LANGLEY — Taxpayers have been paying taxes on the piece of privately-held property that’s been at the center of a land sale controversy involving the Island County Fair Association, according to public documents obtained by The Record.

The Island County Fair Association has been embroiled in a dispute over its sale of a 10-acre parcel near Langley last year that was donated to the county fair by Margaret Waterman in 1986.

Critics have said the sale has the markings of an insider deal, and questions have also been raised about the association’s handling of the money from the land sale.

Interest in the fair association’s land sale arose during the group’s legal skirmish with the city of Langley over a road easement on the county fairgrounds. Langley wants to build a connector road across the southern tip of the fairgrounds to lessen traffic, and the fair association has been using donations from anonymous donors to finance its legal fight.

Questions over those donations prompted scrutiny of last year’s land sale and the money the association received from it. The fair association has refused to turn over public records of donations to The Record, and has hired a Seattle-based attorney to argue that many of the association’s records are off-limits because the fair association is not a public agency.

Judy Endejan of the law firm Graham & Dunn said in a recent newspaper interview that the land was not donated to the county and the nonprofit organization has paid property taxes on the land for years.

The parcel “has nothing to do with the fair,” Endejan told The Whidbey News-Times last week, and she said information about the land sale need not be disclosed.

Records obtained earlier this week from Island County paint a different story about the property, however.

According to a voucher submitted to the Island County treasurer in March 2005 by fair administrator Sandey Brandon, the county paid the “2005 property tax on the Waterman property.”

After a request by The Record for a search of other tax payments, Island County Treasurer Linda Riffe said records could be found for at least two times when the county paid the state property taxes due on the Waterman property after it was donated to the fair.

Fair board chairman Dan Ollis was surprised Thursday when told that the county had paid the taxes on the Waterman property.

“That’s not good,” Ollis said. “The fair fund should have never paid it.”

Ollis said he was shocked because six members of the fair board have to sign-off on the vouchers before they are sent to the county.

“At least six people saw the bill,” he said in apparent disbelief.

Ollis added that he would check on the tax payments and, if necessary, take steps to have the association reimburse the county.

Riffe said additional research done by her staff confirmed earlier reports by The Record that the land was originally donated to the Island County Fair, and not the Island County Fair Association.

As such, Riffe said it appeared the land became the property of Island County. It was ruled as exempt from all taxes except the state’s property tax levy for forest firefighting protection.

Those taxes were $14.50 in 2005 and $14.90 in 2003.

Riffe said her review found two cases in the past five years – in March 2003 and 2005 – when taxpayers paid the taxes on the Waterman property. Riffe also said she did not have immediate access to records before 2003, because those are stored in the county’s archives south of Coupeville.

She also noted that the treasurer’s office contained few records when she replaced treasurer Maxine Sauter in 2002.

“Who paid it those other years where we don’t have records for, I have no idea,” Riffe said.

Riffe could not explain why county money covered the taxes in some years, but apparently not in others.

“It just makes my hair stand on end, not being able to see a clear audit trail of who paid what, of where the money went, and where it came from,” Riffe said.

The stunning revelation came during a week when the county fair board had tried to tamp down the controversy over the land sale.

During the fair board meeting on Monday, board chairman Dan Ollis said he had talked to the Waterman family and they were OK with the sale. He said he had spoken with Debra Waterman, the daughter of Margaret Waterman.

“Debra has no issues with the sale price. The family has no issues with how it transpired,” Ollis said.

“She has no issues with the land sale. She wanted me to pass along that she appreciates what we do as an organization,” he said.

Some critics of the sale have questioned the sales price for the property; it was sold in January to Bryan and Onica Nichols, and Jeff and Erin Hanson for $120,000.

Interest has also been piqued because county rules require all donations to the county fair be placed in the Island County Fair Fund, a government-controlled account in the county’s coffers. The state Auditor’s Office said last month it would review the land sale when it audits Island County’s books in June.

The land sale itself was low-key.

Nichols earlier told The Record he heard about the sale through a friend.

A search of the NWMLS, a Puget Sound region service that gives real estate agents detailed information of listed properties, shows the donated property was never publically listed for sale.

The fair association did not use a real estate agent to complete the sale, although documents obtained by The Record indicate a real estate agent did give fair officials a comparative market analysis (CMA) report in October 2005 that detailed other 8- to 10-acre properties that were listed or sold recently on South Whidbey.

The report listed four sets of 8- to 10-acre properties; vacant land that was still actively listed, properties

“subject to inspection,” pending properties and sold properties.

The CMA report examined 26 properties from Greenbank to Clinton. Average prices for the four sets of properties ranged from $146,764 to $191,000.

The report also shows that the $120,000 sale price for the Waterman donation was well below the asking price or sales price of other Langley properties in the report. Sales and list prices for other comparable properties in the Langley area ranged from $167,000 to $329,000.

Fair officials put the money from the land sale into two separate accounts controlled by the association. The association purchased two one-year CDs at island banks; one for $60,000 at Key Bank, and a second for $60,000 at Whidbey Island Bank.

Earlier this week, Ollis said he gave Debra Waterman his word that money from the land sale would not be used to pay the association’s legal fees.

Last month, The Record asked both the fair board and fair association to release records related to the land sale and other donations.

While the fair board started to release records on Wednesday, members of the fair association have refused to release records of their meetings and other documents.

Endejean, the lawyer hired by the association to shield it from public disclosure laws, has said the fair association’s history as a nonprofit group shows that the group is not a public agency subject to the state’s open records laws.

In a Feb. 13 letter to the county prosecutor’s office, Endejan noted that the board of county commissioners made the fair association its “exclusive agency to operate and manage a county fair.” But Endejan also then claimed the association was not a public agency, and its records unrelated to its running of the fair did not need to be released to the public.

Endejean has also claimed the association gave the fairgrounds to the county in the early 1960s because it no longer wanted to pay property taxes on the fairgrounds property.

News accounts from the time, and county records, instead say the change was made so the fair association could come into compliance with state regulations for accepting state tax dollars.

News reports also left no doubt that Island County was bringing the county fair in-house when it gave the association agency status in 1962.

“By resolution, the commissioners declared the fair a county function,” stated an April 5, 1962 news article in the Whidbey Island Record.

County records also depict a complete takeover of the association when the status of the Island County Fair Association was changed back in 1962.

According to the resolution passed by commissioners at the time, the county not only set up the County Fair Fund for the deposit of all state money for the fair — as well as fair receipts and donations — commissioners also ordered “all monies now in the possession of the Island County Fair Association” to be placed into the County Fair Fund.

On Thursday, Ollis, the fair board chairman, said he couldn’t say at this point whether he considered the Waterman donation a public or a private donation.

Ollis said that the fair board didn’t play a more active role in the land sale because they assumed that the Waterman property was “a product of the association.”

Under Island County Code, the fair association’s board of directors and Island County commissioners are responsible for the management and operation of the annual fair. The fair association helps organize volunteers to put on the annual event.

He explained that a quorum of 10 percent of the total membership of the association was necessary to sign-off on the land sale.

It is not clear how many people were in the association at the time of the vote, but with the current membership of about 36, only four votes would have been enough.

“But when the vote was taken it was unanimous,” Ollis added.

Bob Meinig, a legal consultant with Municipal Research & Services Center of Washington, said there are clear requirements under state law that guide the sale of county-owned land. Municipal Research is a Seattle-based organization that advises city and county government officials and employees in Washington.

“In general, you have to publish a notice of intention to sell and have a hearing, and then sell at a public auction,” Meinig said.

There are exceptions, he said, such as when a government sells land to another government.