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Marina tenants outraged over tax bills

Port Orchard Marina tenants are up in arms after receiving their leasehold tax bills in the mail last month.

According to tenant Rita DiIenno, even though the value of the marina increased 31 percent between 2003 and 2004, the tax bills sent to tenants increased approximately 500 percent over last year’s totals.

DiIenno, who is also a Port Orchard City Council member, addressed the matter to the Port of Bremerton Board of Commissioners earlier this month, arguing the increase was particularly tough to take because the tenants had just finished a multi-year effort to have the port keep lease rate increases to a predictable pre-approved schedule.

DiIenno also recently wrapped up her own fight to have leasehold tax bills reflect just the water property occupied by the tenants.

“There’s a lot of angry boaters who believe they’ve been done in now,” DiIenno said. “When I opened my Feb. 4 bill, I was seething.”

Apparently, a change in accounting practices is behind the startling increase. Port officials said the new way of accounting is mandated by the state; DiIenno said the decision behind the increase was actually up to the port itself.

Formerly, tenants only paid leasehold tax on their actual slip space — essentially paying the property tax they would have paid had they owned their piece of the water.

Under the new system, the entire square footage of the marina is divvied up among the tenants for taxing purposes. According to DiIenno, this means tenants are paying tax on guest moorage, the floats between the slips and all the open water contained by the marina.

She said this is akin to charging homeowners taxes for a park that abuts their properties and the difference in cost is significant.

Last year, DiIenno paid $48 in leasehold tax; this year, she got a bill for $235.92. Even with a 31 percent increase in the value of the marina, DiIenno said, her bill should have only been $61.68.

“It stinks,” agreed marina tenant Gary Hunter. “It doesn’t pass the smell test and I’m not sure it’s legal.”

Lynn Hills, who handles the port’s finances and tax billing, said it’s possible the tenants are right, although it’s not the port’s fault. She said she used a formula sent over by the state Department of Revenue to calculate leasehold tax owed and the formula is what’s now under investigation by the DOR.

“The port didn’t do anything wrong,” Hills said. “We did what the Department of Revenue told us to do.”

The formula that resulted in such high tax bills essentially calculates individual tax bills by dividing the value of the entire marina by the number of rentable square feet and then using that price-per-square-foot number to formulate the leasehold tax due on each moorage space.

Last year, the DOR used the value of just the rentable spaces — not the entire marina — hence the difference.

Hills said the DOR isn’t sure this year’s formula is fair, but changed the calculation method because it didn’t feel last year’s formula was fair, either. A DOR representative has been invited to Tuesday’s port meeting to discuss the leasehold issue as part of a work study session. Hills said she doesn’t know what the final outcome will be — she said the meeting is mainly intended to facilitate discussions between the tenants and the DOR.

“The department has acknowledged there is a problem,” Hills said. “They are looking at it.”

DiIenno, however, does not believe the port is completely faultless in this matter. Moreover, she said the port actually has a motive to keep overcharging.

The port, DiIenno explained, receives a portion of all property taxes collected within its jurisdiction but as a tax-exempt public agency does not pay — and therefore collect — taxes on much of its own marina. Therefore, by asking its tenants to collectively pay tax on the entire marina, the port could then receive taxes generated by its own property.

Other agencies, including the City of Port Orchard, also benefit by this arrangement but DiIenn said that’s not what’s crucial here.

What’s important, she explained, is that the port is violating both its tenants’ trust and the law by overbilling. Even if the city collects less taxes as a result of her efforts with the port, DiIenno said, the billing change needs to be done.

“I swore I would uphold the law,” she said.

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