Land donation not registered as nonprofit property, state says
Published 10:00 am Wednesday, March 7, 2007
State officials confirmed this week that the 10-acre parcel of land that was under Island County Fair Association’s stewardship for 20 years was wrongfully exempt from property taxes.
Controversy has clouded the association’s sale of the land, called the Waterman property, since it was brought to light earlier this year. While some have said the Waterman property was donated to the county, county commissioners released a statement to the press last week that attempted to cut the county’s connection to the land sale.
Mike Gowrylow, spokesman for the state Department of Revenue, said the Waterman property was donated to the Island County Fair in 1986 and did not make it onto the county’s tax rolls.
“At that time, county officials misidentified the parcel as exempt, county property. The error was not discovered until the property was sold in 2006 to a private party and returned to the tax rolls,” he said.
Gowrylow characterized the misidentification as a mistake after he contacted county officials, who told him the land was not county property.
It’s now up to county leaders to decide if they want to be reimbursed for back taxes, Gowrylow said.
The majority of the uncollected tax revenue is lost because county’s have a three-year deadline to collect taxes that are past due.
“There is really no mechanism to recover back taxes in this case,” Gowrylow said.
It is not clear how much tax income was lost because the property wasn’t evaluated for a specific use because it was assumed tax-exempt, he added.
The current owners of the prop-
erty
paid $875.56 in taxes for 2006.
County leaders and fair officials are uncertain about why the piece of land was tax exempt.
In a joint statement, commissioners said last week the Waterman property was never owned by the county. While it was donated to the Island County Fair, some have since said the family intended it to benefit the fair association.
County Treasurer Linda Riffe has said in earlier interviews that the Waterman property appeared to be ruled tax exempt from all taxes except the state’s property tax levy for forest firefighting protection, because it seemed the land became the property of Island County when it was donated to the Island County Fair.
Also, officials with the Island County Fair Association never registered the land as tax-exempt because of the associations no-nprofit status.
Gowrylow said the association did not apply to the Department of Revenue for a tax exemption on the Waterman property.
Properties owned by non-profit organizations may qualify for property tax exemptions if they are used for a qualifying purpose. The Department of Revenue reviews and approves applications for tax exemptions, Gowrylow said.
If the association had applied for an exemption, it would have had to show that the property was being used exclusively for fair purposes, he added.
“The department is not aware of how the property has been used since the association acquired it, but simply holding it as vacant land would not normally be a qualifying use,” Gowrylow said.
Commissioner Mike Shelton initially said he had assumed the land was tax exempt due to the fair association’s non-profit status.
Shelton said keeping the property tax exempt was a mistake.
“The real estate excise report filed on May 10, 1988 is clearly marked exempt, which is a mistake and the property should have been taxed,” he said.
“If it was tax exempt for the wrong reasons, that’s something that needs to be corrected,” Shelton said.
Fair secretary Marilyn Gabelein said she didn’t know how the property had gotten its tax exempt status because that happened more than 20 years ago, before her active involvement in the association.
The donation of the Waterman property to the fair came under scrutiny when critics of the fair association began asking about donations that fair officials had accepted to fund their ongoing legal battle with the city of Langley. The two sides, and Island County, have been fighting in superior court over a new city street that Langley wants to build across the south end of the fairgrounds.
Fair association officials have refused to release records on the Waterman property and other donations, and have claimed the association does not need to release documents because it is not bound by the state’s laws on providing public records.
The state Auditor’s Office has disagreed, and has said the fair association is the county’s exclusive agency for putting on the county fair and must abide by the state’s public records laws. The Auditor’s Office has also vowed to review the land sale when it audits the county’s books in June.
Critics of the land sale have said the dealings of the association should be public, and have pointed to the section of the Island County Code that requires “all donations” to the fair to be deposited in the Island County Fair Fund.
While the county code covering the fair has been rewritten since its initial adoption in the early 1960s, the resolution that granted the fair association its agency status and ordered the county takeover of all the fair association’s assets was still in effect when the land was donated back in the mid-1980s.
Members of the fair association did not transfer funds from the land sale to the county after the sale was completed, however. Instead, fair officials placed the money in two private bank accounts. Fair officials have said interest on the money will be used to create an endowment fund.
Commissioners tried to tamp down the land sale controversy last week by offering their interpretation of the county’s fair rules.
While the county code reads “all fair donations and receipts” have to be deposited in the county-controlled fair fund, the commissioners said in their statement last week that only “donations related to the production of the fair” have to be deposited in the county fair fund.
Money from the sale of the Waterman property in 2006 doesn’t have to go in the county fund, commissioners said, because “the money from the sale of the Waterman property did not come from the production of the fair.”
Shelton considers the word “fair” to refer to the event, not the organization, he explained.
In the commissioners’ statement last week, they also said they don’t believe the fair association is a public agency.
“Two independent legal opinions from private attorneys hired by the fair association state that the Fair Association, Inc. is a private non-profit and not a public agency subject to public records laws. These opinions are consistent with the opinion of the county prosecutor,” the commissioners said.
Island County Prosecutor Greg Banks said the Island County Fair Association is a non-profit corporation.
“Corporations are entities that only exist by virtue of state law that allows them to exist. They must comply with the laws regarding their incorporation and management. Other than that, I can’t say anything about the Fair Association, Inc.,” Banks added.
