Monday, September 6, 2010

Subsidizing Rural Development - A blatant case study

Lummi Island - Providing transportation between a rock and a hard place

People who live in our county's cities are starting to learn the lesson that they are often called upon to share an increasing portion of their tax dollars to support services for those who live in the more rural areas of the county. For years the County through planning and zoning decisions has encouraged lot creation in rural areas, which in turn has encouraged people to “drive till they qualify” since cheaper housing has been available the farther you are willing to drive. Places like Birch Bay, Peaceful Valley, Sandy Point Heights, Sudden Valley, and Lummi Island were all places where families could find an affordable first home, and where lower income folks could more likely afford the rent.

Now we have thousands of people living in these far-flung areas, and while their homes may have been cheaper, providing them with county services is way more expensive. On top of that many of these rural residents seem to believe that the sheriff, the fire department, and the ambulance should show up in the same amount of time as if they lived on Maple St in Bellingham, and they want their roads to be wide and smooth so they can drive fast to get to town where they for the most part work and shop. Ironically, many of these rural characters are some of the most outspoken against any hint of raising taxes to pay for services, instead preferring to continue to allow services for the majority of taxpayers who live in urban areas to decline so their taxes can be used to provide “essential” services to these rural dwellers.

There is no place quite as easy to see and evaluate this problem as Lummi Island, and the current quandary regarding the lease for docking facilities with the Lummi Nation has brought it front and center. Without getting into that lease quagmire, and the increased costs that will have to be put on someone, lets just take a look at how much Lummi Island is already being subsidized by others in the county.

I believe when most people pay taxes to the County they believe that some small “fair share” of that tax money goes to support each of the services that the county provides. While not everyone might agree on the need for all the services, the services at this point include law enforcement, courts, roads, elections, controlling disease, planning, parks, protection of natural resources, economic development, a variety of social services, etc. So for rural residents of Lummi Island how much of their county tax dollar supports these services?
• In round figures the 2010 assessed value of all property on Lummi Island is $270,079,836. This equates to 1.08% of the total countywide assessed value of $25,077,540,196.

• The 2010 assessment for the Road Fund is $1.3361 per $1000 of value, so people on Lummi Island will pay $360,854 into the Road Fund. This equates to 2.12% of the total Road Fund collected countywide.

• The 2010 assessment for the General Fund is $1.02054 per $1000 of value, so people on Lummi Island will pay $275,627 into the General Fund. This equates to 1.08 % of the total General Fund collected countywide.

• The 2009 Lummi Island Ferry operating expenditures were $2,545,688. According to current county policy 45% of ferry operating costs are supposed to come from county taxpayers, and 55% of the costs are supposed to come from collected fares. In 2009 the taxpayers share was $1,145,560, which equates to $509,079 more than all the General Fund and Road Fund taxes that will be collected on Lummi Island in 2010. In other words all property taxes collected on the Island for the General Fund and Road Fund fall over a half million dollars short of covering the cost of just the ferry, and provide no support for other county provided services such as law enforcement, courts, road repair, elections, health department, planning, parks, etc. Of course property taxes only account for about 50% of the General Fund and 75% of the Road Fund, but it is clear that sales tax and other revenue sources paid by people on Lummi Island do not come near paying for the ferry, let alone a per capita share of other county provided services.
Now before my friends on Lummi Island go to look for their pitchforks let me be clear that I am not suggesting that people on Lummi Island should pay 100% of the cost of the ferry. Just like I am not suggesting that the people who use Mosquito Lake Road pay the millions of dollars recently spent to replace the Middle Fork bridge, or that people in the Deming area pay 100% of the millions of dollars that have been spent to protect their area from flooding, or that people in Columbia Valley pay 100% of the hundreds of thousands of dollars being spent to build them a Resource Center, or that the handful of families that live on Rutsatz Road pay 100% of the tens of thousands of dollars that was recently spent to fix their road from river damage. The theory and promise of government is that if we each pay our small fair share, that money will go much further to provide desired services and protect us all from catastrophic losses (violent crime, spread of infectious disease, flooding, loss of our homes or income source, pollution of our drinking water, etc) then if we each had to try to provide those things for ourselves.

Under current county policy the people on Lummi Island are not supposed to pay 100% of the ferry service but only the 55% that gets collected as ferry fares, and then their small percentage of the 45% of the costs that come from taxes. I was not arguing that they are not paying enough, but only using the Lummi Island example to point out that development in rural areas, wherever it occurs, rarely pays for itself and has to be subsidized by those in urban areas. My main point is - before we start arguing about the fairness of such subsidies we should at least stop making it worse!

Unfortunately it appears that some on the County Council, perhaps a majority, while apparently ready to throw the folks on Lummi Island under the bus on these rising ferry costs are also still in favor of encouraging more lot development in rural areas which will just continue to increase the same type of subsidies in other parts of the County. While a logical, slow, predictable correction of these subsidies may be valuable over the long run, it makes no sense to pull the rug out from under these communities after encouraging this type of development for years. But I am not sure any such correction is the plan of the current Council, instead I think those in urban areas better hold onto their wallets, and those in places like Point Roberts, Acme, Kendall, Lummi Island, Deming and Lake Samish better watch your backs because it appears the County Council is just planning to continue the subsidies by allowing services to continue to erode for most taxpayers and robbing existing subsidies from some to appease others. Dumb growth returns to Whatcom County.

It should also be noted that the people of Lummi Island did recognize the problems of such dumb growth and through their comprehensive planning efforts asked that Lummi Island be down zoned to protect their quality of life and their finite water source from being depleted through excessive development and drilling of more exempt wells. Exempt wells in areas where water is already over allocated is another dumb growth subsidy, but that rant will have to wait for a future blog.

So as the cries escalate for making folks on Lummi Island pay their "fair share" watch to see whether the underlying cause of such rural subsidies is going to be addressed, or whether appeasing the selfish grumblers by throwing one area at a time under the bus is a more politically feasible solution than acknowledging and correcting our dumb growth history.


  1. Thank you for this articulate analysis, Carl. As usual, you are spot on. The County has allowed this situation to develop over many years, and development planning (or lack of it) is a huge part of the problem.

    The rules have frequently changed in recent years about what expenses are included as ferry "operating expenses" and how our fares are to be calculated. We have routinely not been included in ferry management decisions, yet the current Council is considering proposals which would burden us with the full cost of the results.

    The problem is not that most Islanders are unwilling to pay their fair share. The problem is the suddenness with which the changes are being proposed for implementation, the drastic nature of the proposed changes, and our lack of input in matters affecting those changes.

    Coupled with the return to policies encouraging far flung rural development, the whole situation seems contrary to reason.

  2. Lies, damned lies, and statistics- Have another look at those numbers:

    1- Lummi Island pays 1% of the county's property taxes, but they are only half a percent of the population. Therefore they are paying at twice the rate they should reasonably be expected to pay. Put bluntly another way, the county is ripping the islanders off on their property assessments twice as much as they rob the county in general 8^)

    2- We're apparently paying 4 times our fair share of the road fund relative to our size. And road maintenance on the island is assuredly not much of a burden, judging by the condition and width of the pavement. There are also no bridges on the island AFAIK, as compared to a bridge for every 7 miles of road in the county. Credit, please, for the cost avoided for the 4 bridges we "deserve" for our 20+ miles of road.

    3- We're punching at twice our weight class with the general fund, too.

    4- The 45% subsidy rate is an arbitrary and capricious figure contrived by committee. Could we comply with the committee that set the subsidy rate for the bus system instead? Bus riders pay 10%, ferry riders pay 55%? Where's the justice in that? Also, the "cost" of the ferry is a fluid figure, depending on how the books are being kept in a given year.

    Whatcom County built the Road to Lummi Island on their own initiative; no one petitioned them to create Lummi Shore Road and buy Wright's ferry. That constitutes an inducement to citizens to settle there and provide the county with property taxes, which they have done for a century. It's a quaint and farcical notion that you can simply abandon that road as some sort of a right-sizing gesture now. The folks in Acme can at least walk home when the WTA topples; you can't walk home to an island.

  3. In response to anonymous -
    I think you are mixing up population numbers and property values. The County's tax system is based on property values not population, so Lummi Island's share is a percentage of the overall value of the property countywide. Population percentage has nothing to do with it. Certainly a flat per head tax would give us different results but that is not the system that the state legislature has handed us. I have absolutely no desire to try to defend this state's silly tax system. I was just trying to point out what Lummi Island's share of the General Fund and Road Fund are, compared to the costs of the ferry operations.

    I agree that the 45% is arbitrary and can change at the drop of a hat. The state ferries and many other jurisdictions are trying to lower that subsidy rate by raising fares. If you have been reading the comments on Herald articles about the Lummi Ferry, or could see the emails that the Council is getting from the 99% of the population that do not live on the Island, you would see that when people just look at this one issue (and not the subsidy they may be getting for their local bridge, dike, road, etc) they are overwhelmingly in favor of reducing the 45% subsidy on the ferry. Some on the Council are also starting to voice that opinion, which is why that arbitrary number could change any moment.

    Sounds like you and I agree that after years of "inducing" people to live on Lummi Island any fast and drastic change to the 45% subsidy, or formula for figuring costs, is not right.

  4. Carl,
    This excellent post and the discussion indicate a need for greater clarity on whether- and if so, to what extent -the overlapping of County taxation with incorporated City populations leads to a systemic flow of subsidies in one particular direction. The question can be posed as follows: Take the County portion of property taxes and estimated sales taxes paid by the different units within the County (Ferndale, Bellingham, other cities, and Unicorporated), then map expenditures to the units that are benefited.

    Some items- like the jail -will tend to allocate "benefit" equally to all taxpayers. Other items, like the ferry subsidy, clearly are a flow of "benefits" in one direction. To make a legitimate case, though, we need to sum these subsidies over all items, not just the ferry.

    Can Council direct staff to perform and present such an economic analysis on taxation and "benefits"?

    At first blush, it looks like rural development as currently practiced is a subtle method of making the cities into cash cows, paying into the system more than their proportion of benefits. This is so potentially explosive an idea, though, that it really should be documented with an all-services spreadsheet so the voters can "follow the money".

    Abe Jacobson (Bellinghamster who might be getting his pockets picked by Crawford, Kremen & Co.)

  5. Carl - Just saw this post. You state that the county provides "law enforcement, courts, roads, elections, controlling disease, planning, parks, protection of natural resources, economic development, a variety of social services, etc." I'm not sure you should provide Sudden Valley in this list. Sudden Valley, through their dues, provides most of their own roads, their own parks, protects their own environment through our Rules & Regs, and the county does no economic development (in fact discourages it in the watershed). Maybe Sudden Valley should be used as a model for other areas of the county to alleviate the current lack of funds;)

  6. Carl, you make it sound as though Lummi Island, as a rural geography, has only recently been inhabitated by contemporary humans. A ferry has been servicing it for over 100 years, much of that time under the auspices of Whatcom County. So please do not use it as your example related to the COS for rural Whatcom County in general. Why don't you go to the heart of the matter which is too many people needing COS. Reduce the population and you reduce the COS to a significant degree.

  7. Thank you for this articulate analysis of the Lummi Island ferry issue. You make an excellent point about how county policies have promoted sprawl which 1) is expensive for the County to service and 2) contradicts the County's Land Use Planning objectives. Hopefully your enlightenment will spread to other Council members.