• School prop bond gives kids new turf opportunities with a state rebate, term limit question back in fourth deja vu
By Naomi Klouda
Voters will weigh in Tuesday on whether a property tax exemption proposed on Prop 1 is worth a loss of $640,000 in funding for Kenai Peninsula fire and hospital services, as well as another loss of $1.3 million in general fund tax revenue.
The ballot initiative, sparked by citizen initiative, asks to raise the property tax exemption from $20,000 to $50,000 for in-state Peninsula residents.
A slate of property tax exemptions make life on the Kenai Peninsula more attractive as newcomers move in and an aging population stays in place.
Qualifying seniors, 65 years and over, already are mandated by state laws to receive the first $150,000 property value as exempt from taxes, Kenai Peninsula Borough Appraisal Manager Denis Mueller said.
Kenai Peninsula Borough voters affirmed an additional $150,000 for a $300,000 exemption. They also receive an additional $20,000 exemption for a total of $320,000 property value.
If the Prop 1 is adopted, they will be able to write off $350,00 value of property, though there is variation according to the city where they live, Mueller said.
Kenai Peninsula Borough Mayor Mike Navarre said city governments would be in a position to not apply the exemption if they so chose. In most cases, it shifts the tax burden from residents to businesses as well as multiple lot owners and has the potential to “stack taxes,” he said.
“In the Central Emergency Services Area, they lose over $350,000. They require 2.65 mils to operate, which will need to rise to 2.80 – that will be felt by property owners,” Navarre said. “It will be made up by increasing the mil rate.”
Homer’s South Peninsula Hospital Service Area will lose a projected $174,268. To operate this service area requires imposing a 2.3 mil rate on the area. In making up for the loss of revenue from the tax exemption, the service area would need to ratchet up to 2.41 mils, Mayor Navarre said.
“Residents will still benefit from the exemption, but with the increase in taxes due to the mil rate, parcel owners, raw land owners – that is undeveloped, property owners of rental units, they will pay higher taxes,” Mayor Navarre said. “In Homer, that’s already higher than others. If you live in the KESA area (Kachemak Emergency Services) and in the (South Peninsula) hospital area, you go up .16 mils. Taxes cross over and get stacked on top in order to make up that difference.”
In addition to the senior exemption, most all personal property already is exempt up to $100,000. This involves boats, airplanes, construction equipment, snow removers and a wide variety of assets.
The problem, critics point out, is that half of all the revenue brought in by the borough comes from property taxes. The borough budgeted for bringing in $45 million through realty and $9.2 million in taxes from oil and gas lease properties, according to the 2014 annual budget. The fiscal year began July 1.
The borough calculated losses for each of the service areas as well as the $1.3 million from the general fund. For South Peninsula Hospital, that amount is calculated loss of $174,268. For Anchor Point Fire, according to the borough’s voter information packet, the loss is $78,659. Seldovia stands to lose $1,628, while the biggest loser is calculated to be Central Emergency Service area at $350,737.
The vice chair and chairman of the Nikiski Fire Service Area, Dan Hammond and Mark Cialek, put out a plea to voters last week. “Please understand what this proposition will do to the emergency services where you live. This proposition will reduce the tax revenue that your service area uses to respond to emergencies,” the two wrote in a joint letter. “This revenue is used to pay responding personnel, operate the stations, and ensure that reliable equipment is ready to respond to emergencies.”
But the Alliance of Concerned Tax Payers is pushing the proposition, saying the borough doesn’t give the whole story in its voter information booklet, sent to Peninsula residents last week.
“Ballot proposition 1, if approved by voters will increase your borough property tax exemption from the current $20,000 to $50,000. This saves the average homeowner several hundred dollars a year on their borough property taxes,” said Mike McBride of Soldotna, a board member of ACT. “The voters’ pamphlet claims local service areas lose revenues, but this is not the full picture. Based on information provided by the Borough, but not included in the voters’ pamphlet, a less than two tenths of a mil increase will offset the revenue loss, assuming there is no growth in the borough economy.”
Yet, there likely will continue to be growth that will more than offset lost revenue, McBride contends. “Why did the Borough withhold this important information? The answer is simple: because half-truths support their position,” he wrote in a Point of View piece for the Homer Tribune.
Mayor Navarre said the tax has the potential to raise taxes for certain sectors, and thereby can hurt the economy. Increasing the residential exemption is an idea that was authorized in statute by the Alaska Legislature. It was furthered by citizen petition and now goes to voters as part of the process before enacting it.
“If you have an area that is all residents, it would be simple; it would be a tax to non resident owners. But it’s a little more complicated here because non residents don’t qualify anyway,” he said. “It becomes a question of how much of a tax increase to make up the difference. If there’s a revenue loss you either increase somewhere or you reduce services.”
The Road Services Area is supported from a $4.7 billion tax base spread across the entire Peninsula, which stretches from Tyonek on the west side of Cook Inlet to the Nanwalek on the southern-most tip, an area the size of Massachusetts and New Jersey combined.
But smaller pools of taxes, such as South Peninsula Hospital’s mil rate, wouldn’t have a large tax base to draw from, Navarre said. If combined, which is realistic for some residents that straddle service areas, the Anchor Point Fire and Emergency Service area, South Kenai Peninsula Hospital Service Area, the Road Service Area and the borough, would cause them to pay a mil rate of 10.45.
Proposition 2 asks: Shall the Kenai Peninsula Borough borrow up to $22,987,000 through the issuance of general obligation bonds?
If passed by voters, the bond pays for planning, designing, site preparation, construction, renovating, installing and equipping of 10 school roofs. This will cost $20.9 million. Another $2 million would go to a turf field at Homer High School. The projects have been approved by the Alaska Department of Education for 70 percent reimbursement, leaving the borough residents to pay 30 percent.
This prop follows up on a 2010 voter-approved Phase I that paid $16.9 million in bonds for roof work at 14 schools. The beneficiaries of this bond were Chapman Elementary, Homer Middle School and McNeil Canyon Elementary and some roof work at Ninilchik School. That work has been completed.
Phase II includes roofs constructed in 1967, with work spread over three years:
• 2014: Homer High turf field and roofs at Kenai Alternative High, Kenai Middle, Skyview High and Tustumena Elementary schools;
• 2015: Homer Middle, Kenai Central High, Paul Banks Elementary and Soldotna Middle schools;
• 2016: Ninilchik and Soldotna High schools.
The borough calculates that after receiving 70 percent reimbursement from the state, the cost to tax payers is about $6.77 per $100,000 assessed real or personal property value.
Homer has been pushing in particular for turf on the football field, which becomes unsafe in rainy, muddy conditions for the many sport participants that utilize it. Homer and Soldotna are the only larger schools without a turf field, which hinders track meets, soccer games, cross country teams and football games during the rainy falls and spring melt break-up seasons. An increase in injuries is a documented part of the problem, coaches say.
ACT warns that the state’s promise of a 70 percent reimbursement isn’t a given citizens should count on.
“That is deceptive,” said ACT’s McBride. “If approved by voters, ballot proposition 2 commits taxpayers to accept ultimate responsibility for repayment of this $23 million school bond. This is in addition to the $52 million we currently owe, according to the borough’s (previous bond.)”
What is not widely known is that the state legislature is not required to pay this bond debt, McBride said. Each legislature makes bond payment decisions based on available revenues for that specific year. If oil revenue is down, the legislature may decline to help offset the school bonds.
Proposition 3A and 3B: The ballot will ask: Shall Ordinance 2013-20 (sponsored by Assemblyman Bill Smith) Substitute, Section 1, which repeals term limits for assembly members, be enacted? (Should we) provide for an increase in assembly term limits form two to three consecutive full terms with a required 180-day break in service before further service is allowed, be ratified?
The related, but separate questions may pose a head scratcher for voters. Though the limit of two consecutive terms for assembly members was adopted by borough voters in 1993, it was repealed by the assembly in 1999. An initiative-driven proposition by the Alliance of Concerned Tax Payers brought the two-consecutive-term limit back to voters in 2007. It passed by nearly 54 percent of the voters.
In June of this year, Hal Smalley, an assembly member from Kenai, introduced an ordinance to repeal that limit. Assembly President Linda Murphy of Soldotna offered a substitute ordinance that would repeal the term limit and put the question before voters. Smith then wrote a substitute to Ordinance 2013-20, which was approved by the assembly. It asks voters whether they want to repeal the two-term limit for assembly members or change the code to increase the term limit from two to three terms.
A “yes” vote for 3A repeal the current limit of two consecutive full terms an assembly member can serve without taking a 180-day break in service; a “no” vote shall not repeal the current two-consecutive-terms limit. A “yes” vote on 3B agrees to an increase from two consecutive three-year terms to three. “No” denies any increase in term limits.
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