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Every year that the State of Washington and Snohomish County siphoned tax revenue from Quil Ceda Village, was like rubbing salt in the wound to the people of the Tulalip Tribes.

Visionary leaders and elders at Tulalip had long envisioned an economic center on the 2,100-acre swath of land along the eastern boundary of the Tulalip Indian Reservation. They envisioned restoring the health of the land, which had been used by the federal government as a military ammunition depot, and transforming it into something good for this Indigenous nation of 5,000 people.

What emerged was Quil Ceda Village, an incorporated municipality that is a visitor destination and an economic powerhouse in the region.

The Tulalip Tribes owns the land. Planned the village. Installed the infrastructure. Recruited businesses. Negotiated leases. And even established a village government. 

And yet the tax reward for all that work went to the state and county.

There was a leasehold tax for non-Indians who leased land from the tribes. The state county also imposed taxes on businesses there, even though business was taking place on Indian land.

“The state and county's collection of these taxes has taken away from the tribes’ ability to meet years and years of unmet needs in healthcare, housing, social services and education,” Tulalip Tribes Chairwoman Teri Gobin said. “It's been 20 years since we first broke ground. The state and county's inability to come to the table to negotiate a sharing of these tax revenues, generated off tribal lands, has caused great harm to the tribe, but specifically, to its members.”

That could soon change.

The Washington Legislature is considering legislation that would return to the Tulalip Tribes and other tribal governments a portion of the tax revenue the state collects from non-Indian business transactions on tribal lands. The legislation would authorize the governor to negotiate tax revenue-sharing compacts with tribes, similar to state-tribal cooperative agreements on taxation for cigarettes, fuel, timber and the rapidly growing economy of cannabis.

The legislation would clear up some complicated jurisdictional issues and end a lawsuit that was destined to go to the U.S. Supreme Court. The lawsuit was filed by the Tulalip Tribes and the United States against the State of Washington and Snohomish County.

HB 2803 was introduced in the state House of Representatives on Jan. 22 and was before the Rules Committee on Feb. 11. A companion bill, SB 6601, was introduced in the state Senate on Jan. 24 and was scheduled to be considered by the Senate Ways & Means Committee on Feb. 11.

Evolution of a conflict, and a solution

The state contended it has the constitutional authority to tax business transactions conducted by non-Indians on Indian land, and since 2001 had collected millions of dollars a year in sales and use taxes.

The Tulalip Tribes asked the state in 2003 to return to Quil Ceda Village a share of the sales tax revenue generated there, as the state does with other municipalities. Municipalities use sales tax revenue to help fund public services.

Snohomish County got a share of tax revenue generated at Quil Ceda Village, but Quil Ceda Village did not. The reason: The state doesn’t recognize Quil Ceda Village as a municipality, even though it was incorporated under Tulalip Tribes law and is recognized as a municipality by two federal agencies. As a result, Tulalip Tribes officials say, revenue that would be allocated to public services elsewhere on the 22,000-acre Tulalip Reservation has had to be directed to Quil Ceda Village to subsidize public services there.

The state and county argued that the Tulalip Tribes was not precluded from charging its own sales and use taxes on businesses owned by non-Indians, but Tribes officials said to do so would amount to double taxation and would drive those businesses away.

A Native-owned business pays a sales tax to Quil Ceda Village of 8.6 percent; if it leases land from the Tulalip Tribes, it makes a lease payment as well. A business owned by a non-Native in Quil Ceda Village pays a 6.5 percent sales tax to the State of Washington, a 2.6 percent sales tax to Snohomish County, and a business and occupations tax to Snohomish County based on gross receipts.

Snohomish County cannot levy a property tax on Tulalip Tribes-owned land, which Quil Ceda Village is. But the county imposes a leasehold tax on non-Indian businesses that lease land from the Tulalip Tribes.

The Tulalip Tribes sued in June 2015, and the U.S. later joined the suit, to stop the county and state from taxing businesses on its land. A U.S. District Court judge ruled in October 2018 in favor of the county and state. The Tulalip Tribes appealed to the US 9th Circuit Court of Appeals. The state's attorney general asked all parties to go to mediation and a settlement was reached on Jan. 6.

The settlement, however, hinges on the legislation’s passage. The appeal will continue if the legislation does not become law, Chairwoman Gobin said.

“We are pleased that the Department of Revenue has introduced a bill that will settle federal court litigation by the Tulalip Tribes and the United States against the State of Washington and Snohomish County,” Gobin said. “The settlement provides an equitable tax-sharing opportunity for certain taxes generated on tribal lands that will benefit all state citizens and the Washington state economy. The legislation has no effect on county or city taxes. This is long overdue. We look forward to continuing this partnership with the state.”

In the mediated settlement with the state that led to HB 2803, the Tulalip Tribes would build a $30 million behavioral health facility that the state says is much needed in the region, Tulalip Tribes Vice Chairman Glen Gobin. The tribes would receive 25 percent of tax revenues as its share until the facility is built; the amount would then go up to 50 percent — $30 million to $35 million a year based on current taxation, Vice Chairman Gobin said. The tribes would also receive 60 percent of sales tax revenue from new development.

The state would receive $15 million to $20 million in annual tax revenue, based on current taxation. Snohomish County would continue to receive its normal share of tax revenue — currently about $5.8 million a year, based on an October 2019 county bond rating report.

If the lawsuit continued and the Tulalip Tribes prevailed, the state and county risked losing it all. The settlement “creates some certainty for the state and county, and some opportunity for us to fund government functions and grow economic development,” Vice Chairman Gobin said.

State Rep. Debra Lekanoff, Tlingit, is a co-sponsor of HB 2803. She is a Democrat.

“Compacts have proven to be successful tools for implementing durable solutions to conflicts between the state and Washington tribes,” she said. “I am honored to co-sponsor this legislation, which will help to clarify the respective authority of both governments.”

Snohomish County Executive Dave Somers told the Everett Daily Herald that the legislation “will resolve the dispute regarding local taxation,” adding, “I will be very happy to have this litigation behind us and look forward to working together on many issues of mutual interest.”

Fourth-largest source of jobs

Today, Quil Ceda Village is the fourth-largest source of jobs in the Snohomish County region, according to Economic Alliance Snohomish County. Major businesses here include Tulalip Resort Casino Hotel, Seattle Premium Outlets, Cabela’s, Home Depot and Walmart; there are numerous other stores and restaurants. Attractions include the Tulalip Amphitheatre and the Hibulb Cultural Center and Natural History Preserve. Community amenities include trails, a nearby golf course and a marina.

The village government consists of a three-member council, a village manager and a village clerk. Village departments include building plan review, permitting and inspections; business and food service inspections; maintenance of parks and trails; freshwater, stormwater and wastewater systems; traffic planning; utilities; and wetlands mitigation.

Fire protection and emergency medical services are provided under a negotiated fee-for-service contract with the Marysville Fire District; law enforcement is provided by Tulalip Tribes Police. The Tulalip Tribes contracts with the county for jail services, funds one full-time county prosecutor, and contributes funding to the sheriff’s office and state patrol. The Tulalip Tribes helped pay the costs of two interchanges on Interstate 5.

Mel Sheldon, president of the Quil Ceda Village Council and a former Tulalip Tchairman, said HB 2803 will return money that will be invested in public services and economic development.

“This is a valuable opportunity,” Sheldon said. “We can put money back into economic development, which will generate more tax revenue for the state. So, it’s a win-win.”

Richard Walker, Mexican/Yaqui, is a journalist living in Anacortes, Washington. He has reported for Indian Country Today since January 2003.