Although the law says it must, the Alaska Legislature has not been living up to a promise it made to municipal governments in 1986.
That promise was to reimburse the municipalities for the revenue they lost under a state law exempting a portion of the value of certain homes from property taxes. It applied to the first $150,000 in value of the homes of senior citizens, disabled veterans and the qualifying surviving spouses of those two groups.
A bill introduced March 3 by Rep. Jim Elkins, R-Ketchikan, however, seeks to pay municipal governments at least 75 percent of what they can expect to lose in fiscal year 2006.
The bill would appropriate nearly $29.6 million from the general fund to the Department of Commerce, Community and Economic Development for distribution to the municipalities.
"The state has not provided reimbursement for these loses at all since fiscal year 1997, and only partial reimbursement was available from fiscal year 1986 through fiscal year 1997," Elkins said, adding that the bill would provide "immediate local tax relief."
Elkins said he had high hopes for the measure, which would pay his own district almost $691,000.
Facing its own fiscal problems, the Kenai Peninsula Borough is looking at several revenue-generating measures, including a reduction of its own unlimited extension of the state exemption law. Seniors, disabled vets and qualifying surviving spouses currently pay no property taxes on their primary residences.
An ordinance introduced by assembly member Pete Sprague of Soldotna proposes to cap the exemption at the first $300,000 in value, a move that would increase revenue boroughwide by $103,000.
The failure of the state to reimburse the borough for revenues lost to the statewide $150,000 exemption cost the borough $3 million in the current fiscal year alone. Statewide, the loss amounts to $40 million.
Elkins said Tuesday that according to his figures, under his bill the Kenai Peninsula Borough would get somewhere around $2.25 million this year and about $2.4 million the next.
House Bill 195 would be good for two years, he said, because one Legislature cannot obligate another.
Elkins said his bill has gotten the support of the Alaska Municipal League.
Another bill, HB144 by Rep. Bill Thomas Jr., R-Haines, could provide long-term relief to municipalities by tapping the earnings of the Alaska Permanent Fund revenues to create a Community Dividend Program, Elkins noted. HB144 calls for a statewide advisory vote of the public.
If Elkins bill became law, it would go a long way toward reducing the $5 million to $7 million shortfall that borough finance officials are predicting for the coming fiscal year.
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