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Coming this spring: Tax cuts for Anchorage homeowners, but tax hikes for business owners

  • Author: Devin Kelly
  • Updated: April 14, 2018
  • Published April 13, 2018

After rising steadily for years, the property tax bill for the average Anchorage homeowner is set to drop about $270 this spring, based on updated budget estimates from the city.

Owners of commercial and apartment buildings will pay higher taxes, however, a reflection of efforts by the administration of Mayor Ethan Berkowitz to shift the city's tax burden away from homeowners. Property taxes are slated to rise about $190 on a $350,000 commercial building, according to city budget director Lance Wilber.

Tax notices will be mailed later this spring. The Berkowitz administration on Friday released the new projected tax rate as well as a revised spending proposal that includes some additional spending for the remainder of the year.

The added spending included more money for the city's vote-by-mail election, security guards at City Hall and a study, proposed by Assembly Chair Dick Traini, to decide whether Anchorage schools should receive more funding from the state.

The city also usually announces spending surpluses or deficits in April. But largely because of delays tied to the beleaguered rollout of the city's new business software system, called SAP, the city has not yet closed its books for 2017, said Wilber. He said that's expected to happen closer to the start of the summer.

The Assembly is set to approve the updated budget and set the tax rate at its April 24 meeting. Anchorage's tax rate changes from year to year and depends on property values and the size of the city budget.

There have been key changes in recent months to how the city collects taxes. In the past six months, Anchorage adopted a new motor fuel tax, and voters approved a higher tax break for homeowners in the recent April election.

With both initiatives, the Berkowitz administration said it wanted to reduce some of the city's tax burden for homeowners. But the changes effectively raise taxes for other types of taxpayers, like drivers and business owners.

The owner of a $350,000 home who qualifies for the residential property tax exemption is on track to pay about $4,820 in taxes in 2018, compared to about $5,100 in 2017, Wilber said. Homeowners who received the exemption last year do not have to re-apply for the higher exemption this year.

Because of settlement payments and an overall drop in property values, the tax savings aren't quite as much as initially forecast, Wilber said. Property values have declined 1 percent overall this year, according to Wilber.

At $506 million, Berkowitz's revised budget is several million dollars smaller than the budget approved last fall. But that's mainly because of a clerical change related to the payment stream for the salaries and benefits of about 40 city workers, not because the city is spending less, according to budget documents.

The documents show the revised budget calls for about $3.4 million in new spending for the rest of the year.

Here's an overview of where the Berkowitz administration has proposed spending more money in the remainder of 2018:

• Assembly chair Dick Traini proposed a study through the University of Alaska Anchorage Institute of Social and Economic Research to decide if the Anchorage School District should receive additional state funding. ($145,000)

• The city's vote-by-mail election. ($150,000, on top of $300,000 already spent)

• Litigation related to cases brought against the Anchorage Police Department. ($500,000)

• Additional security staff at Anchorage City Hall. ($50,000)

• A new payroll officer and overtime to support the city's beleaguered upgrade to a new business software system known as SAP. (About $218,000 overall)

Assembly members may introduce other requests for cuts or spending before the April 24 meeting.

On the revenue side, the city also reported that ticket sales at Sullivan Arena have declined an additional $40,000, reflecting ongoing financial struggles after the exit of the Alaska Aces hockey team in 2016.

But the new motor fuel tax brought in about $66,000 in its first month, and the city also reported rising revenue from ambulance transport fees, budget documents show.

Correction: An earlier version of this story incorrectly reported that property values have declined 4.4 percent overall this year. Property values have declined 1 percent.

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