Borough gives exemptions second look

Possible senior, veteran property tax suggested to bring in extra money

Posted: Sunday, March 06, 2005

Tightening budgets have the Kenai Peninsula Borough turning over every stone looking for new revenues, including now a proposal to cap the unlimited property tax exemption enjoyed by senior citizens and disabled veterans and their qualifying surviving spouses.

Ordinance 2005-07, introduced by assembly member Pete Sprague of Soldotna, would limit the exemption to $300,000 in assessed value. Similar to the situation today, the capped exemption would apply only to a single parcel of real property owned and occupied as the primary residence by a person age 65 or older, by a disabled veteran, or a resident at least 60 who is the widow or widower of a person qualified for the exemption.

In a memo to the assembly, Sprague outlined why it is time to cap the exemption.

"As economic conditions of the borough, as well as its demographics, continue to change, I believe that it is time for the assembly to revisit this unlimited exemption," he said.

State law mandates that municipalities exempt the first $150,000 of property tax values for seniors and disabled vets, as well as their surviving spouses. In 1986, the borough assembly adopted an ordinance making the property tax exemption unlimited, ending the tax liability for those resident categories.

In 1995, the assembly enacted an ordinance capping the exemption at $250,000 for 1996 and eliminating it altogether by 1997. However, then-Mayor Don Gilman vetoed the ordinance.

The state exemption law requires the state to reimburse boroughs and cities for the property tax revenue lost due to the state's $150,000 exemption, which it did up until 1997 when funding ended.

In the current year alone, that failure has cost the borough $3 million. Statewide the loss to municipalities was $40 million.

The borough's "no cap" policy has resulted in an additional lost of $450,000 this year, according to borough finance department figures.

A $300,000 cap would affect 118 properties, bringing a portion of their assessed value (about $10 million worth) within the tax structure, increasing revenues to the borough and service areas by at total of $103,000.

With a $300,000 cap, a $350,000 home would pay a borough tax rate of 6.5 mills on $50,000, or $325 a year.

By comparison, capping the exemption at $150,000 would generate more than $747,000, because the mill rate would be applied to larger portions of far more properties, about 1,100 in all.

Stephen Stringham of Soldotna, who testified at the assembly meeting against a change in the tax structure, offered an indication of what a cap might mean to some seniors.

"You go out and earn a living and you pay to earn that living by paying an income tax," Stringham said. "Then you pay to spend your money by paying a sales tax, and then you pay to keep what you've bought by paying a property tax."

When he was young and could earn a living, he said, paying taxes was not a problem.

"I had no objection," he said. "Obviously, we had to raise taxes some way."

But when people reach an age when they cannot work or cannot find a job because of their age, paying taxes is no long a simple matter, he said.

"If I were to pay property taxes on what I own, I wouldn't eat," he said. "There simply isn't enough money."

Anticipating the coming public debate over capping the exemption, Sprague said he expected discussion would focus attention on the state's failure to fund its own mandated program.

Ordinance 2005-07 is scheduled for at least two public hearings — one on April 5 and again April 19.

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