Sunday, October 28, 2012

Show Me The Money

While some lip service will be be paid to "mitigating" the impact of the Gateway Pacific Terminal Coal Port, the bottom line for the Whatcom County Council might be: Show Me The Money!

What financial incentive would our county officials have to consider the interests of Bellingham, Mt. Vernon, Edmonds, Seattle, Vancouver, or Spokane?

When I woke up this past Tuesday, I saw the answer the majority of our County Council members needed: the coal port "would 'significantly' add to tax rolls" the Bellingham Herald boldly proclaimed. Even better, the Herald reported that the taxes would be "a tax reduction for other property taxpayers." 

Well, even I am liking what I'm reading:
  • add significantly to the tax rolls but
  • reduce taxes for other property taxpayers. 
Can't get any better than that?

But wait! Doesn't this sound a bit like Romney's tax plan? Somehow, this doesn't look like real arithmetic.   

The Herald reporter comforted me that it wasn't Romney math, which he correctly understood that I thought was a bad thing. He assured me that "trying to explain it only creates more confusion."

Having been around the courthouse for a "few years", I knew this tax plan didn't add up.  Not only are there impacts that the public will have to pay for these corporate profits, but the property tax statements in the Herald just don't add up.

The Herald was kind enough to send me a link to this study, which can't be found anywhere I know of on the internet, including the GPT site. Click here for the study.  

It turns out that there are some "cape size" holes in the GPT study. Shocked? Let's take a look at some bad assumptions I quickly found:
  • First, the study assumed that what GPT said would be the construction costs ($665 million) were truly accurate. Why would we? GPT is working to sell their project, and what "sells" their project are exaggerated economic benefits.
  • Second, the $665 million construction cost is for full build out that isn't projected until 2026, if ever. The first phase is half that size, and perhaps half that construction cost.
  • Third, the study assumed that these inflated construction costs would actually be what the County Assessor actually places on the tax rolls. Not so quick Todd and Peter (study author's real names). I contacted the County Assessor, and this is what he said:
"The assessed value of new construction shares the same value assumptions as all other value on the assessment roll. It will be "Market Value".
Just for fun, look up your property value if you own your home. Do you think that that the Assessed Value is Market Value?  No.

And to really make the point, what would the "market value" be for a coal port that has no market? Even the Whatcom County Assessor recognized that fact in a followup Bellingham Herald article. The shutdown of the terminal would mean that GPT might not pay their taxes and/or the market value of the property might plummet.  When that happens, "the durability of the property tax" is --interrupted.

So back to the Herald's comment that property taxes would go down for some. What they didn't explain is that only those taxpayers in districts with fixed bond levies would see their taxes go down. 

It works like this:

Say the School District wants to build a new school and needs to issue a construction bond for $10 million.  The levy rate is based on calculating the yearly payment schedule against the assessed valuation of the district. It is a fixed rate as the voters would have approved a specific amount that would be needed to pay off the construction bond. If assessed values go up, the levy rate goes down. If assessed values go down, then levy rates would go up. The School District would always get the amount it needs to make its annual debt payment -- nothing more and nothing less.

In the above school bond scenario, an owner of a $275,000 house would see their school district bond levy payment go down $11 per year if GPT added $665 million in assessed value to the school district tax rolls. (I assumed a 15-year bond repayment at 3.5% interest, using Ferndale School District's 2012 assessed value of $3.566 billion.)

Really?  You add GPT's numbers of $665 million in new values and the savings to a homeowner on a $10 million school bond might be $11 per year?

Was it this $11 per year in potential tax savings the reason why the Herald would report that GPT would result in a "tax reduction for other property taxpayers"?  Maybe a less complicated way to say it is that the average homeowner in Blaine of Ferndale School Districts might have their taxes reduced equivalent to the price of a burger and fries at Red Robin -- drinks would be extra.

Economic issues are a very serious topic for this project, however. Better reporting and analysis is as critical on this subject as it is on environmental issues. Whether it is a $11 savings to a homeowner, or millions (billions) of dollars to address grade-separated rail crossings, we need to have a real economic analysis done by non-biased experts.

It is unclear how economic issues will be addressed. Economic impacts are not in the list of issues and elements to be discussed in the EIS for this project. SEPA Rules declare that "socioeconomic" is a term that "does not have a uniform meaning and has caused a great deal of uncertainty." (WAC 197-11-448(1)) As a result, the EIS is not required to discuss economic competition, profits and personal income and wages, and social policy analysis.

The County's Zoning Code, on the other hand, does require consideration of the economic impact of this proposal.  One criteria for approval of this permit is that the project "[w]ill not impose uncompensated requirements for public expenditures for additional utilities, facilities and services..." (WCC 20.88.130(6))

The applicant responds that the project "will meet applicable standards for public service and facilities, will contribute significantly to the economic well-being of the service and facility providers, and will mitigate impacts as required by law."

Powerful words: "contribute significantly" and "mitigate impacts as required by law".

Thanks for the hamburger, GPT.* That is your definition of significant?

But back to what is in this for Whatcom County Council. The property tax benefit study shows that Whatcom County will get $1,779,105 annually in increased property and road taxes. While we know that that number is inflated, what if it was $1 million?

A simple cost-benefit analysis might conclude that the tax benefits outweigh the costs -- for Whatcom County. The County doesn't pay for schools, fire, sewer, water or a whole host of other facilities and services. The primary expense of county government is law and justice (jail, sheriff, courts, prosecutor).

The County's public expenditures are compensated -- who cares about the rest of them? Motion to approve. 

* Actually, I'd have to live in Ferndale or Blaine School District to get my hamburger.

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