JSuHm mRarAy Nch Revisited In response to complaints concerning impacts to residents of Scott Valley from the

Exemption Status: Questions have been raised about the tax exemptions JH Ranch receives. JH Ranch’s properties have a religion based “welfare” exemption from Siskiyou County property taxes. An organization may claim a welfare exemption in California by obtaining a federal 501(c)3 status and providing additional documentation to the county including a description of their qualifying activity. JH Ranch states that it is a faith-based organization. The County Assessor, Treasurer and Counsel’s offices have verified JH Ranch’s qualifications for the welfare exemption. Although it took a number of attempts, JH Ranch eventually provided the required Irrevocable Dedication Clause and the necessary language in their statements to qualify both their developed and their adjoining empty parcels. (An Irrevocable Dedication Clause states that the property is irrevocably dedicated to purposes qualifying for the exemption.) For an empty parcel a statement is required, in essence, to state that they use the land for activities associated with their primary qualifying purpose – in this case spiritual walks and/or solitude. The Grand Jury found that the County has done a thorough job of verifying JH Ranch’s welfare exemption status.

Fiscal Impact Property and sales taxes are important sources of discretionary revenue for the County and are crucial in addressing local priorities. (The “Economic Contribution” section below uses financial information submitted by JH Ranch which combines the Scott River Lodge and Ranch operations so the tax totals stated here must also be combined.) Property Taxes For tax year 2017-18 JH Ranch’s French Creek exempted holdings have an assessed value of $7,726,274. The Scott River Lodge has an assessed value of $3,855,972. The combined exempted value is $11,582,000. This is the third largest welfare exemption in Siskiyou County after Fairchild Medical Center in Yreka and Mercy Medical Center in Mt. Shasta. The property tax loss to the County due to the JH Ranch tax exemptions is about $115,820. JH Ranch pays approximately $3,700 in other property taxes such as parcel taxes. Net loss to the County due to JH Ranch tax exemptions is about $112,000 annually. The proposed Plan Amendment currently being considered by the Planning Department does not appear to have any property tax consequences as the additional seven parcels are already tax exempt. JH Ranch is also exempt from paying the transient occupancy tax (paid by entities that provide lodging such as motels). It pays no federal or state income taxes and is not required to obtain a business license. Sales Taxes Sales taxes collected within a county by the state can be sent directly to the county (1.00%) and cities (0% – 0.5%) or indirectly through sales tax funds returned to local governments for specific purposes and programs. These state redirected taxes can amount to an additional 2.25%. The sales tax calculated here assumes the maximum combined rate of 3.25% (given Siskiyou’s 7.25% county rate for JH Ranch’s location). Some goods are taxed at different rates or are excise based (gas for example) which requires a different estimation approach and is accounted for here. Not all tax rate changes coincide with the calendar year, but the assumption here is that they do. Therefore, a maximum tax payment is estimated. The portion of sales and excise taxes contributed by JH Ranch to local government is estimated to be $6,900 on taxable purchases of $209,000.

Economic Contribution: Questions have been raised about JH Ranch’s economic contribution to the community. JH Ranch provided summary financial data for 2017 to allow the GJ to make a brief description of the economic impact on the Siskiyou County economy. (The GJ was limited in its ability to verify JH Ranch provided data.) The financial data provided combined both the Ranch and the Scott Valley Lodge activities; this description will also combine those two operations. These contributions include local payroll and locally purchased goods and services. Some additional fiscal and financial contribution can be attributed to expenditures that remain local for additional spending cycles (sometimes called “multiplier effects”) but these effects often diminish rapidly. The estimation of net economic impact is complex and beyond the scope of this report. JH Ranch reported a payroll of $865,450 which included 17 full time and 18 seasonal employees. They reported $349,450 spent on local services and an additional $416,350 on the purchase of goods (both taxable and non-taxable). Most of JH Ranch’s employees are housed on site and in the summer are fed on site which may affect the local economic impact of employee compensation. The portion of expenditures that remains local is likely to be larger than in other counties due to the number of independent local vendors. It may be reduced by the county’s proximity to Oregon - a tax-free state - if use taxes are not collected. JH Ranch makes local charitable donations (food and college scholarships) of about $9,000 per year.

Local Impacts: There is no doubt that the growing JH Ranch operation has had negative impacts to residents in the area in terms of traffic volume, noise and road safety. JH Ranch has made some efforts to minimize the impacts but the size and nature of the operation limits what it can realistically do. At the start of each 2-week session JH Ranch brings guests in from out of state by flying them to Sacramento and then driving them to the guest ranch in three chartered busses arriving at night. They depart the same way, also leaving at night. During their stay they take excursions for off-site activities. There are commercial deliveries, the daily traffic of JH Ranch employees, and ongoing construction related traffic. The impact is felt by everyone along the route. On a county road that is used by pedestrians, bicyclists, and equestrians French Creek Road can become crowded and at times hazardous. Noise levels from on-site music and activities have also been a local concern. In 1980 the greater Scott Valley community developed a set of guidelines for future development in their area. The Scott Valley Plan was adopted into County Code in 1980 – before JH Ranch began guest ranch operations but after the original campground was well established. The Plan states as one of its goals that “all uses of the land shall occur in a manner that is compatible with other existing and planned land uses”. The language may not be specific enough to preclude a guest ranch but it could easily be argued that JH Ranch’s size exceeds the spirit of the document. The County does not currently have a noise ordinance.

Staffing: Employee turnover has been an issue in the Community Development Department as a whole and has had a particularly large impact in the Planning Department. The problem is most noticeable among department heads and skilled positions where it is common for employees to leave after just a year or two of service. These positions often remain vacant for months. This turnover has caused a loss in morale and productivity for many years. It can take a number of months for a planner to come up to speed on existing projects which causes both existing and new applications to get delayed. There are members of the community who have waited years for their applications to be processed and have grown frustrated by having to work with so many different Planning and CDD directors in Siskiyou County. At the time of this report’s submission the County has been without a Community Development Director and senior planner for many months. It also has no building inspectors – both having left for pay related reasons. The prospects for finding replacements for these positions appear bleak. This is due in large part to labor market conditions for community development professionals. Following the economic downturn from 2008 to 2013 many professionals left the field, or retired, leaving a general supply shortage. At this point the compensation offered in Siskiyou County cannot compete with most other counties. The County’s recruitment efforts appear to be reasonable. They include postings on many government job websites, publication in the Sacramento area, and the use of private recruiters. Siskiyou County has always attempted to fill positions through promotion from within. This has many benefits including drawing new employees from the larger labor pool that exists for entry level positions but also has some drawbacks.

Fees for Service Fees for services provided by the Planning Department to applicants are very low in comparison to most other counties in the state and fall far short of the true cost of providing major services to applicants. The Department estimates the costs for some major services run ten times what the fixed fee recovers. For example, the cost of doing a California Environmental Quality Act (CEQA) review can exceed $10,000 and the flat fee that the County charges is about $1,000. This has been a policy that the Board of Supervisors (BOS) strongly supports despite periodic requests from the Community Development Department for increased fees. Their rationale is that recovering the cost of these services would discourage business development and in turn reduce future tax revenue generation. It is reported that this also stems from their general belief that “less government is better”. In a Grand Jury survey of the ten California counties closest to Siskiyou (Del Norte, Modoc, Humboldt, Trinity, Shasta, Lassen, Mendocino, Tehama, Plumas, Butte), all but Trinity incorporate some form of full cost recovery into their fee schedule. Many of these counties have similar economic characteristics to Siskiyou. Siskiyou County’s largest cities - Yreka and Mt. Shasta - also implement full cost recovery for similar major services. An additional benefit of a material commitment to the application and review process would possibly be that applicants would take the process more seriously – a notable lacking in some of the efforts put forth.

Code Enforcement Over the years there have been numerous letters written by the County to JH Ranch or its attorneys demanding that they comply with code and occupancy requirements. (One of these letters was written by the Director of Community Development at the request of the 2008 GJ report.) The letters have often threatened legal action. To date there has never been any citation or legal action taken by the County in response to a non-compliance issue at JH Ranch. There are various reasons for this. Like most counties, the preferred method to resolve code violations is to issue a “Notice of Violation” and ask that the owner fix the problem. Most violations are corrected within a stated time limit. If the violation is not resolved, then the County has the option to issue an administrative or criminal citation. In Siskiyou County it can take 3-6 months to issue a citation. The County does not often resort to either type due to the time and effort involved and their limited effectiveness in getting compliance. With a maximum fine of $100 recovered from the owner (when it is prosecuted as an infraction) there simply isn’t much of an incentive for the property owner to comply. The issuance of a citation, and its prosecution as an infraction, does not compel an owner to correct a violation – it only compels the owner to pay the fine. Although escalating fees are an option included in the County Code, that option is rarely pursued. The County would argue that using the Department’s limited resources to achieve compliance from those willing to comply is far better than trying to get compliance from those willing to ignore the law and suffer the consequences. Another issue raised by the Community Development Department is described as a “don’t ask permission, ask forgiveness” attitude that illustrates the numbers game that is played by many property owners. There are so few code enforcement officers in such a large county that the “numbers” are on the property owner’s side. This same expression was used by JH Ranch to describe their approach during prior years.

Moving Forward The recent changes in JH Ranch’s management and their efforts to resolve outstanding permits and code violations are positive signs as is the County’s intentions to get a new Plan Amendment in place. A tentative agreement on how CALFIRE’s 4290 road requirements might be met and JH Ranch’s stated intentions to begin the engineering work on that project are also steps forward. Overall, this may present the best opportunity in many years for the County and JH Ranch to get a plan amendment completed and bring some degree of closure to the Scott Valley community.

Stalemate There is still a potential for indefinite delay on this. The incentives for each side are not entirely clear. Although CALFIRE may insist that 4290 requirements are met, in the end they have no authority to compel JH Ranch to do so. CALFIRE’s main leverage comes from their possible refusal to sign off on any plan amendment the County approves. This would place the liability risks resulting from a fire squarely on the County. It is unlikely the County would assume those risks. There is the possibility that the County could legally modify the CALFIRE requirements and bypass the necessity for CALFIRE approval but that has never been done in this county and it is unknown (by the GJ) to what extent that has been attempted in other counties. It is also unknown what affect that would have on liability issues. The public record has shown that the County is either unable or unwilling to test its ability to enforce occupancy limits at JH Ranch. This could be due to possible ambiguities in the 1993 plan amendment or it could be because of the difficulty of enforcing occupancy in general. (It is not feasible to walk in and perform a head count.) JH Ranch is a business. This is made clear in their March 2016 PDPA proposal when they state that their current operations are the “minimum sustainable business model for JH Ranch”. If they are running a sustainable business then what incentive would they have to change the status quo unless there are business consequences to non-compliance? This is particularly evident if they can avoid the cost of completing the 4290 road modifications and the effort of completing a new Plan Amendment by simply doing nothing. It is possible that JH Ranch would have some liability exposure to wildfires given their awareness that such risks exist and CALFIRE’s demand that access problems be fixed. It is also possible that their desire to maintain good community relations - which is a good business decision, as well - will play a role. JH Ranch’s recent efforts to work with the County and its cooperation with this investigation should be encouraging. REQUESTS FOR RESPONSES Pursuant to Penal Code section 933.05(f), the Siskiyou County Civil Grand Jury requests response from the Siskiyou County Board of Supervisors as follows: R4 – R8. The County Administrative Office is requested to respond to R5. Reports issued by the Civil Grand Jury do not identify individuals interviewed. Penal Code section 929 requires that reports of the Civil Grand Jury not contain the name of any person or facts leading to the identity of any person who provides such information Note: The Siskiyou County Civil Grand Jury would like to thank JH Ranch and all the entities and individuals who cooperated with this investigation.