County Council prepped to impose second 1/4-percent REET

The San Juan County Council set the stage to cash in on an additional 1/4 of 1-percent tax on local real estate sales in order to give county parks, roads and the fledgling stormwater utility a financial shot in the arm.

In a 5-1 decision, the council on Tuesday agreed to have legislation prepared that would allow the county to collect revenue generated by a so-called "second" 1/4-percent tax on real estate sales. The county has long-collected, and wielded, funding from a "first" 1/4-percent REET since its authorization by state law nearly 30 years ago. Councilman Gene Knapp, East Orcas, cast the lone dissenting vote.

Despite a lingering slowdown in the local real estate market that could aptly described as historic, Auditor Milene Henely doubts that a second REET would, in general, work as a deal breaker. She said that excise taxes, generally a fraction of a sale price, do not appear to discourage a potential transactions.

"I'm not convinced that they do," Henely said. "My conclusion is it's not a big factor, if it's a factor at all."

The second REET, if approved, would add $1,200 onto the price of a $500,000 sale, and would be paid by the seller. It can be enacted without a vote of the people.

Authorized by the state in 1990, the second REET is available to counties, cities and towns whose long-range planning efforts are dictated by the Growth Management Act. According to Henley, 18 of the 29 counties that plan under the GMA, including Island, Skagit and Whatcom, have enacted the second 1/4-percent REET. In addition, she noted a total of 73 cities and towns in those 18 counties, including Friday Harbor, have also imposed and collect REET 2.

As with the first REET, state law strictly limits the way in which REET 2 revenue can be used. Both are earmarked exclusively for "bricks and mortar" type projects, rather than to pay for operations, wages or "soft" projects, such as computer software. The county's roads, parks and sewer and stormwater utilities would be potential beneficiaries of REET 2. However, Henley recommends that the council seek a legal opinion to determine whether the solid-waste division's languishing "capital" needs would qualify for funding.

The first REET is expected to generate $375,000 this year, a monumental drop from the $915,000 it produced just three years ago. Still, Henley noted that the second REET could help lessen demand on the capital improvement fund, which is increasingly under pressure, and provide the chronically cash-strapped parks department a new source of funding. Parks might be better able to generate revenue on its own if the long-stalled improvements slated for Lopez Island's Odlin Park were completed.

A new tax, she added, might be easier for islanders to embrace even in tough economic times if it helps to improve and to keep the park system afloat.

"County parks represent one of the values people move here for," she said.

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