By a narrow margin of one vote, the Kenai Peninsula Borough Assembly said no Tuesday to introducing an ordinance meant to cap the now unlimited property tax exemption extended to seniors and disabled veterans.
Ordinance 2006-14, on the agenda at the request of Mayor John Williams, would have limited the exemption to the first $200,000 of assessed value, and taxed all value in excess of that amount.
According to the mayor, the ordinance would have impacted a relatively small percentage of seniors and vets, mostly those in expensive homes, leaving the vast majority now benefiting from the property tax relief provision untouched. It would have generated about $645,000 in total revenue, with roughly $300,000 of that going to the general fund, the rest distributed across the 13 service areas depending on their tax levies.
The measure drew mostly negative comments from seniors and veterans who testified Tuesday night, most citing the problems a new tax bill would create for those on fixed incomes.
It appeared at first that there were five votes (the minimum necessary) supporting introduction of the measure, which would have scheduled it for at least two public hearings. But then, assembly member Gary Superman, of Nikiski, spoke.
Noting that the exemption program had been the subject of a lot of discussion last year during an earlier attempt at capping the unlimited provision, he said it was apparent that it was a program many borough residents would prefer to keep.
“These people need to come to an understanding that these programs cost a lot of money,” he said. “This one costs us about $3 million a year.”
That figure is roughly the amount not collected in property taxes as a result of the state’s mandatory exemption of the first $150,000 in assessed value and the borough’s long-standing ordinance making the exemption unlimited.
“Where do we get that money to keep this program going?” Superman asked rhetorically.
He then explained the political reasoning behind his decision not to support introduction of a capping ordinance at this time. The future of a sales tax increase was at the heart of it.
In the October election, he noted, seniors generally supported a ballot measure (Proposition 5) that successfully repealed a 1-percent sales tax increase approved by the assembly last June. That sales tax increase was meant to garner much-needed revenue and avoid a possible increase in property taxes. Prop 5 passed with 54 percent approval.
According to the administration and members of the assembly, however, voters’ minds may be changing as to the necessity for a sales tax increase, given recent information about the financial crunch facing the borough and the possibility that an increase in the 6.5-mill central government property tax mill rate would be needed to balance the fiscal year 2007 budget.
The 1-percent sales tax increase is headed back to the ballot this fall, where the administration hopes it will garner enough support to reverse last fall’s repeal.
But that’s not likely, Superman argued, if seniors an important voting block are dinged now for property taxes.
“If we take (the unlimited exemption) away at this point, there is not a chance that I see of the seniors even going close to a sales tax vote and turning it around,” he said. “I want them to think long and hard about that vote this fall.”
That apparently was enough to sway assembly member Deb Germano, who had indicated a few moments earlier that she was reluctantly prepared to vote for introduction, despite its lack of important provisions a tax relief provision for hardship cases and a residency requirement.
Williams said Tuesday he had every intention of introducing a hardship provision at the April 18 meeting based on an existing state law.
“I guess I like to see things as complete as they can be before we ask the public to come and comment time after time,” Germano said.
When it came time to vote, however, Germano changed her mind. She joined Superman and assembly members Paul Fischer, of Kasilof, Grace Merkes, of Sterling, and Ron Long, of Seward, in voting no on introduction.
Voting for introduction were assembly members Margaret Gilman, of Kenai, Dan Chay, of Kenai, Milli Martin, of Diamond Ridge, and Pete Sprague, of Soldotna.
Those members cited, among other reasons, that although the issue had been raised just a year ago and eventually defeated, the borough’s financial situation had changed sufficiently to warrant, at the least, further discussion and public hearings.
Williams said later that the administration would “head back to the drawing board” and look for other ways to make revenues meet expenses in the budget.
“I’m disappointed,” he said.
Tim Navarre, Williams’ chief of staff, was not happy with the assembly’s decision. He said the administration had been open with the assembly about its intention to introduce a series of measures meant to balance the budget without having to up the property tax mill rate and introduce them one at a time, rather than as a whole package, to allow for detailed discussion and consideration. Failing even to introduce the capping measure had effectively “taken it off the table” for this budget cycle, he said, adding its absence would have an impact on the budget document to be introduced April 18.
Among the things that could be impacted are the property tax mill rate, currently at 6.5 mills ($650 per $100,000 in assessed value), and the borough’s ability to fund education to the state imposed cap on local contribution, Williams said.
The senior exemption cap may not be dead. Germano said after the meeting that she was prepared to work with the administration and place a new capping ordinance on the April 18 meeting agenda if it included a hardship provision and addressed residency requirements for exemption eligibility.
She may have to move quickly. The deadline for preparing issues for that meeting is the end of the working day today.
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