Last November, the Usk bitcoin miner Ethereal Tech US Corporation—a LLC subsidiary of the Chinese bitcoin mining company Bitfufu (the name sounds less ridiculous in Chinese)—filed appeal to the Pend Oreille County Board of Equalization asking for a massive 50 percent deduction in the personal property taxes they owed the county on the grounds that their business was failing. 

Bitfufu is one of three companies operating thousands of highly specialized computers to “mine” bitcoin at the former Pend Oreille Newsprint Company paper mill site in Usk, WA. The other companies are the Beijing-based Bitmain and the California-based Allrise Capital owned by Russian businessman Vladimir Evseev (operating as a number of subsidiary LLCs). 

In the appeal, Bitfufu’s representative Olga Kochmar stated, “As you know in 2022, there were quite a few public [bitcoin] miners who went bankrupt. We are in a similar situation….” She continued, “In a nutshell, this model is not generating any positive cash flow any longer.” She later added, “We’re completely negative…. We’re actually not generating good revenue….”

She explained that their bitcoin mining operation at the mill site in Usk “does not make any money and has the highest hosting rate in the world. That is the argument explaining why it doesn’t generate positive cashflow.” Bifufu operates bitcoin mining facilities across the United States and around the world. In total, the company manages ten times more bitcoin mining capacity as the maximum mining capacity of the Usk facility, so Kochmar’s statement that the Usk facility most expensive mining facility in the world is highly significant and indicative that Pend Oreille County is not a good location for large-scale cryptocurrency mining. 

Kochmar continued to outline their challenges. In March 2022, the company purchased $19 million of bitcoin computers at Usk. The value of the bitcoin they were money wasn’t enough to cover their costs. 

Furthermore, there was no pathway to avoid future financial losses. Kochmar said they couldn’t sell the mining computers “because no one is willing to buy it.” She explained, “the useful life of miner… is usually two years or at max three years.”
And they were contractually locked into their money-losing Usk operation. “In this location we can’t just terminate the contract because we will be liable for it. We can’t stop running the machines because we still have to pay for the hosting services and electricity.”

Like the canary in the proverbial coal mine, Bitfufu’s financial woes reflect Bitmain’s and Allrise Capital’s financial challenges of conducting large-scale bitcoin mining in Pend Oreille County. Bitcoin mining profitability is at record lows (i.e. the amount of bitcoin miners can earn from a given amount of computing power) and power prices are ramping up.
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Bitfufu was started by a former Bitmain executive and is a partner of Bitmain, the world’s most dominant bitcoin mining company based in Beijing. Bitfufu is headquartered in Singapore and provides “cloud mining” services to customers on behalf of Bitmain. “Cloud Mining” is a somewhat misleading term for bitcoin miners selling you bitcoin today that they hope to mine in the future (at a small discount). It is a way for bitcoin mining companies to transfer financial risks to investors and to raise immediate capital after the collapse of the largest crypto-friendly banks last year limited miners’ ability to obtain loans. 

​County Commissioner John Gentle plays dirty.

During his initial 2020 campaign to become commissioner, Gentle’s surrogates, Messsrs. Norman Smith and Christian Meador conspired to publicly embarrass Gentle’s opponent, Devin Beach. Smith and Meador apparently made at least one anonymous donation to Beach and then filed a campaign finance violation complaint with the Public Disclosure Commission against Beach over their donation!

 In a letter to Smith dated August 4, 2020, the State Public Disclosure Commission stated: “Based on staff’s review, we found the following:” and then citing information provided by Beach’s attorney in one of the seven following bullet points, outlined the scheme,“Mr. Beach is being targeted, with knowing falsity, by a few people (some of them public servants also) who have intentionally concealed their names and contributions so as to manufacture a false claim against Mr. Beach. The people who have acted and whom we can identify are Christian Meador and Norm Smith. Between them, Messrs. Meador and Smith have concealed their identities while making contributions of  $25.01, $25.02 and $25.81, over the past three weeks or so, to Mr. Beach’s Campaign. Then to compound their atrocious misconduct and out of an apparent misapprehension of the law, Meador and Smith falsely reported to the Commission that Mr. Beach violated the law by accepting anonymous campaign contributions. The actions of Meador and Smith went far beyond that. RCW 42.17A.435. We have videotape from Spokane Teachers Credit Union showing Mr. Meador doing exactly that. This is both malfeasance and malfeasance in office….”

 The PDC exonerated Beach. Smith and Meador each donated $100 to Gentle and actively promoted his campaign. By refusing to condemn the egregious misconduct by his surrogates, Gentle shows he lacks the personal character to serve in public office in Pend Oreille County.

Pend Oreille County Commissioners,

Our wise Founding Fathers created a system of government remarkable for a system of checks and balances distributed among its branches. As County Commissioners you have the opportunity through the budget process to exercise these checks and balances of the County’s executive departments to assure proper accountability of our County government. As I have detailed below, there needs to be some accountability for our county assessor and his office.

Home values in Pend Oreille County DROPPED last year, so what explains this year’s MASSIVE increase in assessed values?

 In a recent statement to the Board of Equalization, the assessor’s office claimed the Washington State Housing Market Report showed that property values have increased 55% from 2019-2022. However, that report also shows that median home prices dropped last year. The average price of four-bedroom homes DECLINED by $57,000. Furthermore, state law requires the assessor to fairly assess the true value of every property each year, not every five years.

Deputy Assessor Nathan Longly blamed assessor Jim McCroskey. In a evidentiary document recently submitted to the County Board of Equalization, Longly told the Board that the assessor had not done his job for the last five years, so they needed to apply a massive increase this year. He stated, “While the Assessor’s Office does its best effort to keep up with the mandate placed upon the office to value all property at 100% of fair and true market value, due to staffing shortages and tremendous movement in the real estate market, the Assessor’s office has not been able to keep up with that mandate.”

“As such, values have increased rather dramatically, accounting for the last 5 years of market conditions. While the state does allow for the Assessor’s Office to go back and correct such manifest errors, due to the number of properties effected by the office’s inability to make proper adjustments, the blame has been placed on our office and as such has not applied such a burden upon property owners, which would result in owed back taxes. Therefore, the total needed adjustment has been applied for these missed years in this year's valuation and is applied going forward instead.”

 There are at least three problems with the Assessor Office’s statement:

1) The assessor has increased property values in each of the last five years based on market data.

2) According to information provided to and publicly reported by the State DOR by the Assessor, the Assessor’s office has been fully staffed with its authorized 5 full-time employees every year except in 2021, when it had 4.45.

3) The county assessors have one of the smallest workloads in the State. According to DOR, their workload is 25% smaller than the average county assessor and 40% lower than the average in Spokane, Stevens, and Ferry counties.

 The Assessor’s excuses do not hold water. Property values are dropping. He has a full staff and one of the lowest workloads in the state. The Assessor owes us an honest answer which the commissioners should demand during the upcoming budget discussions.

 You have each publicly stated you support robust accountability in government. We look forward to seeing if you intend to live up to your campaign slogans.

​If you were upset by the massive increase in property tax values levied by the County Assessor, you’ll be even more upset to find out that while county officers have been dishing out massive tax increases to everyone else, they have been giving themselves HUGE discounts on their own property tax assessments.

County Commissioner John Gentle has avoided paying tens of thousands of dollars in property taxes on his 21-acre hilltop estate overlooking Diamond Lake. His 3,561 sqft, three-level home with three-car garage, 1,200 sqft shop, and separate barn is assessed at only $369,419—ten thousand dollars less than he purchased the home for eleven years ago in 2013 and far less than the million dollars that real estate websites estimate is current market value

County Commissioner Brian Smiley’s 3,416 sqft home with two shops (484 sqft and 1800 sqft) on 26.5 river-front acres along the Pend Oreille River only increased 4.5 percent this year while his nearby neighbors received increases of up to 60 percent. Total assessed value: only $415,693.

Auditor Marianne Nichols’ 2,200 sqft home 26.5 wooded acres overlooking the Pend Oreille River saw only a 3.9 percent increase on an inexplicably low assessment of $213,123.

On his website, the Assessor states that he is required by law to value property “at 100% of market value.” Five months ago, Deputy Assessor Nathan Longly listed his 3,035 sqft, 4-bedroom Newport home for sale at a market price of $398,000. Three months later he “officially” assessed his same home at $317,213 for tax purposes-- $81,000 or more than 20 percent less than what his asking price indicated he believed was the true market value of his home.

It appears that county officials are using their office to avoid the same heavy tax burdens they are happily placing on their neighbors.