A property tax mill rate increase will not be necessary to balance the fiscal year 2007 budget to be presented to the Kenai Peninsula Borough Assembly next month, Borough Mayor John Williams said this week.
“At the April 4 meeting, I will be presenting ordinances and resolutions that will guide the direction of the budget we have prepared,” he said during an interview Thursday. “I’m not quite ready to release the entire budget, but what I can say is that it will be a budget that everyone will live with.”
Williams said the pending plan requires a draw from the borough’s dwindling reserve account, called its fund balance, but not nearly as much as was needed to balance the fiscal year 2006 budget.
“This budget will spend less money from the general fund overall than last year,” he said. “And there will be no mill rate increase.”
Borough property owners currently pay a 6.5 mill levy that is, $650 a year for each $100,000 of assessed value.
Senior citizens have been enjoying a significant property tax break for years, in part because of a state law that mandates an exemption from taxes on the first $150,000 of assessed value on a senior’s primary residence. A long-standing borough ordinance has made that exemption unlimited.
That’s about to change, Williams said.
Providing the assembly agrees, one of the moves Williams is set to propose April 4 would cap the senior housing exemption at $200,000. That is, seniors would begin paying property taxes on property values in excess of $200,000.
“We are the only community (in the state) giving an unlimited cap,” Williams said, adding that the proposed cap at $200,000 would be satisfactory for the needs of the senior community.
Williams also said the borough was preparing to restructure the biennial motor vehicle tax, which he said would “up the cost somewhat to every individual.”
Another adjustments necessary to balance the budget without upping property taxes will impact the budgets of the borough’s 13 service areas.
For the first time, service areas will begin paying fees to the general fund to cover the administrative services provided to them by the central government, such as legal services, payroll control, grants administration and the like.
“We have never charged for administrative work done on their behalf,” the mayor said.
Williams noted that the central government has for some time routinely retained interest earned on service area funds. Finance Director Craig Chapman said that a study several years ago determined that the services being provided to the service areas could be covered by retaining the interest earned on service area funds.
“It was basically a wash. But things change,” he said.
The mayor is expected to propose a change that would leave interest earnings in the service area accounts, but begin charging administrative fees instead.
Just how much each service area would pay for those services will depend largely on their size, their budgets and other factors. For some, the costs may amount only to a few thousand per year. For large, complex service areas, such as Central Emergency Services and Nikiski Fire Services, the costs could rise into the tens of thousands of dollars annually, the mayor said.
People interested in tracking those budget items as the budget process moves forward over the next two months can find them listed under interdepartmental charges.
The changes shouldn’t come as a shock to the service area boards, Williams said.
“I have personally visited with and assisted in the preparation of every service area and departmental budget,” he said. “I’ve studied every number in this (proposed) budget.”
One service charge already implemented is a change in the surcharge on telephone bills that goes to support the E-911 system. The assembly recently voted to up the surcharge from 75 cents to $1.25 a month.
“Even with that, the fees don’t totally offset the costs,” Williams noted. “We are still short about $200,000. But it’s a start.
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