Borough proposes property tax cut

Homeowners could benefit from 2003 fiscal budget plan

Posted: Monday, April 08, 2002

Homeowners could be paying less in the way of property taxes starting in July if the Kenai Peninsula Borough Assembly approves a proposed cut in the tax rate when it adopts the fiscal year 2003 borough budget later this spring.

A little over a month from now, the assembly will write that budget and likely base many of its decisions on preliminary projections provided Tuesday by borough Finance Director Jeff Sinz that included a proposal to reduce the current 7.0 mill levy to 6.5 mills.

Before that, however, the assembly will set the level of local funding for schools, expected to be around $30 million, Sinz said. The preliminary budget numbers were given to the assembly to provide some kind of 2003 budget context within which the school-funding decision could be made.

The general fund numbers are likely to change between now and May 7 when the general fund budget ordinance is to be introduced, Sinz said.

Those preliminary numbers project a general fund budget of around $52.2 million, which includes $11.7 million to pay the day-to-day operating costs of borough government departments.

Some $2 million will be drawn from the borough's $25.5 million fund balance to cover general fund costs. But that's OK, Sinz said, because the fund balance is higher than the ideal range -- between $12.5 million to $22.5 million.

In other words, the borough has more in its savings account than it needs, which justifies tapping the fund and lowering the tax rate.

That favorable condition should continue to at least 2006, by which time, under current projections, the savings account will have fallen to about $18.4 million, roughly in the middle of the ideal range.

According to Sinz, taxable property values will increase $252 million in fiscal year 2003, an 8.6-percent rise over the current fiscal year. The petroleum industry is largely responsible. Some $74.1 million worth of the increase is related to the British Petroleum's gas-to-liquids plant, and $38 million is related to the Tesoro refinery, Sinz said.

Reassessment of Kenai River riverfront properties, new construction and a general increase in property values boroughwide accounted for the rest of the $252 million boost, he said.

On the flip side of the coin, personal property assessments will be down $7.7 million, or 3.8 percent, below the current year, most of that is the result of reductions in the value of personal property associated with the Agrium Plant and Phillips natural gas facility, he said.

Sales tax revenues, which account for about 28 percent of all revenue to the borough, are expected to show a 3-percent increase over fiscal year 2002.

Sinz noted that future revenues would be impacted if the state implements a statewide sales tax, an idea under discussion in the Legislature as one way of bridging the expected fiscal gap. Exactly how is the big question, he said.

"It depends on the final form, but it could have the effect of net increases in revenues or net decreases," he said.

Federal revenues, this year amounting to $1.55 million, are expected to remain level for the next several years, Sinz said. So too state Revenue Sharing and Safe Communities Program funds, which are expected to remain level at around $3.3 million.

The projected $11.7 million needed to pay to operate borough departments would be just over $500,000 more than the $11.2 million originally approved for fiscal year 2002 in June of last year. The 2002 budget has since been amended upward to $12.4 million.

Salary and health benefit increases written into personnel contracts account for roughly $380,000 of the expected increase, according to Sinz.

When all expenditures are included, such as the borough's local contribution to schools, debt service and assorted capital projects, the complete 2003 borough budget will be roughly $52.2 million, down a little more than $1.4 million from the current year's amended spending level.

By far the largest single expense is schools. Next year education costs are expected to be $30.7 million, $330,000 more than this year.

The assembly is expected to introduce the fiscal year 2003 budget ordinance at the May 7 meeting in Seward. Work sessions are planned between May 20 and June 3. Final passage is expected at the June 4 meeting in Soldotna.

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