Tax break nixed

Exemption on land cleared of beetle kill won't be extended

Posted: Thursday, September 06, 2007

The Kenai Peninsula Borough Assembly voted Tuesday to allow a five-year-old property tax exemption related to spruce bark beetle infestation to terminate at the end of this year.

Ordinance 2007-30, which sought a three-year extension of the borough's tax exemption for increases in property values resulting from the removal of beetle-infested trees, failed to win assembly approval.

After the Alaska Legislature authorized tax exemptions for lands infested by insects in recognition of the extensive and costly infestation of the spruce bark beetle, the borough enacted a local exemption in 2002, making it retroactive to the 2001 assessment year, according to Shane Horan, director of assessing.

The idea was to encourage property owners to harvest infected trees quickly in order to produce healthy forest growth and reduce fire damage, he said.

Extending the exemption would be expected to affect the borough's valuation of lands held by Native corporations under the Alaska Native Claims Settlement Act. Those ANCSA lands already are entirely exempt from taxes except when they are developed, leased or sold to third parties. In defining "developed," Congress stipulated that land on which timber resources were being harvested "shall be considered developed only during the period of such harvest and only to the extent that such land is integrally related to the timber harvesting operation."

Horan noted that the ordinance, if enacted, would continue to provide the tax exemption on harvested ANCSA lands so long as the timber was on infested land or on land at risk of infestation.

Assemblyman Gary Knopp opposed the extension, saying there had been little if any private interest in the tax exemption extension, and that even with the Native corporations and associations, the ordinance's incentive had not worked as expected during the past three years. He said that testimony during assembly committee meetings had shown no current harvesting activity, nor was any planned.

Knopp said none of the six participating Native organizations in the Cook Inlet area had contacted the borough seeking an extension, but rather it had been the borough contacting corporate officials. Only Cook Inlet Region Inc. (CIRI) responded, Knopp said.

"I wonder about the need for this," he said. "I'm also concerned that they can harvest timber, sell the timber rights, earn revenue off of it, and then be exempt from (taxes on) profit and valuation of property."

Since the 2001 assessment year CIRI and five local Native associations have shared tax exemptions totaling nearly $179,000. However, in 2005 only the Seldovia Native Association harvested any acreage, and none of the organizations has harvested in the past two years.

In a letter to Horan, Cindi Bettin, land administrator for CIRI, expressed interest in continuing the exemption, but acknowledged CIRI had no plans for any significant harvests this year.

Assembly members voted against extending the termination date to 2010 by a 4-3 vote. Assemblywoman Margaret Gilman abstained. Her husband is an attorney who represents one of the Native groups. Assemblywoman Deb Germano was absent.

In a break from recent lengthy meetings that have pushed the midnight deadline, Tuesday's confab was rapid and was gaveled to a close before 9 p.m. That is largely because the six ordinances up for public hearings drew no public testimony at all, including the tax exemption measure.

The five others accepted and appropriated state or federal grants to various borough programs and were non-controversial. Approved unanimously were:

* Ordinance 2007-19-05, appropriating a $160,000 state grant to reimburse purchase of a fire engine for the Central Emergency Service Area;

* Ordinance 2007-19-06, appropriating a $15,000 state grant to Kachemak Emergency Service Area for purchase of ATV rescue/Fire Support equipment;

* Ordinance 2007-19-08, appropriating a $50,000 state grant to the Nikiski Fire Service Area for purchase of emergency response equipment;

* Ordinance 2007-19-12 appropriating a $52,750 state grant for the Spruce Bark Beetle Mitigation Program; and

* Ordinance 2007-19-15, a U.S. Department of Homeland Security grant of $54,229, for the Bear Creek Fire Service Area for communications equipment and training.

Hal Spence can be reached at

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