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Anchorage assessors work to correct records on property tax exemptions

  • Author: Devin Kelly
  • Updated: February 12, 2017
  • Published February 12, 2017

A new report from the Anchorage assessor's office shows the city significantly understated the value of property tax exemptions for Anchorage buildings and land in years past, a gap in record-keeping that has taken on more political urgency with the state and local budget crunch.

Nonprofits, government agencies, churches and other organizations that don't pay property taxes would have gotten a total tax bill of at least $138 million, according to the assessor data. That money is shifted to other property taxpayers, who must pay slightly higher taxes to cover for the exempt real estate.

City law grants about a tenth of the exemptions. Most of the rest are required by state law.

Some officials say the tax-burden shift is unfair and are reviving discussion about it. The $138 million is nearly twice the amount estimated in a 2014 report issued by the Budget Advisory Commission, which also relied on city data.

At the time, city assessor Bryant Robbins told commissioners the data was incomplete and that his office was working to update the tax rolls for exempt properties.

The actual number of tax-exempt properties in Anchorage has grown very little over the past three years. But Robbins and his staff found that in the city's appraisal database, some tax-exempt property wasn't showing up at all, and others showed no value.

Robbins said in an interview that he and his predecessors had focused far more energy over the years to keeping track of taxable properties than for assessing fully exempt real estate.

But, he noted, there's been increasing interest in the exemptions among policymakers as state and local governments deal with tightened budgets.

The city Budget Advisory Commission — an 11-member public commission that advises the city administration, Assembly and Anchorage School District on budget issues — said in its 2014 report that property owners were unfairly subsidizing tens of millions of dollars worth of property taxes that would have been paid by exempt organizations.

The report recommended ending some property tax exemptions and also changing state and local law to make it easier to collect payments in lieu of taxes from exempt entities. There were also calls to clarify state and local law on the definition of a "nonprofit" for tax purposes.

The commission also pointed out that state-required exemptions, including tax breaks for senior citizens, were "unfunded mandates" that removed millions of dollars from city tax rolls without compensation from the state.

Some of the changes, such as tax breaks for churches or Native corporations, could be difficult and controversial to remove, particularly at the state level. But Mayor Ethan Berkowitz and the Anchorage Assembly are pressing some of the issues to the state Legislature this year.

In the city's list of requests to the Legislature, there was a plea to "localize property tax exemptions."

"With more and more financial responsibility being shifted from the state of Alaska onto local governments, consideration should be given to allow property taxation decisions to be made within the municipalities that are being affected by the cost shift," the Berkowitz administration wrote in the packet to all 60 legislators.

The city is also asking lawmakers to make optional a 2 percent state-mandated tax break on property with new sprinklers. The city already requires sprinklers in new buildings.

Most recently, the city's Budget Advisory Commission has proposed that the state Legislature use money from the Permanent Fund to subsidize the tax exemptions, though commission members acknowledge that isn't likely. Commission members say the current system isn't equitable.

"What we would like to see is what we can do to review and change some of these exemptions to lessen the burden to the taxpayers," said Al Tamagni Sr., a member of the Budget Advisory Commission.  

The 2014 report relied on data from the city appraiser's office. At the time, Robbins warned commissioners that the records were incomplete and the amount listed for the exemptions wasn't correct.

After the report came out, Robbins, his staff and members of the city Information Technology department embarked on an effort to clean up the records.

The team used a combination of aerial photography and other kinds of imagery to profile buildings and estimate their value. Robbins said the approach avoided the cost of sending out staff members with tape measurers.

Facing the new policy questions, property tax exemption records are becoming a higher priority, Robbins said. This week, the city posted a job notice for a full-time employee to focus on records and tax exemption administration.

As well as a potential future source of revenue for the city, accurate records could have implications elsewhere. If a disaster struck Anchorage and caused widespread damage, the city would want to know the value of the properties for a federal disaster declaration, Robbins said.

"If we had to report numbers to the feds or something like that … it's still not perfect, but it's better than it was," Robbins said.

Tamagni, of the Budget Advisory Commission, said he expects to discuss the new numbers and possible changes to tax exemptions further with other commissioners in the coming months.