Spending in most of the Kenai Peninsula Borough’s 13 service areas would increase under the proposed 2007 budget, but only property owners within the Nikiski Fire Service Area will face a property tax increase.
The new budget calls for a .5-mill increase to the fire service area, which would take the service area’s mill rate to 2.8 mills, raising the tax on a $100,000 home to $280 a year.
The tax increase is necessary primarily because of the increasing volatility of the service area’s tax base, which depends heavily on the oil and gas industry, said Tim Navarre, chief of staff to Mayor John Williams.
Navarre said the service area board had asked for a .7-mill increase, but Williams opted to raise it only a half mill. The board had requested an increase last year under Mayor Dale Bagley’s administration, but did not get one, he said.
Along with declining revenues from downward trending industry property values, other costs are rising, Navarre said. The service area also has an under-funded fund balance, the account holding savings for day-to-day operations and unexpected costs.
The increase would help “make sure the service area is strong enough to withstand some hits (like dropping industry property valuations) and make adjustments,” Navarre said.
The new budget proposes total expenditures (including certain operating transfers) in the Nikiski Fire Service Area to hit $3.82 million, up from just over $3.1 million in the current year.
Oil and gas industry property values within the fire district have declined for several years. In fiscal year 2004, for instance, they were worth nearly $642 million, generating $1.45 million in borough tax revenues that year, according to the budget document. By the current fiscal year, FY 2006, the value had fallen to just over $450 million and revenues were down to about $1 million. Values and revenues are expected to decline further in 2007.
Meanwhile, real and personal property values of service area residents also fell between 2004 and 2006.
The overall effect was a decline in total tax revenues from $3.14 million in 2004 to $2.55 million in 2006.
While oil and gas property is expected to continue its falloff, real and personal property values of everyday citizens are expected to rebound slightly in the coming year, leading to an overall increase in total property value.
A 2.8-mill levy is expected to generate tax revenue on the order of $3.12 million for the service area, according to the projected budget.
The administration has requested no mill levy increases in the other service areas. Spending is expected to increase along with costs in most, but some, like the relatively new Lowell Point Emergency Medical Service Area, established in 2003, will see expenditures drop significantly from those of the current year.
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