Mayor: ACT’s claims flawed

Williams says critics drew faulty conclusions

Posted: Friday, April 07, 2006

Mayor John Williams delivered a formal rebuttal Tuesday to Alliance of Concerned Taxpayers’ allegations that his four-month-old administration is heading in the wrong direction, and that it would depend on raising taxes to cover the cost of government, rather than cut spending.

As he has in interviews since ACT members first presented their critique of his young administration at the March 14 meeting of the Kenai Peninsula Borough Assembly, the mayor said outdated or misinterpreted figures used by ACT led to “significant errors” and that their conclusions were far off base.

Mike McBride, head of ACT, stood by his organization’s figures and their interpretations of the data.

“The numbers we used were from audited statements of the borough — Comprehensive Annual Financial Reports (CAFR). They should be accurate. If the numbers change from year to year on a CAFR, what good are they?”

ACT members said their review of those past audits showed that over the past 20 years the borough government expanded far faster than population growth should have required, and that government was spending far more than the economy and tax base could support.

In presenting his own case to the assembly, Williams said he hoped to correct ACT’s errors and “present a clear and factual perspective on the history of the borough and borough government.” He titled the presentation: “The Facts versus ACT.”

Williams said the economy and population have grown significantly over the last 25 years, which are generally signs of health. But the cost of living also grew, even as the buying power of the dollar declined.

Real property market values, he said, are 20 percent higher than in 2001, another indication of a healthy economy, while the property tax levy has fallen 24 percent in the past 10 years. Another indication of a strong economy is the services provided by borough government, many of those added at the direction of voters. Still, borough government growth has been modest, he said.

Focusing in on ACT’s claims, the mayor said the borough’s population grew 27 percent since 1987, not the 17 percent ACT said. That matched the 27 percent growth in government employment (excluding those working for voter-approved service areas).

ACT claimed that borough median family income had grown by just $2,000 since 1987 and used that figure to demonstrate that government growth had outstripped the ability of taxpayers to cover the costs. That was inaccurate, Williams said, adding that Census Bureau statistics show borough median family income growing by more than three times ACT’s number.

ACT had attempted to demonstrate the economy’s weakness by suggesting the price for changing a tire had remained at $10 in Nikiski for years, even as government spending rose.

“I can’t take responsibility for what one business will charge compared to another,” Williams said. “That’s the free market. But what I can do is give a fairer look at what the cost of living is doing here in the Kenai Peninsula Borough.”

University of Alaska data shows the cost of living for a family of four in the Kenai/Soldotna area rising by 22 percent in the past 10 years, Williams said, adding that was a “fairer indicator” of how costs have risen in the private and public sectors.

ACT members were also wrong, Williams said, in their interpretation of the rise in property assessments and what they mean to the economy.

“First of all, ACT’s starting figures were off by a couple of hundred million (dollars), while their ending figure was correct,” he said. “ACT then tried to infer that growth was weak, while in actuality, total valuations grew by 27 percent. This is strong, steady growth and an indicator of an economy that is not weak as ACT would have you believe.”

More significant, he added, is that over the past five years, borough property tax assessments have generally lagged 7-10 percent below market values calculated by the independent Multiple Listings Service. Assessments, Williams said, are not arbitrary. State law requires assessments be based on market values. Falling too far below state requirements could endanger such things as state aid to schools.

ACT’s figures for total sales tax collections were accurate, but the group drew the wrong conclusions, Williams said. Revenues from the borough’s 2 percent sales tax grew 6.25 percent over 20 years. While that amounts to a 125 percent increase over all, it represents a rise of only $8.7 million in that 20-year period, the mayor said.

Actual property tax revenue growth, meanwhile, also did not match ACT’s figures of $14 million to $28 million from 1986 to 2005. The correct numbers were $17.3 million and $45.1 million, Williams said.

While his numbers would appear to support ACT’s argument that government had grown substantially in 20 years, the mayor said there was much more to the story than presented by ACT.

For one thing, he said, in 1986, property taxpayers carried 60 percent of the general tax burden. Last year, they were carrying 65 percent.

“The assembly tried to address this growing imbalance last year when they tried to raise the sales tax rate to 3 percent,” Williams said. “But because of (the ACT-promoted) Proposition 5 (which repealed the 1 percent increase), property taxpayers will continue to pay a larger share of the general tax burden.”

Inflation has significantly impacted the buying power of the tax-generated revenue dollar, the mayor said.

“We have had a net loss of buying power equaling nearly $4 million in the last decade,” he said.

The borough’s undesignated fund balance (essentially, a savings account maintained to meet unexpected spending needs) has declined since the late 1990s from a high of around $26 million to about $14 million today, largely in reaction to public demand — in some cases, Williams said, from people who are now officials with ACT who argue today that the declining fund balance is the result of poor fiscal management.

“They can’t have it both ways,” he said.

The fund balance has declined because it has been used to balance past budgets, budgets significantly affected by five cuts in property tax mill rate since the mid-1990s, a move that also came in reaction to public demand.

According to the mayor, total annual government spending has grown $44.2 million since 1987. That included education, service areas, debt service (which actually fell), special revenue funds and general government spending. About $13.2 million of that was the direct result of the voter-approved creation of service areas. Growth in education funding, meanwhile, resulted from the “high priority” citizens have placed on schools. The central government’s spending, meanwhile, has grown by $4.7 million since 1998, a modest average of 1.84 percent per year, Williams said.

In an interview Wednesday, McBride said ACT was “absolutely not” backing off its figures or analysis. He also said he “didn’t spend a lot of time studying his (the mayor’s) report.”

“I don’t think any of us will,” he said.

McBride took issue with the mayor’s report title: “The Facts versus ACT.”

“He is assuming that just because he’s mayor, people will believe this stuff. But there are holes in it,” he said.

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