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Borough may hike vehicle license fees

Money crunch drives auto tax

Posted: Friday, April 14, 2006

Automobile owners would begin paying higher motor vehicle taxes to the Kenai Peninsula Borough next year under a measure proposed by Mayor John Williams’ administration.

An ordinance introduced April 4 would impose license fee hikes beginning in January 2007 to be paid on a biennial basis at the time of renewal. That is, the owner of a brand new vehicle registered in 2007 would pay the tax (and the increase) in the first, third, fifth, seventh, and ninth years, and so on.

Over the course of a decade, the proposed rate increases would cost the owner of a new passenger vehicle or pickup truck $175 more than the current tax structure, an average of $17.50 more per year.

The owner of a brand new 18,000-pound commercial truck would pay $1,262 more over the same 10-year period, for an average of $126.20 more per year.

The levy on motorcycles currently declines from a first-year fee of $20 to a steady $10 a year in year six. Under the new tax scheme, motorcycles would be flat-rated at $20 for all years. Thus, a decade’s worth of tax increases (five biennial renewal payments) would cost motorcycle owners an additional $100.

Owners of newly registered taxicabs would shell out an additional $155 over the same time period.

Other tax hikes proposed in the ordinance cover motorbuses, non-commercial trailers, and other classes of commercial trucks. Dealer plates, now taxed at a flat rate of $100 per year, would go to $150 per renewal.

The ordinance gets a public hearing at the April 18 assembly meeting.

Alaska law enables municipalities to receive taxes collected by the state when a motor vehicle is registered using either the state fee schedule or one written by the municipal government. Tax revenues are distributed to the borough’s general fund, service areas and to the cities of Kenai, Soldotna, Seward, Homer and Seldovia.

Craig Chapman, borough finance director, estimated that the tax increase would generate about $600,000 more on an annual basis. Because state law requires motor vehicle taxation to kick in at the start of each new calendar year, the new tax, if approved, would generate an additional $300,000 between January and the end of June next year, the final six months of the borough’s July 1-June 31 fiscal year. Again, the borough, service areas and cities would share that money.

Justification for the increases was based on bringing borough fees in line with those of other regions of the state, Chapman said. For most vehicle types, peninsula residents currently pay less in motor vehicle taxes than their Matanuska-Susitna Borough counterparts.

Most of the increases Williams has proposed would raise the borough’s levy to match or nearly match that of the Mat-Su for the first few years of a vehicle’s life, but would drop off faster in the outer years compared to Mat-Su, Chapman said.

For instance, under the proposed terms, the $632 the owner of a new 18,000-pound commercial truck would pay under the proposed scheme in year one would equal what Mat-Su owners currently pay. But Kenai Peninsula truck owners would pay $46 less than Mat-Su owners in year three, $24 less in year five, $102 less in year seven, and $117 less in year nine.

The tax increase is one of several proposals Mayor Williams has said he would submit for the assembly’s consideration as the administration wrestles with rising costs.



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