Mill rate increase not needed

Mayor John Williams said Thursday he would abandon a proposed borough property tax increase and ask the Kenai Peninsula Borough Assembly to once again set the tax levy at 6.5 mills, where it has been since 2003.

A resolution set to go before the assembly Tuesday seeks a two-tenths mill increase to 6.7 mills starting July 1. However, when the mayor first addressed the possibility of a tax increase last month, he said he would be willing to roll it back to the current rate of 6.5 mills if the state budget included “meaningful funding” for the municipality.

The budget, adopted by the Legislature earlier this week, includes $3.6 million for the borough “for the purpose of defraying increased energy and other costs.” Though not formally called “revenue sharing,” it amounts to as much.

In addition, the borough is in line for $702,515 targeting the cost of municipal public employee retirement obligations. Williams said he was prepared to take Gov. Frank Murkowski “at his word” that he would sign the budget passed by the Senate and House.

“I will ask the assembly to set the mill rate at 6.5 mills,” he said. “Hopefully, we won’t have to adjust it later.”

Williams also said he was going to put most of the $3.6 million state appropriation into reserves for use when needed.

If adopted by the assembly, the mill rate boost would have cost the owner of a $250,000 home an additional $50 a year. When Williams first announced his intention to seek a borough mill rate increase last month, he said he was doing so reluctantly, arguing that it was “the only responsible way” to fully fund education.

The draft 2007 borough budget, which gets a public hearing Tuesday, nevertheless currently projects possible mill rate increases to 7 mills in 2008 and to 7.5 mills in 2009. Whether those increases will be necessary remains to be seen and could hinge on borough voters, who will decide the fate of a sales tax increase at the polls this fall, and on what future Legislatures do with regard to municipal aid.

Levy-setting resolutions are passed each year to set the mill rates for the borough and its service areas just prior to the start of the new fiscal year.

The only other mill rate change called for in the current resolution would raise property taxes in the Nikiski Fire Service Area from 2.3 mills to 2.8 mills. Each tenth of a mill increase adds $25 to the tax bill of a $250,000 home, so the requested half-mill raise would cost that homeowner $125 a year.

The fire service area rate increase is meant to address rising costs and an increasingly volatile service area tax base, administration officials said.

The latest service area budget proposal increases expenditures from $3.1 million this year to $3.82 million.

Meanwhile, oil and gas industry property values in the service area have fallen for several years. In 2004, they generated $1.45 million in tax revenues.

In the current fiscal year, that revenue stream is around $1 million. Service area residential real and personal property values also fell between 2004 and 2006.

Combined, the two revenue streams decreased by about $590,000 between 2004 and 2006.

The service area board had requested a .7-mill increase, but Williams opted for the smaller .5-mill raise instead.

If approved, the 2.8-mill levy will generate about $3.12 million in service area revenues in 2007.

How much for service?

Following is a list of service area mill rates in the Kenai Peninsula Borough. They do not face proposed changes this year:

All other service area mill rates would stay the same. That is:

· Bear Creek Fire Service Area, 2.25 mills

· Anchor Point Fire and Emergency Medical Service Area, 2 mills

· Central Emergency Service Area, 2.35 mills

· Kachemak Emergency Service Area, 1.75 mills

· Lowell Point Emergency Service Area, 1.75 mills

· Central Peninsula Emergency Medical Service Area, 1 mill

· North Peninsula Recreation Service Area, 1 mill

· Kenai Peninsula Road Service Area, 1.4 mills

· KPB for Post Secondary Education, 0.10 mill

· Seward-Bear Creek Flood Service Area, 0.50 mill

· Nikiski Senior Service Area, 0.20 mill

· Central Kenai Peninsula Hospital Service Area, 1.0 mill

· South Kenai Peninsula Hospital Service Area; 1.75 mills