Local governments eye bond sales should tax cap pass

Posted: Friday, October 13, 2000

ANCHORAGE (AP) -- Local governments statewide are planning to sell millions of dollars in bonds for public construction projects should Alaska voters approve the property tax initiative next month.

Their goal would be to beat the Jan. 1 deadline of Ballot Measure No. 4, at which time voter-approved bonds would fall within a 1 percent tax cap. Officials say the brief period from Election Day to the New Year may be the last time in years that the bond market can be tapped for funds should the tax cap be approved.

In addition to capping property taxes at 10 mills and restricting how fast property assessments can rise, the initiative would change state law on bonds. While voters can now decide to increase their taxes over the current 30-mill limit by approving bonds, the initiative removes that option and includes bonds sold after Jan. 1 within the 10-mill cap.

Officials in Anchorage and other communities that rely on property tax say the demands of government operations and services would soak up all 10 mills and leave nothing to repay bonds. If the initiative is approved, local governments would no longer be able to count bond money as a separate pool of funds for fixing roads, schools and other infrastructure needs, they said.

''It's virtually the end of the major source of outside funds for Alaska capital improvements,'' Eric Wohlforth, an Anchorage-based bond attorney whose firm has handled public financing for decades, told the Anchorage Daily News.

Eddie Burke, spokesman for Tax Cap Yes, said the initiative won't kill capital projects. It will instead remove some of the tax burden from property owners and force local governments to find other funding sources, including sales taxes.

''The tax cap campaign is not about reducing alternative revenues,'' he said. ''It's about preserving the right and ability to maintain your home. It does nothing to preclude communities from adopting new tax flow.''

Jim Crawford, chairman of Tax Cap Yes, has said that bonds could be issued against other revenue sources such as sales taxes.

But Wohlforth called that proposal ''disingenuous'' because only the unlimited power to tax property to repay bonds guarantees that a municipality's ''full faith and credit'' is behind them. Bonds backed by other forms of taxes, or that are limited by a tax cap, ''definitely command higher rates -- they are more costly, if they they're salable at all.''

Kate Giard, chief fiscal officer for the Municipality of Anchorage, doesn't see a way to issue bonds if the tax cap passes. And without bonds, she said, ''there will be very tight future capital planning, almost no capital projects in the future.''

To ensure that the School District gets voter-approved projects funded, Anchorage will sell $138 million worth of bonds in November and December if the initiative passes, she said.

In Juneau, City Manager Dave Palmer said passing the tax cap would kill plans for a new high school.

Wohlforth said it's too early to tell whether a flood of Alaska bonds in the last two months of the year would affect rates, and ultimately their cost to taxpayers.

''It depends on the market,'' he said. ''At times there would be no problem, but if the market is soft, too much supply would drive up the price.''

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