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Parnell appoints former oil executive from California to state oil tax board

Richard Mauer
AL GRILLO

Gov. Sean Parnell has appointed a Californian who worked for 18 years in the oil industry to the state board that sets the tax value for oil-industry property despite a law that says board and commission appointees must be registered Alaska voters.

Dennis Mandell, 59, of Salinas, Calif., began an indefinite term on the State Assessment Review Board March 1, taking the place of former Anchorage city assessor Marty McGee, who was kicked off the board last month by Parnell. Members of that board are paid only expenses and serve at the pleasure of the governor.

Mandell is the second former oil industry executive appointed to the board since January by Parnell. The other, Bernie Washington, worked for Mandell at Arco, though he still lives in Anchorage. Their appointments are subject to legislative confirmation.

Under McGee's tenure, including his period as chairman, the review board set increasingly high values for the trans-Alaska pipeline system, resulting in hundreds of millions of dollars in additional property taxes to the state and local governments, including Anchorage, from the oil producers that own the line, its offices and equipment.

Mandell, 59, said in a telephone interview that he last lived in Alaska in 1995, when he worked for Arco appraising business decisions and analyzing conflicts with government over taxes and other charges. At the time, Arco was the state's number two oil producer. Its Alaska assets were mainly taken over by ConocoPhillips in 2000.

The five-member board reviews appeals from local governments and oil companies over the valuation of crude oil transport property assessed by the Alaska Department of Revenue. Parnell's appointment of a Californian to that board contradicts an Alaska statute, 39.05.100, which says, "a person appointed to a board or commission of the state government shall be and have been before the last general election ... a registered voter in the state."

Mandell said he is registered to vote in California, where he runs a one-person consulting firm, Mako Strategies of Carmel, a firm with a post office box and no telephone number.

"I have no property, no economic interests in Alaska," he said. He visits the state two or three times a year, he said, mainly because his "partner" is from Anchorage and her parents live here.

A spokeswoman for Parnell, Sharon Leighow, gave three different reasons, in three separate email messages Friday, why the law requiring Alaska residence didn't apply to Mandell's appointment.

First she said that the Alaska Constitution only required an appointee to be a U.S. citizen.

"Oh my," said Anchorage attorney Craig Richards when shown a copy of Leighow's email. Richards, who has appeared before the board representing Valdez, said that laws often clarify or expand on a provision of the Constitution.

Leighow then emailed a copy of a 1973 Alaska House Finance Committee report on the bill that created the board. The report said it was the "feeling" of the committee that a governor should be able to appoint experts on property assessment from wherever they could be found.

A reporter suggested in a reply to Leighow that when legislative intent contradicts the plain language of a law, the law prevails.

Leighow said a Department of Law attorney wasn't available, but she emailed another explanation:

"SARB is a quasi-judicial/regulatory board. For those types of boards, the constitution simply requires members to be U.S. citizens. We try to find the most qualified individuals to serve. In most cases, qualified applicants can be found here in Alaska. On certain highly technical boards, we have considered individuals who reside outside of Alaska," Leighow said.

She didn't respond when asked why McGee, an Anchorage resident who served on the board for about six years, wasn't as qualified as Mandell.

Taxes on the oil industry have been an overriding concern of the Parnell administration for the past four years. The governor successfully pushed for a major reduction in oil production taxes last year that is expected to save the industry billions of dollars over the next decade.

Though property taxes don't take as big a bite as royalties and production taxes, they're substantial and are a major source of revenue for communities along the pipeline -- the North Slope Borough, the Fairbanks North Star Borough and Valdez in particular. Anchorage also gets a piece, mainly for offices and the pipeline's operations center.

In 2013, the Alaska Department of Revenue said the pipeline system was worth $7.16 billion, which would have resulted in a total property tax of $143 million to be split between the state and the communities.

Valdez, Fairbanks and the North Slope Borough challenged that value, and the board, under McGee, said the state's valuation was too low. The proper number was $11.9 billion, the board said -- making the total tax $237.4 million. Of that, Anchorage's share was just over $4 million.

This week, after McGee was fired and the two oil industry veterans appointed, the state came up with a value for the pipeline of $5.6 billion -- less than half of what it was just the year before, resulting a tax savings for industry of about $115 million. Anchorage attorney Bill Walker, an independent candidate for governor and a law partner of Richards, said the communities will almost certainly appeal to the board.

The board currently has only four members. Leighow said a search is underway for another candidate.

McGee said members typically have property tax assessment experience from working as local assessors, as he did, or on local tax equalization boards, the appeals boards for local property taxes. The State Assessment Review Board functions like an equalization board for crude oil properties.

Neither Mandell nor the other appointee, Washington, has that kind of experience, though both said they worked on property tax matters in industry.

Washington, 63, is now the chief financial officer at Alaska Public Media, the parent nonprofit for public radio station KSKA, public television station KAKM and the Alaska Public Radio Network. Washington said he sought the position on the board to expand on his public service work since he left the oil industry, and because he would appreciate the challenge of conducting complex business analyses.

Mandell said he's already done property tax work in Anchorage, hired by Mayor Dan Sullivan to resolve the property tax dispute with Enstar Natural Gas that resulted in McGee leaving his job as municipal assessor.

Mandell said his goal in the Enstar case was to negotiate a settlement that all sides could live with. McGee said the city settled too low and that was one of the reasons he quit.

"He didn't have a method -- he was just trying to seek common ground between the two parties of the appeal," McGee said.

As for the state board's work, its methodology has been endorsed in court decisions in Superior Court and just recently by the Alaska Supreme Court, McGee said.

But Mandell said he's read the Supreme Court decision and believes it has holes.

"I think the court left a lot of things that need to be answered," he said.

McGee said he thought he was replaced by Parnell to get a more friendly board to the oil industry, but both Mandell and Washington said they were independent.

"I'm looking for the best methodology," Mandell said.

Reach Richard Mauer at rmauer@adn.com or 257-4345.

 


By RICHARD MAUER
rmauer@adn.com