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Tax on oil tankers sunk

Borough finds enough holes in proposal to pull plug

Posted: Thursday, December 08, 2005

A proposal to increase revenue by changing the way the Kenai Peninsula Borough taxes visiting oil tankers fell in defeat Tuesday night, much to the pleasure of Anchorage oil executives who testified against the measure.

The borough assembly voted down the ad valorem tax measure, tightened rules for disabled veterans and senior citizens applying for a property tax exemption and was taken to task by Alliance of Concerned Taxpayers members for allegedly raiding the borough’s land trust fund of $1.4 million to make up for revenues that will be lost by a rollback of the borough sales tax.

A government affairs executive for Tesoro told the assembly a proposed change from a flat tax on ships more than 100 feet long to a tax based on the actual value of the ships would “penalize Tesoro,” and jeopardize the company’s safety and environmental protection efforts.

“The vessel tax impacts us in an area where we already are at an economic disadvantage,” said Kip Knudson.

“We think it’s an unfair tax specifically directed at Tesoro,” he said.

Currently water craft are taxed at an annual flat rate, determined by the length of the vessel, up to 100 feet. The maximum tax is $1,000.

Under the proposal, vessels longer than 100 feet would be taxed based on the vessels’ true value. In the case of Tesoro’s tankers, the amount could be as high as $600,000.

Alaska Oil and Gas Association Executive Director Judith Brady said her organization objects because the measure “proposes to tax barges and ships of the oil industry almost exclusively.”

Brady said the companies the borough is proposing to tax to pay for access to roads and health services in the borough by workers on the ships, are companies that already are paying taxes for those services.

“It’s double taxation,” Brady said.

Soldotna resident Bill Keller said his property taxes have doubled each of the last three years, and he thinks the oil companies “should start paying more.”

Testifying against the proposed tax, Ninilchik resident Ruby Kime said, “You cannot tax us into prosperity.

“You have to cut spending.

“You tax these guys and they’re going to go away. You’ll chase the jobs away,” Kime said.

Borough assembly member Pete Sprague said the ad valorem tax method mirrors a city of Valdez tax that the Alaska Superior Court has ruled is legal.

Assembly member Margaret Gilman pointed out that the proposed tax on Tesoro would be “a 600 percent increase.”

“I see this as losing jobs for this borough,” Gilman said.

Assembly member Gary Superman said Tesoro’s property tax assessment on its North Kenai refinery “went up 30 percent last year.”

“They’re paying their fair share,” he said.

Sprague said in authoring the proposal, he had no intention of targeting one industry or one company.

The measure was defeated 8 votes to 1.

The assembly enacted an ordinance requiring late property tax exemption applications from seniors and disabled veterans to be filed during the tax year for which the exemption is sought.

Previously seniors and disabled veterans were given three years to file late applications.

Disabled veterans are required to provide a letter from the Veterans Administration stating they are at least 50 percent disabled.

Retired Army Sgt. 1st Class Keller told the assembly it often takes more than three years for the VA to make a determination regarding disability.

When asked why so long, Keller removed his artificial leg, held it over his head and said, “Sometimes it’s harder for some to see that I’m disabled.”

Borough Assessor Shane Horan told the assembly if a veteran has appealed a VA decision and the appeal is on file with the borough, his office will wait for a letter from the VA.

The assembly scheduled a public hearing for Jan. 3 on Ordinance 2005-51, repealing portions of revenue enhancement Ordinance 2005-09 and calling for a referendum vote on the remainder of that ordinance.

Ordinance 2005-09, enacted on June 7, increased the sales tax rate from 2 percent to 3 percent, provided guidelines for using the borough land trust funds and required sales taxes on recreational services on a per-seat, per-day basis.

On Oct. 4, Kenai Peninsula voters elected to roll back the 1-percent increase to the sales tax and impose a restriction requiring that any future increases gain the approval of 60 percent of the electorate.

The push to overturn the sales tax increase was organized by the Alliance of Concerned Taxpayers, whose grass-roots efforts led to the successful initiative petition that put the repeal proposition on the fall ballot.

The targeted tax increase, however, was only one part of Ordinance 2005-09. The ordinance also included other measures to increase revenues. ACT members filed a referendum petition to repeal them too.

In other business, the assembly:

· Voted to support keeping the Homer Farm Services Agency office open;

· Voted to support the Sterling Highway reconstruction from Mile 157 to Mile 169 from Anchor Point to Baycrest Hill;

· Enacted Ordinance 2005-19-32, accepting a U.S. Department of Homeland Security grant to purchase communications equipment for the Kachemak Emergency Service Area;

· Enacted Ordinance 2005-19-33, relocating Kasilof River Road with funding from a Homeland Security grant;

· Voted to support a grant application for improving Jacobs Ladder Drive north of Captain Cook Recreation Area, providing access to land in the Moose Point and Gray Cliff subdivisions;

· Voted to support reopening the 1991 civil settlement from the Exxon Valdez oil spill claiming $100 million for mitigation projects; and

· Set a public hearing for Jan. 3 on a proposed conveyance of 10 acres of land on Redoubt Avenue to the city of Soldotna for a city cemetery.



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