Assembly to consider tying property tax breaks to dividend rules

Tax exemptions may tighten

Posted: Monday, April 17, 2006

Snowbirds who like spending the frigid months enjoying the warmth of the sun in the Lower 48 may soon find themselves out in the cold as far as the borough’s unlimited property tax exemption is concerned.

Two members of the Kenai Peninsula Borough Assembly have proposed an ordinance tying eligibility for state and borough property tax exemptions to eligibility for an Alaska Permanent Fund Dividend check, and limiting how long exempted residents could be absent from their homes each year before losing that eligibility.

An ordinance proposed by assembly members Deb Germano, of Homer, and Gary Superman, of Nikiski, would require that seniors and disabled veterans (or their surviving spouses at least 60 years of age) be eligible for a dividend check in order to remain eligible for the state’s mandatory exemption from taxes owed on the first $150,000 of assessed value.

Current conditions of eligibility require such citizens to live in their primary residences for at least six months of the year.

The proposed ordinance would impose stricter time requirements on recipients of the borough’s unlimited tax exemption absolving them of property taxes on value beyond $150,000. To be eligible for that tax break, a person would have to live in the borough for two years prior to applying for the exemption, and, with certain exceptions, could not be absent from the borough for more than 90 days in the subject year.

Those exceptions would be the same as those in the permanent fund dividend program. State law permits municipalities to tie eligibility for the $150,000 state exemption to eligibility for the permanent fund.

The Alaska Supreme Court has determined that because municipalities are under no obligation to do what the Kenai Peninsula Borough has done since the late 1980s — provide an unlimited exemption beyond that of the state — local governments may enact stricter eligibility requirements in their own exemption laws, according to Borough Attorney Colette Thompson.

The ordinance includes no provision, as yet, regarding any cap on the assessed value eligible for the borough’s exemption.

By a 4-5 vote at the April 4 meeting, the assembly declined to introduce an ordinance proposed by Mayor John Williams that would have capped the borough’s exemption at $200,000 of assessed value. Had it become law, seniors and disabled veterans whose primary residences were valued at more than $200,000 would have paid property taxes on that portion in excess of $200,000.

Williams offered the ordinance as a way to generate more revenue for the struggling borough budget. It would have affected about 10 percent of the senior and disabled veteran properties, according to the administration.

Germano said she talked at length with Superman, who had argued successfully at the April 4 meeting that imposing a tax on senior and disabled veteran property owners now might put at risk any support those residents could lend this October to overturning last fall’s Proposition 5, a measure that reversed a 1-percent increase in the property tax.

Germano said that “absolutely” was a reason for leaving any mention of a cap out of the new ordinance. She also said she had talked with Mayor Williams and Tim Navarre, Williams’ chief of staff, who she said the cap was not a must-have at this time.

“Politically, for getting the sales tax turned around, it (a cap) doesn’t make sense at this time,” she said. “It’s off the table.”

Navarre said Friday that the administration has some reservations about applying the residency requirement. A program that costs more to administer than the benefit derived would serve no purpose, he said.

Changing demographics and declining revenues have brought the whole matter of exemptions to the fore.

“It needs to be cleaned up,” Germano said. “The younger population is declining, and seniors are increasing in numbers. We have this additional income we continue to lose to the seniors. That’s fine, but let’s make sure they are truly residents and not just here for six months or less out of the year.”

The measure is Ordinance 2006-21.

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