HomeMy WebLinkAbout040726 email - $7 million over 10 years Re_ Clarification on PILT Applicability for Broadband Operations -Re_ JPUD PILTALERT: BE CAUTIOUS This email originated outside the organization. Do not open attachments or click on links if you are not expecting them.
Dear Commissioners,
I appreciate the District’s efforts to expand broadband access in Jefferson County.
I am writing regarding the District’s current provision of retail broadband service and its obligations under RCW 54.16.425.
The Jefferson County Assessor recently stated there is “no question” that broadband network property used to provide retail internet service is subject to PILT, and further noted that
the PUD has not reported property in a manner that allows PILT to be assessed.
As it stands, the District appears to be operating outside the statutory PILT framework, creating potential legal and financial exposure for both the District and the County.
There are two clear paths forward: comply with the PILT requirements associated with retail service, or transition back to a wholesale/open access model where independent ISPs provide
retail service.
The PILT obligation is not insignificant—on a system of this scale, it could represent approximately $600,000–$700,000 annually in property tax equivalents. Addressing this now avoids
embedding a substantial and ongoing cost into the system long-term.
More broadly, I would encourage the District to ensure that its broadband program is built on a solid and durable foundation.
As an essential utility, operating alongside electric service, broadband must be structured to withstand future legal and financial scrutiny.
Electric ratepayers cannot be expected to subsidize broadband operations, and unresolved statutory obligations today could create significant exposure in the future.
Of particular concern is the risk that PILT obligations may later be challenged, potentially resulting in material liabilities that impact the viability of the broadband system itself.
Given existing legal precedent distinguishing broadband from core “utility” service, such an outcome could place the asset at risk in ways that would be difficult to unwind once the
system is built.
To ensure the long-term success of the system, and protect ratepayers Investment and access to a competitive broadband ecosystem, we must be certain the project is in full compliance
with state law.
I would encourage the District to obtain clear legal guidance and resolve this issue promptly.
Respectfully,
Mitchell Shook
Sent from my iPhone
On Apr 7, 2026, at 9:25 AM, Jeff Chapman <JChapman@co.jefferson.wa.us> wrote:
Thank you Mr. Boyd.
I honestly don’t see that the PILT would grow substantially except maybe for a few years. It is depreciated assets, like with other personal property, and should be comparable to
the property tax of other utility providers in Jefferson County.
My role in this is to take the values given to me, apply the levy rates, and generate the tax amounts. If I am not being given meaningful values, then the PILT is $0, but it is auditable
by the State. I will follow up with the authorities in Olympia. Since the question is what assets are subject to PILT, the arbitration statute regarding values isn’t really applicable.
It is more of a legal question that PUD is challenging the law (a PUD law I might add).
Jeff Chapman | Jefferson County Assessor
P.O. Box 1220 |Port Townsend, WA 98368
360-385-9105
From: Leo Boyd II <lboyd@nopdatacenters.com>
Sent: Monday, April 6, 2026 4:53 PM
To: Jeff Chapman <JChapman@co.jefferson.wa.us>
Cc: Mitchell Shook <mitch@advancedstream.com>; Frank Dudley <FrankD@dor.wa.gov>; Josh D. Peters <JDPeters@co.jefferson.wa.us>; Stacie Prada <SPrada@co.jefferson.wa.us>; jwilson@jeffpud.org;
dtoepper@jeffpud.org; kcollins@jeffpud.org; jrandall@jeffpud.org; Bret Black <bblack@ejfr.org>
Subject: Re: Clarification on PILT Applicability for Broadband Operations -Re: JPUD PILT
ALERT: BE CAUTIOUS This email originated outside the organization. Do not open attachments or click on links if you are not expecting them.
Mr. Chapman,
I can distinctly recall Kevin Streett saying that if they have to pay the PILT the yearly payment will quickly exceed the revenue brought in from retail service. I also recall the
estimated annual PILT payment at this point would have exceeded $250K and would be growing. I'm sure the schools would be grateful for an additional $125K, as well as $27.5K to the
County general fund and $52.5K to fire & EMS. I don't know where the other 18% goes, but I'm sure it would be appreciated.
I own 3 businesses and property in Jefferson County. I ensure my taxes are paid on time and in full. If I don't the County or other taxing agencies get to take it from me. I don't
even get to negotiate how much I have to pay.
Thanks,
Leo J Boyd II
North Olympic Peninsula Data Centers
216 W. Patison St
PO Box 83
Port Hadlock, WA 98339
360-385-4686 <tel:360-385-4686>
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On Mon, Apr 6, 2026 at 3:51 PM Jeff Chapman <JChapman@co.jefferson.wa.us <mailto:JChapman@co.jefferson.wa.us> > wrote:
Mr. Shook and Mr. Boyd
I appreciate your feedback on the PUD broadband PILT assessment found in RCW 54.16.425. When researching this back to the studies PUDs were doing, including the comprehensive 2023
Snohomish County study by Magellan-Advisors, it is clear that the issue of whether PUDs should provide the Retail stack rather than just the Wholesale Active/Passive stacks was a significant
matter. After review, many PUDs stayed with Wholesale only, and decided to work with ISPs and others for providing the Retail stack.
The amendment to the 2018 legislation (SB6034) that authorized PUDs to provide retail service by Representative Morris (attached) “removes the sections imposing a privilege tax on
PUD sales of retail Internet service. Subjects PUD broadband network property used for retail internet service to annual payments in lieu of property taxes.” This is clearly a PILT
on the “broadband network property”. This can also be understood from the Kitsap PUD comments “The taxing piece is not right, but if there is a tax paid by private
entities, Kitsap PUD would be willing to make it clear it would assume the same obligation.” It is important to realize that Jefferson County government had nothing to do with
the adding of the PILT language to the statutes (I don’t know that any county government did).
In my opinion, there is no question that the “broadband network property” would be the entire network that provides retail internet service. The resolution under consideration on
Tuesday by Jefferson County PUD will violate this belief which is widely held. However without an interpretation through the Attorney General’s Office, the Governor’s Broadband Office
in Commerce, or a legal decision, I can’t state for certainty what seems clear in the legislative decision. Nor do I have any authority to stop the PUD from passing their Resolution.
However, doing so, they are not changing the law. I can not speculate on where that will proceed to if they do pass the Resolution, but I can follow up with the State Broadband Office.
I would mention though that the impact on Jefferson County budget of PILT revenue is fairly minor, and the strong resistance by PUD to paying their statutory broadband PILT obligation
more than consumes any potential return since the County is left with having to defend the entire fund mechanism if we choose to do so. The PILT is distributed like property tax,
which means that schools receive 50% of it. The County general fund is only about 11%. The Fire Districts with EMS get about 21%.
The PUD has not cooperated with me and have not reported as do private businesses and utilities that operate solely in Jefferson County. Most report property diligently, as the predecessor
to the Otto Street location, Alaska Power and Telephone, did timely every year right up to their move to Ketchikan. (Before becoming Assessor, I was AP&T’s programmer for 14 years
at their Otto Street location where PUD now is located (AP&T built the building)).
That said, we can only levy PILT on what is reported, which PUD has not done. I assume they can’t make the April 30th payment deadline since we don’t have a proper reporting to bill
on.
Thank you for your time and voicing your concerns,
Jeff Chapman | Jefferson County Assessor
P.O. Box 1220 |Port Townsend, WA 98368
360-385-9105
From: Mitchell Shook <mitch@advancedstream.com <mailto:mitch@advancedstream.com> >
Sent: Friday, April 3, 2026 9:06 AM
To: Jeff Chapman <JChapman@co.jefferson.wa.us <mailto:JChapman@co.jefferson.wa.us> >
Cc: Leo Boyd II <lboyd@nopdatacenters.com <mailto:lboyd@nopdatacenters.com> >; Frank Dudley <FrankD@dor.wa.gov <mailto:FrankD@dor.wa.gov> >
Subject: Clarification on PILT Applicability for Broadband Operations -Re: JPUD PILT
ALERT: BE CAUTIOUS This email originated outside the organization. Do not open attachments or click on links if you are not expecting them.
Dear Mr. Chapman,
I wanted to respectfully weigh in on the discussion regarding Jefferson County PUD’s broadband operations and the applicability of the Payment in Lieu of Taxes (PILT) requirement.
I have been involved in open-access broadband networks for nearly three decades and currently operate as an ISP on multiple public fiber systems across several states. I share this
only to provide context that my perspective is grounded in the practical and policy distinctions between wholesale-only and retail-enabled public networks.
At a high level, the distinction that matters for PILT applicability is not how a network is characterized administratively (i.e., “wholesale” vs. “retail”), but how it is actually
used in practice.
If any portion of a PUD’s broadband infrastructure is used to provide retail telecommunications services directly to end users, then that activity aligns with the conditions under
which PILT has historically been applied. In that case, the network is functioning, at least in part, as a retail utility operation rather than purely as open-access infrastructure.
By contrast, true wholesale-only models—such as those used by a number of PUDs and open-access systems—maintain a clear structural separation:
* The public entity owns and maintains infrastructure
* Independent ISPs provide all retail services to end users
* The public entity does not participate in retail billing, service delivery, or customer relationships
Several PUDs in Washington have deliberately avoided retail participation specifically to remain outside PILT applicability, reinforcing the importance of maintaining this distinction
in both practice and policy interpretation.
This distinction has been critical in preserving both:
1. Competitive neutrality among providers, and
2. The intended tax treatment under Washington law
Allowing a hybrid approach—where retail services are provided while the system is still characterized as “wholesale” for purposes of avoiding PILT—would effectively blur that line
and create an uneven regulatory environment.
From a policy standpoint, consistent application of PILT ensures:
* Fairness to private providers operating in the same market
* Protection of county tax bases
* Clarity for future public broadband deployments across the state
I appreciate the care your office is taking in reviewing this issue. Given the broader implications, this interpretation may ultimately serve as an important reference point for
other jurisdictions navigating similar questions.
Please let me know if I can provide any additional technical or operational context.
Respectfully,
Mitchell Shook
Advanced Stream
Sent from my iPhone
On Apr 2, 2026, at 5:48 PM, Jeff Chapman <JChapman@co.jefferson.wa.us <mailto:JChapman@co.jefferson.wa.us> > wrote:
Thank you Mr. Boyd.
Unfortunately, I can only do my processing steps with the information I am provided. I did ask PUD for some clarification, which has not happened.
Jeff Chapman | Jefferson County Assessor
P.O. Box 1220 |Port Townsend, WA 98368
360-385-9105
From: Leo Boyd II <lboyd@nopdatacenters.com <mailto:lboyd@nopdatacenters.com> >
Sent: Thursday, April 2, 2026 4:36 PM
To: Jeff Chapman <JChapman@co.jefferson.wa.us <mailto:JChapman@co.jefferson.wa.us> >
Cc: Mitchell Shook <mitch@advancedstream.com <mailto:mitch@advancedstream.com> >; Dudley, Frank (DOR) <FrankD@dor.wa.gov <mailto:FrankD@dor.wa.gov> >
Subject: JPUD PILT
ALERT: BE CAUTIOUS This email originated outside the organization. Do not open attachments or click on links if you are not expecting them.
Jeff,
Given the County's current budget issues, I find the PUD's attempt to define almost the entire broadband network as wholesale really disturbing in order to avoid paying the PILT.
I'm sure the DOR would agree that if they use any portion of the network to provide retail service directly to end users, the network is subject to the PILT requirement. I believe
they should be required to follow the wholesale only model like other PUDs if they don't want to be subject to PILT payments to the County.
Please see the attached PUD agenda.
Thanks,
Leo J Boyd II
North Olympic Peninsula Data Centers
216 W. Patison St
PO Box 83
Port Hadlock, WA 98339
360-385-4686 <tel:360-385-4686>
Electronic Privacy Notice: This e-mail is confidential and intended solely for the use of the addressee(s) named above. If you are not the intended recipient, please be advised that
you are legally prohibited from retaining, using, copying, distributing, or otherwise disclosing this information in any manner. If you have received this e-mail in error, please promptly
notify the sender and immediately delete it. Thank you