Proposition 1: Property tax exemption changes up for vote

Homeowners could receive $50K exemption, businesses to make up the difference.

Anchorage Daily NewsAugust 21, 2012 

Ballot Measure 1 in the Aug. 28 primary election could lead to an increase or decrease in your local property taxes. It depends on what you own and where you live.

The initiative would make it legal for local governments to exempt the first $50,000 worth of a homeowner's property from taxes. Under current state law, local governments, with voter approval, can choose to exempt up to $20,000 of the value of owner- occupied housing from property taxes.

Some Fairbanks civic leaders pushed to get the initiative on the ballot to raise the limit to $50,000. Former Fairbanks North Star Borough Mayor Jim Whitaker, one of the backers, said he wanted to reduce property taxes for homeowners, even if businesses would therefore need to pay a bigger share. And they would, unless the local government cut spending.

But Anchorage Mayor Dan Sullivan and city assessor Marty McGee are against the ballot initiative. McGee says in Anchorage, increasing the exemption to $50,000 would benefit owners of some homes at the expense of renters, owners of the least expensive housing, and businesses. Tax rates would rise, he said.

"When you get into the details, it really doesn't pencil," Sullivan said.

While the property tax initiative could have a significant effect on how local governments operate, and on who pays more taxes, there's no organized campaign for or against it. A state election pamphlet mailed to voters features pro and con arguments, with Fairbanks borough assemblywoman Nadine Winters and Whitaker on the pro side, and McGee opposed.

Backers of the $50,000 exemption limit tried for years to get the Legislature to up the allowable exemption, Whitaker said.

"Then it was clear it wasn't going anywhere."

Whitaker, Winters and former borough assemblywoman Eileen Cummings launched a statewide initiative campaign to put it on the state ballot.

If the borough's overall tax collections stayed the same, a $50,000 homeowner exemption would mean commercial enterprises in Fairbanks like the Flint Hills Resources refinery, Fort Knox Mine and Alyeska Pipeline Service Co. would pay a little more in borough taxes, Whitaker said.

"I think that would be a reasonable outcome for Fairbanks," he said.

The rules in Anchorage are a bit different than Fairbanks.

In the Fairbanks borough, 20 percent of a residential property's value, up to $20,000 may be exempted.

Anchorage allows exemption of 10 percent of the property value, up to $20,000. The benefit to those with lower value homes is fixed by the 10 percent cap, McGee said. A $150,000 house would be eligible for a $15,000 exemption no matter whether the dollar limit is $20,000 or $50,000.

But tax rates for everyone would have to rise to make up for those getting $50,000 exemptions, he said. That would result in a tax increase for the lowest value homes -- those assessed at $237,000 and below. They would pay $1 to $50 more per year, McGee said. Those with homes valued between $237,000 and $1.8 million would get tax reductions ranging from $1 to $350, he said.

Apartment buildings and other commercial real estate wouldn't get the break, and their taxes would go up.

"What people just don't seem to understand is that it sounds good on the surface, but it doesn't apply to renters, the lowest socio-economic group," Sullivan said.

Six local governments including Anchorage and the North Star Borough currently offer breaks for homeowners.

The City of Valdez allows up to 30 percent of the value to be exempt, up to $20,000, meaning even lower-value dwellings would qualify for the full exemption, according to an analysis prepared by Eshleman & Associates for the North Star Borough in May.

The North Slope Borough, Kenai Peninsula Borough and the Bristol Bay Borough allow $20,000 exemptions with no percentage limits.


Reach Rosemary Shinohara at rshinohara@adn.com or 257-4340.

City property taxes

How the tax base is divvied up:

• Personal property business and mobile homes, including mobile homes in courts — 9%.

• Commercial real property, including multi-family over three units — 29%.

• Residential real property — 62%

Total: $28.9 billion.

Taxable real parcels: 96,000.

Parcels that receive the residential exemption: Approximately 47,700.

Eligibility for the exemption: The first 10% of a residential property’s value up to the limit ($20,000) is exempt.

Upping the limit:

• If the properties currently receiving the residential exemption are increased from $20,000 to $50,000, properties assessed at $237,000 and below (before the exemption is applied) will receive a higher tax bill ($1-$50); approximately 15,400 properties or 32%.

• Homes assessed between $237,000 and $1,775.000 will receive a tax reduction ($1-$350); approximately 32,300 properties or 67%.

• Homes above $1,775,000 will receive a higher tax bill; 13 properties.

• Average value: The average value of single family residences in Anchorage in 2012 is $315,000.

Source: Marty McGee, MOA

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