Tax exemption cap up for debate in Seward

Meeting in Seward today, the Kenai Peninsula Borough Assembly will hold the first of two public hearings on a proposed ballot measure that would ask voters in October to approve a cap on the currently unlimited property tax exemption granted to seniors and disabled veterans.

No matter the value of their holdings, those residents, or their surviving spouses 60 years and older, are exempt from property taxes. The exemption applies only to a person’s primary residence.

Ordinance 2007-12, if approved by voters at the Oct. 2 municipal election, would cap the exemption at the first $300,000 of assessed value, meaning exempt residents would begin paying property tax mill rates on any value in excess of that amount.

A state-mandated exemption requires municipalities to forgive taxes on the first $150,000 of assessed property value for such residents. A borough law adopted in the 1980s made the exemption unlimited. At first it cost the borough about $131,000 in lost tax revenue. A state program reimbursed the borough for revenue lost due to the state’s exemption. That practice stopped, however, in the late 1990s.

Today, the combined exemptions cost the borough about $5 million in lost revenues annually. A bill now before the Legislature would up the state’s exemption to $250,000. Another bill proposes reinstituting a state reimbursement program.

Ordinance 2007-12, proposed by assembly member Gary Superman, of Nikiski, is meant to stem at least a portion of the revenue drain. It is the latest in a string of attempts to modify the tax program that “have resulted in little more than ill will and contention,” Superman said in a memo to the assembly.

When an attempt to cap the borough’s exemption failed in February, Superman said, several members indicated they might support a ballot measure on the issue.

“I suggest we do that and let the public decide the future course of this program,” he told the assembly. “I urge your support and welcome debate to craft a final question to be put on the ballot this fall.”

Ordinance 2007-12 includes a hardship exemption, which would forgive a portion of the taxes on value above $300,000 if the tax exceeded 2 percent of a person’s household annual income. The exemption would be granted for anything in excess of 2 percent of the gross household income.

A second public hearing on the measure is scheduled for May 15 in Soldotna.

Also up for a public hearing Tuesday is Ordinance 2007-19, the fiscal year 2008 borough budget. Two more hearings are scheduled for May 15 and June 5. The proposed spending plan would appropriate nearly $63 million, including $14.7 million for general government operations, and $37.7 million for schools.

Mayor John Williams’ mayor’s report includes notification of several road surveying contracts signaling the start of the road repair season. Included are survey projects on Holt Lamplight Road, Tolum Road and Strawberry Road.

Hal Spence can be reached at hspence@ptialaska.net.