Measure would limit borough’s ability to up taxes

Posted: Friday, May 26, 2006

According to the Alliance of Concerned Taxpayers, a tax targeting one segment of the population — like seniors or veterans — is a slippery slope, and one the group doesn’t want the borough to go down.

To that end the group has filed an initiative petition application proposing an ordinance for the Oct. 3 ballot that would limit the Kenai Peninsula Borough Assembly’s power to raise taxes.

“We are trying to cap the revenue stream,” said Vicki Pate, ACT’s vice president and the prime sponsor of the petition, “so that there is no incentive to go after the seniors for their few thousand dollars, or the vets for theirs, or the guides or the long-haul truckers.”

Pate said it’s sometimes easier for people to accept a tax increase on one small segment of the population when that tax doesn’t apply to them.

“The borough is trying to divide and conquer,” she said.

If approved by voters, the measure would link the borough’s taxing ability to the Anchorage consumer price index and changes in the borough’s population.

Specifically, ACT proposes that increases in the total tax levied during a fiscal year not exceed that of the preceding year by more than a certain percentage, which would be determined by adding the percentage increase in the Federal Urban Consumer Price Index for Anchorage from the preceding fiscal year to the five-year average percentage growth or decline in borough population figures.

According to Pate, the resulting percentage would be multiplied against the total of all revenue from all borough taxes, and that would set the ceiling for the next year’s increase, should an increase result from the calculation.

So, if the borough collected, say, $25 million in tax revenues in one year, a 3 percent Anchorage CPI and a .5-percent five-year average population growth (3.5 percent total) would limit the allowable increase in the total tax revenue the following year to $875,000.

It would be up to the borough assembly to decide how that increase would be accomplished, Pate said.

The proposed law provided four cases where the calculated limitation would not apply, such as taxes on new construction or property improvements that occurred during the current fiscal year; taxes required to fund additional voter-approved services; special taxes authorized by voters; taxes required to fund the cost of court judgments against the borough or to pay principal or interest on bonds, including revenue bonds.

As of Monday, Mayor John Williams was not contemplating a request for a mill rate increase in fiscal year 2007, though he had considered one earlier this spring. The current borough tax levy is 6.5 mills. The assembly is expected to adopt the fiscal year 2007 budget June 6. Mill levies for the borough and its service areas must be set by June 16. Meanwhile, borough voters will decide this fall about the future of increases to the sales tax rate.

This latest move by the grassroots organization follows a similar initiative filed by ACT in April that was rejected by Borough Clerk Sherry Biggs on May 9. State law dictates that the power to levy taxes be exercised by ordinance, and ACT’s initiative would have required a vote of the people if the borough wanted to enact a mill rate increase higher than the amount called for by ACT’s suggested population-consumer price index formula.

On Tuesday, Biggs said that the ordinance language ACT proposed (in the old and new versions) does not spell out clearly just how the population-consumer price index percentage factor would be applied in figuring the following year’s tax levy.

“That’s still an issue,” she said.

The borough legal department is analyzing the latest ACT request and is expected to write an opinion today, the day that, by law, the borough clerk must render a decision to certify or reject the application.

In a May 15 press release, ACT President Mike McBride, of Nikiski, said the organization had expected its “ACT-CAP” initiative petition application to be rejected by the clerk’s office. ACT has begun raising funds in order to challenge that decision in the courts, he said.

“Our legal advisors have assured us the borough’s stated reasons for rejecting the ACT-CAP initiative would likely be overturned in court,” McBride said.

In that same press release, Pate said the borough has nothing to fear from voter approval of tax increases.

“It is the goal of ACT to promote sustainable fiscal policy by requiring voter approval for large tax increases or major capital spending,” she said. “I am confident that if tax increases or capital projects are justified, voters will support them.”

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