Fair, but needs work

Posted: Friday, October 31, 2008

The way the Kenai Peninsula Borough assesses property can be fair, but needs fixing, members of a task force launched to review how the borough attaches value to buildings and land has concluded.

Launched last spring, the Equitable Assessment Methodology Task Force met for the final time in mid-October, reaching a consensus that the state-mandated "full and true market value" methodology currently in use can produce fair and equitable assessments, but that assessors are partly hamstrung by the fact that the sales prices for many properties are unknown, forcing them to assign values often based on educated guesswork.

To remedy that, the task force recommended asking the Alaska Legislature to amend state law to allow for mandatory disclosure of real property sales prices. Such a system would underpin assessments with facts and likely reduce the numbers of hours devoted to the task, assessing officials have said.

The assembly also put its support behind an Alaska Municipal League resolution supporting mandatory real estate sale disclosure legislation.

Resolution 2008-083, adopted Tuesday night by the Kenai Peninsula Borough Assembly, backed those and other task force recommendations including:

* Seeking supplemental funds for retaining contract services to support developing valuation models with Computer Assisted Mass Appraisal software that would allow the borough to re-evaluate properties on an annual basis;

* Adding educational materials to annual tax bill mailings explaining the borough's assessing and budgeting processes;

* Investigating tax relief measures for the poor, sometimes called "circuit breaker" programs;

The task force examined several other methodologies used elsewhere in the nation for establishing property values, but found problems with each, including inequities arising out of attempting to exclude market value from calculations.

The assembly rejected a move by Assemblyman Gary Superman, of Nikiski, to support another recommendation backing an AML resolution asking state lawmakers to allow municipalities to exempt up to $100,000 of a property's value from taxation. Currently, state law allows municipalities to exempt the first $20,000 of assessed value from taxation.

Superman said the higher exemption was needed to provide property owners with some real relief, and he warned that if the assembly (and the state) did not make that move, Alaska was likely to see a ballot initiative limiting property taxes similar to the problematic Proposition 13 in California.

Others on the assembly, however, said the idea went beyond the scope of the task force's work, and that the hit the borough, and possibly the service areas, would take from exempting as much as $100,000 from taxation would be enormous.

According to the borough, such an exemption level would cost more than $7.7 million.

The value of property on the Kenai Peninsula has seen a large upswing in recent years. With state law governing how assessments are established, the borough has attempted to hold down the size of individual tax bills by lowering the mill rate. It has come down 2 mills in the past three years.

Unfortunately, when the borough lowers its mill rate to ease the burden on homeowners, it loses revenue not only from them, but also from oil and gas properties.

Industry properties are taxed at a rate of 20 mills by state law. Out of that amount comes whatever the borough assessment requires. That means that when the borough lowers its mill rate, money that would have gone directly to the borough, simply goes to the state.

Assembly members said the Legislature should examine that problem and find a way in which the borough could continue to offer tax relief to individuals, but not suffer a loss of revenue from large industrial properties.

In other business, the assembly approved Ordinance 2008-19-26 appropriating $30,000 for purchase of a four-wheel drive vehicle and snowplow for the Anchor Point Fire and Emergency Medical Service Area.

Hal Spence can be reached at hspence@ptialaska.net.

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