Assembly eases exemption rules

Posted: Thursday, January 10, 2008

Senior homeowners who like to travel can now be gone from the Kenai Peninsula Borough for up to half a year while remaining eligible for the borough's senior property tax exemption.

Tuesday night, the Kenai Peninsula Borough Assembly voted 5-4 to ease a restriction that had required seniors to be able to show they were gone from the borough no more than 120 days in a tax year to qualify for the borough's tax break. That restriction is now 180 days, the same as the state requires for receiving an Alaska Permanent Fund Dividend check.

Since passage of a state law in the 1980s, Alaska residents 65 years or older, or their surviving spouses 60 years or older, have not had to pay taxes on the first $150,000 of assessed value of their primary residences. Not long after the state law was adopted the borough made the exemption unlimited, thus freeing eligible seniors from any property tax obligation. The borough is the only municipality in the state that extends such an exemption.

Initially, the cost to the borough was minimal. But over the years, the program has grown significantly more expensive, in large part to rapidly rising property values, but also because in the late 1990s the state ceased reimbursing municipalities for the revenue lost due to the state's mandatory $150,000 exemption.

Facing rising costs and falling revenues, the assembly voted in September 2006 to tie eligibility for the borough's unlimited exemption to eligibility for an Alaska Permanent Fund Dividend. Additionally, Ordinance 2006-21 required that seniors be absent from the borough no more than 120 days a year to maintain that eligibility. This was seen as a way for seniors to demonstrate they were really committed to being borough residents.

A year later on Oct. 2, 2007, peninsula voters opted to cap the unlimited tax exemption for seniors at $300,000. (An unlimited exemption remains in place for disabled veterans.) That move dramatically reduced the drain on revenues because many more seniors with high-value homes were now required to pay at least some property taxes. Seniors owning homes valued under the $300,000 cap remained free of any property tax obligation.

Borough Mayor John Williams said, however, that it soon became clear enforcing the 120-day restriction would be problematic, and he and Kasilof Assemblyman Paul Fischer proposed Ordinance 2007-39 eliminating the 120-day restriction, and making it 180 days.

Several members of the assembly said the 120-day restriction was not too much to ask, given the generosity of the borough's added exemption, but nevertheless agreed that enforcing the restriction might be a problem. As Assemblyman Ron Long of Seward put it, the 120-day restriction had the potential of "making liars out of our seniors, cops out of assessors, and finks out of neighbors."

Long also noted that he like the idea of turning the job of tracking seniors' whereabouts back over to the state.

The assembly rejected an amendment offered by Assemblyman Pete Sprague of Soldotna that would have broadened the borders of the 120-day restriction from the borough to the state.

Opponents, such as Assemblyman Gary Superman of Nikiski argued against easing the 120-day restriction in any way. The public and some of his colleagues based the idea that enforcement would be difficult on "bogus assumptions," he said. He noted that the assessing department had recently added personnel.

He also took issue with the presumption that the state would do the enforcing of the borough's 180-day requirement.

"It's just not true, folks," he said.

The suggestion that seniors would have difficulty with two different eligibility periods in which they must be physically present in Alaska 180 days for the PFD and 120 days for the borough's exemption had been "blown out of proportion," Superman said.

He also noted that the borough law included a host of good excuses allowing seniors to be absent from the borough for more than 120 days, and that the borough exemption had never been intended as a subsidy for snowbirds. Few residents in his district, he added, were wealthy enough to be snowbirds in any case.

Finally, Superman noted that homeowners do not have a constitutional right to a property tax exemption.

Assemblywoman Margaret Gilman, who ultimately supported the change, said she would largely because of the unenforceability factor. But she also noted that no one was advocating for younger taxpayers who subsidize senior homeowners.

When it came to a final vote, Sprague, Gary Knopp of Kalifornsky, and Grace Merkes of Sterling joined Superman in opposing the change to 180 days. They were outvoted by assembly members Long, Gilman, Fischer, Milli Martin of Diamond Ridge and Bill Smith of Homer.

The new residency requirements go into effect immediately.

Hal Spence can be reached at hspence@ptialaska.net.



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