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It’s true that there is a “tax problem” on the Swinomish Indian Reservation, but it is much larger than the Great Wolf Lodge tax case that everyone has been hearing or reading about lately. For decades, the Swinomish Tribe has faced at least four separate but related tax problems that went largely unnoticed in the Town of La Conner until the impact of the Great Wolf Lodge decision that invalidated a state tax on the permanent improvements of lessees on federal trust land was felt by property owners of fee lands both here in town and on the reservation.

No Tribal Property Tax.

The first problem is the Tribe’s lack of authority to levy taxes on any real property (land) within the Tribe’s reservation.

For any other jurisdiction – county, city or town – the major source of revenue to pay for the governmental services it provides is the local property tax.

Approximately 70 percent of the reservation is owned by the United States “in trust” for either the Tribe or tribal members and is not taxed by the Tribe or anyone else.

The other 30 percent is owned “in fee” by mostly non-native individuals and other non-tribal entities.

The State can tax those fee lands on the reservation, but federal courts have said the Tribe cannot.

Cost of Services to Fee Lands. The second problem is that property taxes from fee land owners on the reservation are collected by the state and distributed to local taxing districts but not shared with the Tribe, which pays for some of the more expensive services provided to the residents and owners of fee lands.

For example, if a resident of an expensive waterfront home on Skagit Bay calls 911 to report someone breaking into their home, a tribal police officer will arrive and secure the home within about 3-5 minutes, while a deputy county sheriff will take on average close to 30 minutes – sometimes as much as an hour – depending on how far away they are when they receive the call. That’s because the Tribe has three patrol cars patrolling the reservation 24 hours a day, seven days a week, while the county has a relatively small number of officers spread out across all of the unincorporated areas of Skagit County.

Now that Tribal Police are cross-deputized with the county sheriff, on the vast majority of those calls, the only officer you will see is a tribal police officer. Police protection costs the Tribe four million dollars annually – half of that comes from the Tribe’s own funds – none of that comes from fee land owners or from the property taxes fee land owners pay to the county.

Allan Olson has worked for the Swinomish Tribe since 1981, first as the director of the Tribe’s legal department and since 2001 as the Tribe’s General Manager

Olson’s statement continues as paid content on page 6

Enterprise & Limited Tax Revenues Must Replace Property Tax.

A related third problem is that the Tribe is forced to rely on private enterprise revenues – from the Tribe’s casino, gas stations, tobacco outlet and other tribal enterprises – and very limited tax revenue – from utility taxes and now the use and occupancy tax on trust land improvements - to replace or “back fill” the lack of a property tax.

People often ask why the Tribe operates a casino and sells liquor, tobacco and now cannabis.

The short answer is that it has to – in order to raise the money to pay for the essential governmental services it provides to its members and to all of the residents and property owners on the reservation.

Revenue from these activities make up for some – but not all - of the lost property tax revenue that would otherwise have come from both trust (federal) and non-trust (fee) lands on the reservation.

In other words, the Tribe “plays the hand it’s dealt” by Congress and the Federal Courts – if Congress were to pass a law that gave the Tribe the same property taxing authority as neighboring jurisdictions, the financial choices and decisions made by the Tribe would likely be very different.

School Funding and the McCleary Decision.

The fourth problem is the state’s inadequate funding of public schools.

Even after the recent state legislation that marginally increased school funding to satisfy the state Supreme Court’s “McCleary Decision,” local schools are still struggling to address the educational needs of their students.

Many of the kids that suffer the most from underfunded schools are kids from low income families that need extra help the most.

For the past 10 years, the Tribe has spent over $500,000 annually to mitigate this funding shortfall by employing an increasing number of para-pros (teacher’s aids) to help kids that struggle with their school work.

In 2019, the Tribe will pay $700,000 to employ 13 of these para-pros – one for each grade K-12 – to assist teachers in La Conner classrooms and $320,000 to pay for teachers in the Tribe’s pre-school.

And the para-pros and pre-school teachers don’t just help tribal kids – they help any kid in the classroom that needs help.

The $1,000,000 that the Tribe pays annually for teachers and teacher aids is in additional to Federal Impact Aid money ($1,830,000 this year) that the Federal Government pays to the La Conner School District “in lieu of property taxes” that would otherwise have been collected from the Federal Government for federally owned trust lands – including the land leased to residents of Shelter Bay and the Pull & Be Damned Road Community.

Great Wolf Lodge.

The Great Wolf Lodge decision involved the Chehalis Tribe in southwest Washington and held that counties in Washington State cannot impose real property taxes on permanent improvements (houses and other structures) to land owned by the Federal Government in trust for a tribe or its members – regardless of ownership.

The gist of the case is that a permanent structure becomes a part of the land its built on (a “fixture”) and the exemption from taxation that applies to federally owned land applies equally to anything permanently connected to it.

Although the legal doctrine of “fixtures to the land” has been settled law for over 100 years, the Great Wolf Lodge decision still came as a surprise to everyone here – the Tribe, school district and county.

Following the decision, the state department of revenue sent out invitations to “stakeholders” asking for input on a property tax advisory they were preparing for county assessors.

Tim Bruce brought the notice the school district received to the Swinomish Senate concerned that taxpayers might not pay the second half of that year’s county taxes and concerned that the school district might not have enough funds from the school’s capital improvement levy to make their construction loan payments.

The other big concern was the potential impact on the county from tax refund claims – not just for that year (2014) but also for the three prior years (2011-2013) – claims potentially worth up to $7,000,000.

Tribe’s Use and Occupancy Tax.

Working with county attorneys, the Swinomish Tribe adopted a “Use and Occupancy Tax” for 2014 and a retroactive tax for 2011-2013 that offered a dollar for dollar credit for taxes paid to the county, thereby protecting the county from refund claims for tax revenues that had already been spent and ensuring that there wouldn’t be a funding gap that would cause the school district to miss a loan payment.

Going forward the Tribe approved a similar tax for 2015 using the same tax rate as the county, and allocated tax revenues among local service providers that had received the tax in the past – the school district, fire department, La Conner library and EMT – but also allocated some of those revenues to reimburse tribal funds that paid for the para-pros (teacher’s aids) the Tribe employed to mitigate inadequate state school funding that the State Supreme Court said violated the State Constitution in the McCleary Decision.

The Ghost of Sandy Stokes.

Contrary to what Sandy Stokes said in her “Citizen View” in this newspaper – this shift did not cause property taxes in La Conner to go up 25 percent.

The total levy rate for the Town of La Conner was $13.2505 per $1,000 of value in 2014 prior to the Tribe’s new tax and went up only 5.7 percent in 2015 (to $14.0064/1,000) and then dropped in 2016 (to $13.5944/1000) and again in 2017 (to $11.8106/1000).

Appraised values went up significantly during these years, which also increased property taxes, but those increases were the result of a variety of causes – not just the shift in taxes from reservation trust lands.

It is also not true that “state bureaucrats” in the Department of Revenue blindly took the advice of tribal attorneys in secret meetings and issued a property tax advisory that somehow misled county officials.

The Governor has adopted policies that require the Department of Revenue and other state agencies to consult with tribes whenever they plan to do something that may affect tribal interests.

DOR had its own attorney general and tribal liaison (also an attorney) to help carry out these requirements.

In addition to the DOR notice that was sent to all “stakeholders” – like county assessors and school districts – DOR invited all of the tribes in Washington to a tribal consultation meeting attended by the DOR director, deputy director, the executive director of the governor’s Office of Indian Affairs, DOR assistant tax policy director and DOR’s Tribal Liaison.

So tribal representatives and their attorneys did meet with DOR staff – to provide input – but neither blindly followed the other.

And lastly, it’s not true that the state “backed down” when it decided not to appeal the Great Wolf Lodge decision to the US Supreme Court. The decision was based on long standing principles of property law – “fixtures” – and it was decided unanimously by a three-judge panel.

The state tax on permanent improvements to trust land – as adopted by the state legislature – was doomed to failure and the state knew it.

In another case, it was the attorney general’s office that ignored recommendations by the governor and several state agencies when it decided to appeal the tribes’ favorable Ninth Circuit Court decision in the recent Culvert Case to the US Supreme Court. So, the State doesn’t “back down” in cases it thinks it can win – and has repeatedly “not backed down” even in cases it didn’t win.

2019 School Levy Vote. The La Conner School District – and other local taxing districts – are now collaborating with the Tribe in a positive way on a government to government basis as neighboring jurisdictions to generate the funds necessary to pay for the services they provide to both reservation and non-reservation communities. The new school levy is a case in point – the levy that will replace the current levy in 2020 is for a much smaller amount ($807,605) than in the past, while the 2019 tribal contribution ($660,000) will be a significant increase from the $400,000 the Tribe contributed in 2015.

The Tax Question.

From the Tribe’s perspective, the Great Wolf Lodge decision is a small but incremental step toward restoring the authority and autonomy of the Tribe over its reservation – rights that were promised to the Tribe by the United States in the 1855 Treaty of Point Elliott in return for the Tribe’s surrender of its ownership rights to lands in the rest of Washington that were homesteaded by settlers 150 years ago.

The state could try to come up with a different type of tax and incur the considerable expense of defending it, but regardless of what authority the state has or doesn’t have, the question raised by Great Wolf Lodge should not be “can the state tax leasehold improvements on leased trust land” but rather “should the state tax those improvements.” For all of the above reasons, the answer should be a resounding “no.”