Lodge's suit stirs budget troubles

Two Thurston County offices have been forced to cobble together money to pay for the county's legal defense in a federal lawsuit over Great Wolf Lodge's property tax status, a burden that angers Assessor Patricia Costello.

County commissioners earlier had turned down a request by Costello and the Prosecuting Attorney’s Office to provide an additional $75,000 this year to help pay for the litigation, which has significant implications for county taxpayers.

The two offices are cutting costs and shifting priorities in their strained budgets for the remainder of this year and the start of next year to free up some money to get the case to trial, which is scheduled to begin in the spring.

“I was astounded because I feel it’s the responsibility of the commissioners to provide the funds to the prosecuting attorney to defend the county in a suit,” Costello said.

Commissioner Sandra Romero said her board doesn’t have money to give after grappling with a budget crisis brought on by the decline in tax and other revenue because of the recession. The county has shed more than 10 percent of its work force and cut its operating budget by more than $7 million.

“We have so many needs in Thurston County, I mean daily, and we have to draw the line,” she said. “We can’t be adding much right now, especially any place where we have no idea what the final cost might be. We can pretty much assume the other side will have unlimited resources. Thurston County can’t go it alone.”

The lawsuit focuses on whether federal law prohibits Thurston County from levying and collecting property taxes on Great Wolf Lodge, which features an indoor water park, a hotel and a conference center. The lodge, near Grand Mound, is built on American Indian trust land and owned by a Delaware-based limited liability company, CTGW LLC, consisting of the Chehalis Indian Tribe and Great Wolf Resorts Inc., a publicly traded corporation.

The tribe and CTGW LLC sued the county in September 2008 after Costello attempted to levy property taxes on the buildings and other improvements, which are partly owned by a private, non-tribal company. The trust land itself is exempt from property taxes.

County officials say the case is important because if the lodge owner prevails, the tax burden will be redistributed onto other payers. The tribe argues that moving to tax the improvements is an attack on the tribe’s self-governance and represents illegal interference in its economic development.

The improvements were projected to bring in about $800,000 to county coffers this year alone. The county has agreed to suspend its effort to collect the taxes pending the resolution of the lawsuit in U.S. District Court in Tacoma.

The lawsuit is entering a key phase. Dec. 31 is the deadline for motions for summary judgment by the parties. Those rulings could limit the issues argued at a trial and potentially decide the case. The seven-day bench trial is scheduled to begin April 13.

Commissioners set the budgets for offices led by independently elected officials. The Prosecuting Attorney’s Office represents the officials in lawsuits, and a portion of its budget pays those legal costs, if any are incurred.

The Great Wolf lawsuit is one of the most complex civil cases the county has undertaken, Chief Deputy Prosecuting Attorney Jon Tunheim said.

Two lawyers in the office’s civil division are working on it nearly full time, he said. An outside attorney has been hired. Costello’s deputy, Dennis Pulsipher, has been working full time with the lawyers on the case for several weeks, Costello said.

Tunheim said that although the existing office budget can pay for the lawyers’ time to prepare and argue the case, it doesn’t cover the additional costs that a case of this scope entails: hiring additional legal assistance, paying expert witnesses, hiring a court reporter for numerous depositions and paying the reporter to produce transcripts of depositions that can last several hours.

In August, Costello and a representative of the Prosecuting Attorney’s Office met with commissioners during an executive, or closed, session and requested additional money.

Costello said commissioners wanted a cost estimate and to know whether other counties or the state Attorney General’s Office would join in the legal defense. A week later, the Prosecuting Attorney’s Office gave them an estimate of $75,000, she said. The Attorney General’s Office wasn’t interested in taking the case, Costello said. Because it was a Thurston County issue, other counties wouldn’t be in a position to provide assistance, she said.

Commissioners Sandra Romero and Cathy Wolfe opposed the request; Commissioner Karen Valenzuela supported it. Costello learned of their decision in early October.

Costello said that since then, she and the Prosecuting Attorney’s Office have committed to pay the extra legal costs out of their budgets to see the case to trial. She estimated the cost at $100,000.

It galls Costello that the commissioners couldn’t provide funding for the legal defense but were able to restore a contribution to the Human Services Review Council to the tune of $50,000 at the urging of Valenzuela, who sits on the council. The county and its three largest cities pool tax dollars to distribute to social-service agencies in the community through the review council.

“I think we could have done both,” Valenzuela said. “If I could have had my way, we would have done that, but I was outvoted.”

Asked about the review council funding, Romero said it represented a fixed and known cost and that the additional legal fees weren’t finite.

“If we had unlimited resources, we could pursue it,” she said, “but we don’t.”

Recently, the commissioners agreed to pay Sheriff Dan Kimball more than $25,000 for private legal fees he incurred to settle his appeal of a directive given by the commissioners to cut his command staff during the budget-reduction process. County leaders said they paid the money to avoid additional legal costs incurred by continuing the appeal.

Tunheim said his office’s lawyers will do the best they can and was unwilling to say the commissioners’ decision puts them at a disadvantage. But he suggested this isn’t the last the commissioners have heard about the matter.

“We’re certainly going to need to have the support of the board as we go further into this to try to put together the best defense possible,” he said.

Christian Hill: 360-754-5427