Four property tax breaks for agricultural, timber and “open space” have recently become an issue for voters, the County Council, San Juan County Assessor Charles Zalmanek and the Washington state legislature.

The tax breaks are important to the property owners, especially the growing number of small farmers in the county trying to make a living from agriculture and forestry. Both the assessor and the county council have made it clear that they don’t want to make things more difficult for small farmers.

The four tax programs reduce the property tax assessment on land from the usual fair market value of the property to the current use value for agricultural, forestry or simple “open space.”

These tax preferences were enacted by the people in 1968, when a whopping 68 percent of the voters approved the Open Space Taxation Amendment to Article VII of the Washington Constitution.

The constitutional amendment was succinct, self-explanatory and far reaching: “[F]arms, agricultural lands, standing timber and timberlands, and other open space lands used for recreation or enjoyment of their scenic or natural beauty, shall be valued for purposes of taxation on the basis of the use to which such property currently is being applied, rather than on the highest and best use.”

The implementing statute, Chapter 84.34 of the Revised Code of Washington, is neither succinct nor self-explanatory, which has resulted in the tension between the assessor and the county council.

The “current use” value of agriculture land in San Juan County is only 4.6 percent of the  fair market value of that land. The property taxes on land in the timber programs are calculated on an even lower average current use value – only six-tenths of one percent of the fair market value.

Of the 110,142 acres of properties in San Juan County, only some 56,000 acres, or under 51 percent, are assessed and taxed at the “highest and best use,” which under applicable regulations is the fair market value of the land and improvements. Current use agriculture, open space and forestland acres comprise 27.8 percent of the land and 4.6 percent of the owners. 21.5 percent of the land is exempt from taxation altogether.

Because property taxes must raise a certain amount of money to fund multiple public agencies and programs, any “current use assessment” that reduces taxes for agriculture or timber lands or open space will mean that ordinary residential property owners, whose property is assessed at “fair market value,” will see their tax bills rise.In recent years, local assessors have been spurred by the Department of Revenue to scrutinize applications and monitor continued eligibility for the four property tax current use programs related to farmlands, timber, timberlands and open space.

Efforts by Assessor Richard Zalmanek and other county tax assessors to enforce the law and remove outliers have caused county councils and the state legislature to address the process by which the exemptions are granted and the monitoring of continued eligibility by exemption holders.

Property taxes have been a source of friction between tax assessors and property owners since the assessment reduction programs were enacted by constitutional amendment and implemented by the Legislature in 1971. Now legislators in Olympia and in rural counties are caught in the middle between owners of tracts of property, especially larger tracts, who want to reduce their taxes and assessors seeking to minimize “tax shifting” to people who cannot avail themselves of the exemption programs.

That friction generated heat in San Juan County recently, when the council inserted two special provisions in the 2014 county budget, one of which withheld 8 percent of the assessor’s 2014 budget until the assessor provides a comprehensive written report detailing the administration of the current use farm and agriculture program and the criteria used by the assessor in deciding continued eligibility.

The other proviso requires the assessor to provide quarterly reports “showing the status of new construction valuation” in the county. Zalmanek has blamed delays in updating assessments for new construction on budget constraints.

San Juan County Prosecutor Randy Gaylord refused to give the usual “approved as to form” imprimatur to the 2014 budget because of the process the county used in passing the provisos. But Zalmanek says he will nevertheless comply with the provisos and provide the council with the required information.

Zalmanek views the “tax shift” problem as a reason the county should devote more resources to verifying the eligibility of the participants in the four programs. To make the assessment of taxes “fair, uniform and equitable” – a tax collection mantra that is a Zalmanek favorite – the assessor since 2009 has been working to verify the eligibility of participants in the four programs.

In one 15-month period in 2011-2012, 23 landowners were removed from the four special assessment programs, with only two appeals filed. Four removals were at the owner’s request.

Responding to taxpayer complaints, local 40th District state Representative Christine Lytton introduced House Bill 2306, which seeks to liberalize eligibility rules for the current use farmlands program

After a fiscal note by the Department of Revenue on a related bill predicted a five million dollar tax shift from favored taxpayers to ordinary property owners during the first year after enactment, both bills were stymied. HB 2306 was then amended into a “study bill” but passage now appears unlikely.

The council and the assessor say they only want to enforce the law to ensure that qualifying property owners can participate in the current use programs. Neither wants ineligible property owners to take advantage of unfair reductions.

Zalmanek points out that a 2007 audit of his office criticized enforcement of the law, and a current informal legal opinion from the Attorney General confirmed his interpretation that ineligible property owners be removed “promptly” from the program.

“I disagree with the assessor’s interpretation,” said San Juan County Council Chairman Rick Hughes, who welcomes the Legislature’s interest in the Open Space Law.