Tax break sounds good but would hurt borough in long run

When Kenai Peninsula Borough voters go to the polls Oct. 5, they'll be asked if they want to vote themselves a tax break.

Hard as it may be, they should say no.

Kenai Peninsula Borough Proposition No. 1 asks if residents want to increase the real property tax exemption for qualifying taxpayers from $10,000 to $20,000. There are many reasons the time is not right for such a move, including the loss of approximately $577,250 to the borough's general tax fund. In addition, the move would mean a loss of tax revenue to each of the borough's 14 service areas.

By comparison, the savings to individual taxpayers would be small about $70 per year for most homeowners by some estimates. While every little bit helps taxpayers, the bottom line is that small benefit does not outweigh the harm to the borough's finances.

The most compelling argument, however, against the tax break is the contradictory message it sends. All across the nation municipalities are struggling to meet their financial obligations; Alaska communities are no exception. While the borough's finances are in good shape and the high price of oil keeps Alaskans from making tough money decisions, those aren't good enough reasons to offer a tax break.

As assembly member Ron Long of Seward noted when the assembly agreed in August to put the measure on the ballot: The borough does not have a fiscal plan. The mill rate has not been increased this year. Issues over a sales tax have not been resolved, and the sales tax cap has not been raised.

In other words, the time is not right to be decreasing the borough's revenue.

Just this week, the National League of Cities released a survey from finance officers around the country that shows the growing fiscal challenges of communities everywhere:

More than three in five cities were less able to meet their fiscal obligations this year than last year.

This year, city revenues were expected to grow by 2.6 percent while expenditures increased by 3.6 percent. "This gap means that cities will have to make additional cuts in services or raise taxes and fees to balance their budgets this year," said Don Borut, the executive director of the League of Cities.

2004 marks the third straight year that municipal revenues have declined. "As a result, 54 percent of cities are reporting that they have increased fees and charges for services, another 25 percent opted for increasing property taxes, and 22 percent increased impact or development fees," the league reported in its survey.

The borough is in an enviable position that it doesn't fit into those categories, but it shouldn't tempt fate.

It also shouldn't tease voters with a tax reduction and later come back with a property tax increase or higher sales taxes or some other plan that will take more money from their pockets. It's just not fair. If increasing the exemption is the way to go, it should be part of a broader fiscal plan, which the borough doesn't currently have.

Every year, for the last several years, the state has provided less and less money to municipalities. Even if the price of oil remains high, it isn't likely the state will start returning some of that money to municipalities, which now are being asked to pick up the slack.

While increasing the exemption would put a little money in some taxpayers' pockets, the loss of revenue to some service areas eventually would hurt their ability to provide the services that residents rely on. The borough's road service area would be hit with an $84,473 loss; the Central Peninsula Hospital Service Area with a $56,632 loss; the South Peninsula Hospital Service Area with a $38,684 loss; and the Nikiski Fire Service Area with a $20,044 loss. The lost revenue would have to come from elsewhere or services would have to be cut, if efficiencies can't be found.

The confusing thing about borough Proposition No. 1 is that voters could say "yes," but the assembly could say "no." The assembly can't adopt the change without a nod from voters, but, once given that nod, it doesn't have to move in that direction. That would be a slippery slope given today's general distrust of government in general.

It's worth noting that the assembly is not of one mind about the proposition. It made it to the ballot only by one vote, with assembly members Paul Fischer, Milli Martin, Grace Merkes, Gary Superman and Pete Sprague voting "yes" and Long, Dan Chay, Betty Glick and Chris Moss voting "no."

While it's appreciated that citizens have a say in the issue, voters would do well to reject the proposition. In the long run, the proposition is penny-wise, but pound-foolish.