Lake County officials are grappling with the loss of nearly $1 million a year in tax revenue after the Confederated Salish and Kootenai Tribes announced Friday they would not provide payments to make up for the removal of Salish Kootenai Dam (formerly Kerr Dam) from the local tax base.

The tribes, along with the tribally owned corporation Energy Keepers Inc., assumed control of the dam last month. Because the tribes are a sovereign government, they do not have to pay taxes to state or local governments.

Prior to the announcement last week, the tribal government had discussed with Lake County officials the possibility of voluntarily providing funding to make up the difference in lost tax revenues.

In 2014, dam owner PPL Montana paid $999,324 in taxes, more than half of which went toward state and local schools.

Polson School District, which operates on a budget of about $15 million, received $299,149 from the dam’s property tax.

Superintendent Linda Reksten said Tuesday that she and other school officials weren’t blindsided by the tribal council’s decision, but the difference would likely be borne by the remaining tax base.

“That amount of money is going to be spread among the taxpayers that are in the Polson School District area,” she said. “Essentially, it just has to be absorbed, because there’s no way that you can cut out that big sum of money from your budget.”

Other Lake County schools received $109,653 in taxes from the dam last year, and the county got $312,720.

Lake County Commission Chairman Gale Decker said Tuesday that the dam was the largest single tax revenue source in the county, and it accounted for about 2 percent of the county’s nearly $16 million budget.

“We talked to them this spring, and at that time they were very up front with us, and said they were going to have to look at revenue projections and that it was a first-time entry into selling power,” he said. “When we came out of that in the spring, there was a good chance we weren’t going to make up any of that lost revenue.”

Decker said the commission is still looking into how to deal with the loss, but indicated that cuts would be difficult.

In the county’s schools, cutting the budget would almost certainly mean cutting staff, which could harm the district’s ability to meet accreditation standards. Cuts in county government level also would likely equate to a loss of staff, for which he doesn’t see much room.

“I don’t want to say there’s hardly any fat, because I don’t think there’s any fat at all. We operate on a pretty tight budget,” Decker said. “If we do cuts within any of the departments, it will be pretty noticeable. There will be services impacted.”

Decker declined to identify any potential cuts under consideration, but noted that several new properties will be coming onto the tax rolls and may soften the blow for the county. They include a Red Lion hotel and a new Taco Bell.

In a press release, the tribes said that multiple factors influenced their decision, particularly the economic climate and the “uncharted territory” in getting into the energy business. They are the first tribal government in the country to own a hydroelectric dam.

“From an economic perspective, we’re at an all-time low in power prices, and we’re near an all-time low in water flows,” Energy Keepers CEO Brian Lipscomb said Wednesday.

The release also noted that the tribes contribute a range of services to the county and local community, including access to public lands, firefighting, low-cost or free use of tribal lands for schools and community groups and an estimated $829,000 in consumer power subsidies through Mission Valley Power.

Reporter Samuel Wilson can be reached at 758-4407 or by email at swilson@dailyinterlake.com.