interests and industries in the islands.

The blueprint that circulated later in Olympia called for a 1 percent tax on real estate sales, rather than the 2 percent more typical of land conversation initiatives on East Coast at the time, and called for the tax to be paid by the buyer. Cowan said that a buyer-paid excise tax was at that time “totally contrary to state law.” That’s because, he said, state law governing excise taxes targeted those earning proceeds of a sale.

The enabling legislation adopted by the state Legislature contained a sunset clause. That meant the local voters would have to ratify the REET’s continuation every 12 years, or earlier.

Land bank facts

The San Juan County Land Bank was launched with this mandate: to preserve in perpetuity areas in the county that have environmental, agricultural, aesthetic, cultural, scientific, historic, scenic or low-intensity recreational value and to protect existing and future sources of potable water. The organization is guided by a county ordinance and run by a small staff and a commission of seven citizen volunteers. The primary source of funding is a one percent real estate excise tax paid by purchasers of property in San Juan County. Other sources of revenue include the conservation futures tax, private donations, grants and interest income.

The county doesn’t lose any property tax revenue from the 1 percent tax on real estate sales or when the land bank buys land or a conservation easement. Instead, the amount of revenue the county is allowed to collect via its property tax levy – a predetermined amount each year – gets redistributed across all property-tax paying properties that remain on the property tax rolls.

According to the assessor’s office, the owner of a $500,000 home pays about $10 more annually in property tax because of land removed from the tax rolls by land bank property purchases.

There are two kinds of land bank purchases: a fee-simple acquisition (buying property outright) and conservation easements on  privately owned property, legally bound to preserve conservation values. Most easement properties do not provide public access. Land Bank fee-simple acquisitions are typically called “preserves” and are open to the public.

As of December 2010, the land bank owned a total of 3,180.42 acres. Turtleback Mountain Preserve, which is 1,578 acres, makes up close to half of that number. There is a total of 111,000 acres in San Juan County; the land bank owns 2.86 percent. The land bank also has 2,078.88 acres in conservation easements and a 400-acre lease on Lopez Hill.

The land bank has collected a total of $49 million in real estate excise tax. It has spent $69 million in acquisitions, easements and building up its stewardship fund.

Harvey Himelfarb, an Orcas resident who is on the Land Bank renewal committee, says “Every 12 years, unless it’s renewed by our community, [the land bank] goes out of existence in terms of new acquisitions. The land bank puts money aside for stewardship of what has been protected. Someday, our citizens will decide that enough land has been protected, and then the land bank will simply be stewarding.”

Two sides of the land bank coin

Orcas Islander Patty Pirnack-Hamilton supports the REET renewal because “we benefit as an island community because we have places to go.”

“What is one percent? That’s nothing,” she said. “It’s your contribution for living here, as far as I’m concerned. It doesn’t cause my land value to go down; if anything it enhances the value of my property. I think you can never have enough property for people. It’s a no-brainer to me. I’m really rooting for it; I can’t imagine it’s an issue.”

Himelfarb says, “Some day we will have enough land to preserve the quality of these islands. But I don’t think we are there yet. We need more beach access on Orcas.”

Orcas bookseller Doug McDonald says having attractions like land bank preserves is a draw for tourists.

“Our whole economy is basically tourist-based,” McDonald said. “The richer places we have for people to come, the more we can help the local economy. Once a piece of land is developed it can never go back. We want to buy as much land as we can now.”

Orcas realtor John Erly is uncertain about the measure.

“I’m all for preserving land,” Erly said. “I sometimes question whether or not a county like San Juan County can afford to take land out of the tax base.”

A local committee, “Opposing the Land Bank Initiative,” wrote the following: “[The Land Bank’s] mission has digressed. Rather than focus on their core mission of preserving open space, the Land Bank has become entangled in ‘urban’ projects … The Land Bank has exempted 3,580 acres. As they remove more from the tax base something has to give. Either rates on the remaining base have to increase, or income for government services is reduced.”

The statement reads further, “It’s time for a much needed public discussion about the length of the funding window, the management of LB holdings, and the focus of its mission. Vote no and start the dialogue.”

 

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