Tax cap issue goes to voters

Support for cap hard to find on peninsula

Posted: Tuesday, October 31, 2000

Proposition 4, better known as the tax cap, could rock Alaska's public sector for years to come if voters approve it Nov. 7.

But whether the shake up would be for the better or worse has become a hot debate, with both sides calling the other's positions "baloney."

Opponents have mounted a well-organized, well-financed campaign against the measure, saying the cap would gut services, damage the economy, undermine quality of life and tie the hands of future generations.

Advocates of the cap accuse opponents of "scare tactics" to preserve the status quo at the expense of homeowners.

Uwe Kalenka, the Anchorage restaurateur who launched the initiative and heads the group Tax Cap Yes, said it bothers him that those he calls "special interests" ask how public services would be paid for if property tax revenue drops.

"No one gives a darn about the taxpayers," he said. "No one asks how the taxpayer will pay their tax bills."

Kalenka said his group has not had time to analyze finances on the Kenai Peninsula, but he suspects they are similar to situations in Anchorage he criticizes.

But his movement is attracting flak on the peninsula, where groups are lining up to oppose it. Only one of the seven legislative candidates, Republican Moderate James Price, who live on the peninsula has endorsed it.

One spokesman for Against the Cap, the statewide organization mobilized to defeat the proposition, is Mike Navarre, who former borough mayor and state representative. He rejects the tax cap advocates position that government spending in Alaska is out of control.

"That kind of charge is grossly unfair to the people who serve at the local level," he said.

He criticized the Tax Cap Yes arguments as vague and uninformed.

"I don't think they have made their case," he said.

Here is a summary of the debating points between the factions:

n Property tax levels

Cap advocates say tax burdens on homeowners are excessive, rise quicker than inflation and make it more difficult for families to afford homes.

"The problem is just as bad on the Kenai. Kids need a roof overhead first," Kalenka said.

But his opponents have brought out studies showing that Alaskans have some of the lowest overall taxes in the country.

Alaska is unique and conventional taxes are inappropriate here, Kalenka responded.

Criticisms of Anchorage's property taxes don't apply on the peninsula, cap critics charge.

Navarre said the peninsula has a diversified tax structure that works well. The property taxes include exemptions for senior citizens and homeowners and actually have declined over the years, he said.

n Local control of taxation

Cap critics here say the proposition imposes Anchorage's problems on the rest of the state.

Kalenka said the tax cap proposition had to be statewide because state statutes list rules on property assessments and cap the mill rate at 30.

Navarre countered that the general guidelines are part of state statute, but rates are set by voters or elected officials, a type of local control the cap would short-circuit.

n Assessments

Under the current system, homes are periodically reassessed to determine their fair market value. Taxes may go up without mill rate increases as property values rise.

Kalenka called that "legal theft."

Navarre said assessors follow rigorous rules to assure tax rolls reflect full and true value, and state law penalizes municipalities that tweak the numbers. Peninsula citizens can challenge and change assessments. Property taxes are not increased "willy nilly," he stressed.

The tax cap would limit assessment increases to a maximum of 2 percent per year, regardless of market value fluctuations. Tax assessments would reset to true values only when a property was sold.

n Municipal finances

Cap advocates say municipalities are sitting on piles of money. Putting that money in private hands would boost the economy.

Kalenka said the state has lots of money and most cities have what he described as overpaid employees and slush funds.

"(In Anchorage) we found more money than you can shake a stick at," he said. "If they have excess money, that means they have excess taxation.

"We need to look for the inefficiencies, which are numerous."

Navarre countered that spending every cent a municipality has would be unwise or impossible.

Funds in peninsula borough reserves are invested, generating as much income annually as another 1 mill of property tax would. Without savings, the borough probably would have to raise taxes, he said.

Some accounts are dedicated to specific purposes. For example, federal law mandates the borough pay into a large escrow account for someday closing down sanitary landfills.

"Those kinds of funds cannot be utilized," he said.

Navarre also dismissed the tax cap advocates' claims that enormous savings are possible by merging departments and agencies. They provide no details and grossly inflate the savings claims, he said.

"What they are suggesting is that you can somehow create money out of thin air," he said.

Tax cap spokesperson Jim Crawford repeatedly has suggested merging the state lending institutions: the Alaska Industrial Development and Export Authority, the Alaska Housing Finance Corporation and the Alaska Student Loan Corporation.

At a forum earlier this fall, Sen. John Torgerson, R-Kasilof, said the Legislature looked into such a merger but concluded it would not generate the funds tax cap advocates predict.

Kalenka scoffed at the statement.

"The senator down there doesn't know what he is talking about," he said.

Kalenka predicted the proposition will pass on a groundswell of popular support. He likened it to last year's vote against using part of the permanent fund.

But others disagree.

Bill Parrish, former chair of the Save the Dividend group that helped win last year's proposition vote, said tax cap proponents invited him to join their group and he declined.

"I don't agree with it," he said.

"I think the tax cap is going to have an astronomically negative impact on the economy. I think it's ludicrous."

Parrish worries that the tax cap, if passed, could endanger the permanent fund dividend by increasing pressure for lawmakers to tap the fund.

He said he has discussed the cap with others and found few peninsula people who support it. He predicted it will fail.

"How do we want to live?" he said. "That's the bottom line."

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