To be eligible for the Kenai Peninsula Borough’s unlimited property tax exemption in the future, senior citizens must eligible for an Alaska Permanent Fund dividend and not be absent from the peninsula for more than 120 days in any one year, under a new law adopted by the Kenai Peninsula Borough Assembly on Tuesday.
Certain exceptions permitting absences over a cumulative 120 days, such as for medical care or certain kinds of employment, are included in the new law.
Voting 6-3, the assembly passed a measure supporters said recognizes that the senior tax exemption program created in the 1980s to assist the peninsula’s relatively small pioneer population had grown dramatically in cost over the past two decades as more and more residents reached age 65 and additional qualifiers moved to the peninsula to retire.
Assembly member Grace Merkes, of Sterling, has called for reconsideration, however, so the measure could be back before the body at the Sept. 19 meeting.
Supporters say they see the residency issue as an attempt to differentiate between residents that truly make the peninsula their home, and others who spend much of their time Outside, but claim their borough homes as their primary residences to qualify for the borough’s tax-free property status.
Opponents, including several seniors who testified at a public hearing Tuesday, said the rules could keep some seniors from traveling, even to other parts of Alaska. Funny River resident Byron Bondurant took a different tack, arguing that the borough risked driving away a valuable resource. He said senior volunteers serving on committees in his community were largely responsible for seeing many valuable local projects through to fruition.
“It’s not so much whether they (seniors) can afford to pay the tax or not, but whether you will lose them,” Bondurant said. “I’m convinced that you are going to lose a lot of them if you go ahead with this ordinance.”
A state law passed in the 1980s required municipalities to exempt the first $150,000 of assessed value of a home occupied as a primary residence by a senior over 65, disabled veterans or their surviving spouses who were at least 60 years old. State law also permitted municipalities to extend that tax break to assessed values above $150,000 if done by ordinances approved by voters.
Kenai Peninsula Borough voters approved such an ordinance in 1986, one that created an unlimited tax exemption, relieving qualifying residents of their need to pay any property taxes to the borough or to its service areas. The borough is the only municipal government in the state to extend such an exemption.
For several years, the Alaska Legislature approved bills reimbursing municipal governments for the revenues lost due to the state’s mandated exemption. That stopped in the late 1990s, however, as the Republican-led Legislature opted to end the program as part of a larger spending-reduction effort.
Meanwhile, the population of seniors continued to expand and real property values skyrocketed along with the cost of government services. At the same time, the population growth among working-age taxpayers began to slow. Over time, the senior exemption has increased the burden on those paying taxes.
In the 1980s, when there were far fewer seniors, the tax-exemption program reduced tax revenues to the borough by about $131,000 annually, Mayor John Williams told the assembly. Today, lost revenues are approaching $4.5 million per year as senior populations grow in every part of the borough. There are some 2,700 residents currently eligible for the senior tax-exempt status, who pay nothing to the borough or service areas for road maintenance, fire protection, recreational facilities, hospitals or the bonds to pay for hospital facilities, he said, adding that it is seniors who demand many of those services, and “at an ever increasing rate.”
The ordinance before the assembly Tuesday did not address issues beyond residency. Nevertheless, its provisions covered seven pages, often with cumbersome verbiage. Assembly member Pete Sprague, of Soldotna, who is running as a Democrat for the Alaska House in District 33, opposed the new residency requirements, in part because of the ordinance’s complexity.
“I really subscribe to the concept of keeping it simple,” he said.
The fact the state reneged on its bargain to reimburse, as well as the growth in the number of eligible residents, had hurt borough finances, he said. Still, voters created the exemption.
“The simplest way to resolve this would be to put it back on the ballot,” he said. “We’re just spinning our wheels.”
As adopted Tuesday, the new ordinance requires borough residents be eligible for an Alaska Permanent Fund dividend check in order to qualify for the state’s $150,000 exemption. They would not actually have to apply for a check, however.
To get the borough’s unlimited extension, residents will have to show they spent no more than 120 days absent from their primary residences during the qualifying year.
Exceptions to that rule were tied to exceptions permitted under the state’s Permanent Fund eligibility rules, which allow longer absences for such things as medical care, caring for an ailing family member, serving in Congress, serving as an employee of the state in a field office, serving in the military, and the like.
The 120-day provision could be problematic for the borough assessor’s office, said Assessor Shane Horan. The state tracks eligibility for the fund at 180 days, and that data would be available to aid the borough in determining qualification. But the 120-day rule could cause more verification work for the assessors’ office, Horan said.
The ordinance included a clause sunsetting the measure in 2009.
The measure is Ordinance 2006-21.
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