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Alaska Supreme Court to decide Mat-Su farmer's road tax crusade

  • Author: Zaz Hollander
  • Updated: September 28, 2016
  • Published November 27, 2014

PALMER -- Ray DeVilbiss, a Lazy Mountain hay farmer, brought his fight to stop paying local road taxes to the Alaska Supreme Court this week.

DeVilbiss pays about $1,500 a year in road taxes for 110 acres of land annexed into the local road service area in 1981 -- long after his family moved to a spectacular grassy bench on the property overlooking the Matanuska River in the 1950s.

His brother, Larry, a former state agriculture chief, now serves as the mayor of the Matanuska-Susitna Borough.

But as far as Ray DeVilbiss is concerned, at least on this particular issue, bureaucrats like his brother are part of the problem.

Anyway, he says, he started his road tax crusade before his brother became mayor. "He's no asset in this."

The gripe

The DeVilbiss property sits inside the roughly 13-square-mile Lazy Mountain Road Service Area, where residents pay to keep roads plowed and generally passable.

But his driveway connects to a road that's maintained by the state -- North Wolverine Road -- and not the borough.

Because his driveway doesn't directly access a borough road, DeVilbiss argues that a 2007 state law allows the borough to exclude him from the road area and from paying money into it.

DeVilbiss says he doesn't even drive on a borough-maintained road to get out of the neighborhood.

He argues that even if he did, it wouldn't matter: Local roads don't provide a benefit for the general public but instead represent a "special service" to a select group of homes or a subdivision.

"The issue isn't that people drive on 'em. The issue is that properties are receiving a special benefit," DeVilbiss said last week during a driving tour of the area. "If the obligation is to the drivers, then put a toll on the roads."

The borough disagrees.

A first

The Assembly in 2011 denied a bid by DeVilbiss and several other Lazy Mountain landowners with properties on state-maintained roads to be excluded from the road service area.

DeVilbiss was the only "non-accessing" landowner to take the borough to court. He lost his Superior Court bid for relief last year.

During proceedings on the civil lawsuit, the borough argued successfully that the 2007 law allows the Assembly to exempt a property from the road service tax rolls but it's not "a mandate for borough action," attorney Nicholas Spiropoulos wrote in a motion.

Palmer Superior Court Judge Eric Smith in a September 2013 order ruled the borough wasn't required by that state law to exempt the DeVilbiss property and the tax was lawful.

DeVilbiss filed an appeal this year that's now before the state Supreme Court.

Justices heard oral arguments in the case Monday. The court apparently has never before ruled on a case involving "non-accessing" property tax payers.

But the fact that the highest court in the state is hearing the case is not necessarily an indication of its legal merit.

The court had no discretion in accepting the DeVilbiss appeal, according to the appellate courts clerk. Under Alaska law, justices hear all appeals of lower court decisions on civil lawsuits. The court is expected to issue an opinion within a year, if not sooner. DeVilbiss has the right to appeal the court's final judgment.

Spiropoulos said the borough expects to prevail because U.S. Supreme Court and state-level decisions favor the argument that bodies like the Assembly have the authority to make sure residents pay equally into a taxing area with a public purpose.

"We're waiting for the court to rule and obviously we're going to respect whatever the court says," he said.

Pricey precedent

If the decision goes in DeVilbiss' favor, however, the precedent could lead to lower tax revenues for the Mat-Su and other municipalities that operate road service or any local service areas.

Borough and state officials say they haven't calculated the potential effect in the Mat-Su or elsewhere in Alaska.

But the borough did look into the consequences of removing non-accessing properties from the Lazy Mountain Road Service Area, or RSA.

A 2011 analysis showed that 39 percent of the RSA's tax revenue comes from property owners who have access off borough-maintained roads. That amounts to $86,700 in tax payments.

If all those parcels were taken off tax rolls, the remaining property owners would see a tax increase from the current 2.51 "mill" or millage rate -- $2.51 for every $1,000 of assessed property value -- to 3.81 mills, according to the borough finance director.

"Whatever you do to shrink that tax base is going to raise the millage rate for everybody else," said state assessor Ron Brown.

Law behind the crusade

DeVilbiss says his bid is legally justified under a 2007 law sponsored by then-Rep. John Coghill, the Fairbanks Republican who's now a state senator.

Generally, service areas are formed when residents vote to pay taxes for a service like roads or firefighting.

But Coghill in 2007 sponsored a bill to give municipalities the authority to add property owners to a road service area if its roads provide their only access, without first holding a local vote.

A paragraph in the law also allows for the opposite: An assembly can exclude from a service area a parcel that doesn't rely on locally maintained roads for its only access.

A Fairbanks North Star Borough attorney argued that section only applies if the owner of the parcel "no longer needs or uses the roads within the road service area for access to their property," according to committee meeting minutes from a 2007 hearing.

Flip side

Driving the roads en route to his farm last week, DeVilbiss pointed out examples of what he calls the borough's "arbitrary abuse of power."

A local doctor has property half in, half outside the road service area, borough maps show. His driveway connects to a state-maintained road. But he pays borough road taxes on the whole parcel.

But for DeVilbiss, there's another problem that's the reverse of his situation and just as frustrating.

He says the borough isn't requiring road service tax payments from people who live just outside the RSA boundary but rely on borough-maintained roads to get in and out.

He points to several examples, including a couple of public figures with property adjacent to the RSA who don't pay taxes into it despite using local roads.

DeVilbiss estimates there's "at least $2 million" in property that falls outside the road service area and isn't being taxed.

"The issue is right and wrong, justice and equality," he said. "This is a serious abuse of equality."

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