Politics

Alaska tax board nominee says Outside residency, not tax trouble, caused withdrawal

Gov. Sean Parnell's controversial nominee to a critical tax assessment review board said he withdrew his nomination because he was concerned about the "political hot potato" his appointment had become, and not because of news that his consulting company had lost its business license in California after not paying corporate income taxes.

In fact, said Dennis Mandell, California is in error, and he's been trying to fix that error to no avail. He doesn't owe the state taxes, and he shut down his business there in 2007.

On Thursday, the Alaska Legislature was set to begin considering the appointment of Mandell, of Salinas, Calif., to the Strategic Assessment Review Board. The board establishes the value of the trans-Alaska pipeline and related infrastructure, which is critical for municipalities and states that collect property tax revenues.

But Wednesday evening, Mandell had already pulled his name from consideration. He said that's because he'd met with lawmakers who told him his appointment seemed unlikely because of his out-of-state residency.

Parnell has been blasted for the appointment of Mandell, a former employee of the oil company Arco, after he fired Marty McGee, an assessor who had argued successfully for a larger valuation of the pipeline.

Critics have said Parnell is attempting to overhaul the board to reduce the pipeline's value. That would reduce the property taxes paid by oil companies to the municipalities and the state.

In a press conference Thursday, Parnell in fact argued that the value of the pipeline should be falling, not rising, because less oil is flowing through it and because proven oil reserves have dropped in recent years and not been replaced.

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He said the review board is broken, and that he's now considering firing the entire board.

Parnell's argument goes against what the Alaska Supreme Court ruled recently, that the value of the pipeline is contained in the ability "to monetize the Alaska North Slope's $350 billion worth of oil reserves."

The assessment is based on complicated factors, including replacement cost of the pipeline, depreciation and the size of North Slope reserves. The valuation is based on the theory that the reserves are extensive enough that the oil companies would replace the pipeline if they had to and that the replacement cost plays into the tax value.

Parnell has also been heavily criticized for selecting an out-of-state resident.

Mandell's announcement to the governor's office that he'd withdraw came before the distribution of the Legislative Research Services report on Thursday morning.

The research division, at the request of Rep. Andy Josephson, D-Anchorage, looked into the licensing status of Mako Strategies. It reported that the California Franchise Tax Board had suspended Mako's license on Sept. 1, 2009, for failing to pay taxes.

The California board was not permitted to release further information, the research division said.

Mandell said the state of California erred in trying to collect taxes from Mako Strategies, and that he's been trying to fix the error for the last year -- as soon as he learned about the mistake, said Mandell.

Mandell, a California resident, ran two businesses called Mako Strategies in 2006, he said. One was based in California and one in Nevada.

The one in California shut its doors in 2007, after its work in that state was done, he said.

The other continues to operate in Reno, Nev., but an analyst works for him in Carmel, Calif., and collects mail at a P.O. box that's listed on the makostrategies.com website.

The Nevada corporation is licensed to do business, Mandell said, something the Legislative Research division also noted.

For some reason, he said, the state of California has assumed that the Nevada firm is actually a California firm, and that it should pay taxes in California, he said.

Sen. Kevin Meyer, R-Anchorage, co-chair of the Senate Finance Committee, said on Thursday afternoon that he hadn't heard about the tax questions raised by the research division, which Democrats had highlighted in a press release issued Thursday morning.

Meyer said he'd met with Mandell on Wednesday and told him his appointment was unlikely. Other lawmakers also told Mandell that, Meyer said.

Mandell, a former oil industry executive, was technically qualified for the post, Meyer said.

But he said he didn't support Mandell's appointment because Mandell is from California and not an Alaskan.

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Meyer said he believes "it's legal for Parnell, by the constitution, to appoint someone from out of state. But it's not common practice or something that we as a legislature would support."

Contact Alex DeMarban at alex(at)alaskadispatch.com.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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