SHELTER BAY LEASE RENTS
History and processes explained
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Hello Shelter Bay Neighbors,
I, like many of you have questions about our situation here in Shelter Bay. Our rents and leases, our
arrangement with the Swinomish Tribe. Why our costs keep going up? I have also heard, like many of
you lots of stories and allegations about what folks think might be happening. So I have gone to the
source to understand for myself the facts of how our leases and rents really work, how they came about,
and what’s true and what’s not true. I hope you ﬁnd this information helpful.
Ken Barnes in Shelter Bay
1. 1969: THE SWINOMISH TRIBE and individual allottees owned valuable land / Fidalgo Island.
The Tribe / allottees wished to develop the land but had no funding to do so.
Osberg Construction was looking to develop but had no land.
Osberg Construction did have ample and ready funding.
2. THE AGREEMENT:
The Swinomish Tribe and individual allottees did not wish to sell their land.
The Tribe / allottees were willing to lease the land for a period of 75 years.
The rent of the land would be reduced to compensate for the developers investment.
Osberg Construction agrees to build the infrastructure and to develop the property.
Osberg does this in exchange for reduced rent.
Osberg will then sell land subject to lease.
3. SHELTER BAY IS FORMED:
Shelter Bay Company is formed as a for-proﬁt corporation.
Shelter Bay would:
a. Hold the master lease.
b. Develop the infrastructure.
c. Develop the building lots.
d. Sell sub-leases for these building lots.
Shelter Bay Community is formed as a non-proﬁt corporation.
The Shelter Bay Community would:
a. Serve as HOA to manage the community.
4. 2004: SHELTER BAY COMPANY IS PURCHASED BY THE SHELTER BAY COMMUNITY.
The marina was included in this acquisition.
The Master Leases would remain with the Shelter Bay Company.
The Land is comprised of:
a. 44 Fee Simple lots (occupant owner - not leased).
b. 870 Leased Lots - owned by the Tribe and allottees.
c. Community property to be leased at $0.
5. HOW THE LEASE WORKS:
There are two Master Leases; Lease 5020 and Lease 5080.
Lease 5020 covers Divisions 2, 3, 5 and started 07/01/1969.
a. Initial Rent $20,250. per year.
b. Initial Rent Expires after 24 years.
c. Subsequent Adjustments start 1993 and every 10 years thereafter.
d. Adjustment = 7% of market value of undeveloped land.
e. Value to be based on independent appraisal.
Lease 5080 covers Division 4 and started 07/01/ 1970.
f. Initial Rent $7,060. per year.
g. Initial Rent Expires after 24 years.
h. Subsequent Adjustments start 1994 and every 10 years thereafter.
i. Adjustment = 7% of market value of undeveloped land.
j. Value to be based on independent appraisal.
6. IMPORTANT DETAILS about the lease
a. The Bureau of Indian Aﬀairs (BIA)
1. BIA is intermediary between the Tribe and Shelter Bay Company.
2. BIA Collects all rents under the Master Leases.
3. BIA Remits rents to the Tribe and allottees.
b. Master Lease Rents are payable annually:
1. BIA bills Shelter Bay Company in May for the year beginning July 1.
2. All payments are due BIA before July 1.
c. Residents pay Shelter Bay monthly and annually:
1. In advance toward total due in June.
2. Annual payment to Shelter Bay Co in May based on sublease amount
and Seattle Consumer Price Index.
3. Supplemental payment makes up diﬀerence between total rent due BIA
and actual amount collected by Shelter Bay Company.
7. LOTS ARE NOT ALL THE SAME VALUE.
Lot rents are based on size, location and estimated market value.
Details regarding individual lot rents can be found in the rent roll.
8. TEN YEAR LEASE ADJUSTMENT HISTORY
(adjustments occur over two years)
As shown in Section 5.c,d,h,i, above, starting 1993 rents are adjusted every 10 years.
a. 1969: Adjusted land value: stipulated in lease. Resulting rent: $29,310.
b. 1993 ﬁrst reset: Adjusted land value: $3.0MM. Resulting rent: $210,000.
c. 2003 second reset: Adjusted land value: $19.4MM. Resulting rent: $1,358,000.
d. 2013 third reset: Adjusted land value: $29.2MM. Resulting rent: $2,024,000.
e. 2023 fourth set: Adjusted land value: $61.3MM Resulting rent: $4,286,045.
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9. LEASE APPRAISALS and what occurred in 2003
The leases were written to allow each party to get an independent appraised land value.
Diﬀerences in the appraisals to be resolved through arbitration as req. by one or both parties.
a. Shelter Bay appraisal was $7.8MM
b. The Tribes appraisal was $26.0MM
c. As a result Shelter Bay demanded arbitration, to be paid at it’s own expense.
d. The arbitration was not settled until 2008.
e. The appraised value set by the arbitrator was $19.4MM, requiring not only for
Shelter Bay to pay for an expended arbitration but also to create a
“Supplemental Rent” to cover the resulting shortfall.
10. THE 2013 ADOPTION OF THE VALUATION INDEX
To avoid another costly battle at the next lease adjustment Shelter Bay and the Tribe and
allottees agreed to use a “Valuation Index” for future lease adjustments. The index would be
derived from Skagit County appraisals of properties similar to Shelter Bay.
11. HOW IS THE VALUE OF SHELTER BAY CALCULATED?
a. A residual value method is used by both sides.
b. Start with the current value of Shelter Bay.
c. Subtract the cost of development, including Infrastructure, such as roads, sewer, etc.
d. Subtract the costs of dredging out the marina and building up land near the water into buildable lots.
e. Subtract the cost of permitting, engineering, sales cost, fees and interest for development.
The resulting ﬁgure is the residual value of the land as undeveloped.
12. IN 2020 THE SHELTER BAY BOARD AND THE TRIBE AND ALLOTTEES MUTUALLY AGREED
to continue using the Valuation Index method. As Shelter Bay collects monthly in advance of the BIA year
end payment Shelter Bay, using available data, estimates what the increase could be when the
Skagit County assessment data is available in December. Depending on the accuracy of the
estimate a supplemental rent payment may be due to cover any shortfall.
a. Shelter Bay has estimated a 97% increase.
b. The actual increase is 109.6%
c. $123,149 Shortfall between 97% collected and 109.6% due will be paid from Lease Admin. Fees
d. Adjusted land value for 2023-24: $61,229,217.
e. Rent at 7% of land value for 2023-24: $4,286,045.
f. FY 2023-24 Supplemental Rent Calculation
$4,286,045. Total Rent Due.
$754,611. Rent paid by Individual Sublease Fees for each lot.
$204,400. Marina pays $204,400.
$3,327,034. Supplemental Rent – Remaining amount to be paid by residents.
Neighbors, I hope you ﬁnd this information useful. If you have questions I have found the Shelter Bay oﬃce
and Board to be easy to reach and very helpful with factual information. See their contact information below.
Community Manager: firstname.lastname@example.orgShelter Bay Board of Directors: email@example.com
Ken Barnes, a neighbor in Shelter Bay