JUNEAU — The Alaska Senate advanced legislation Tuesday that would allow municipal governments to levy taxes on “blighted” buildings and fully exempt property taxes for new development in an effort to address the state’s housing crisis.
For developers, the current property tax abatement allowed in state statute is capped at the minimum amount that local governments are required to contribute to public schools. Senate Bill 77 would allow for all of that tax burden to be exempted, but municipalities would still need to provide the minimum contribution for education from other sources.
The second section of the bill would allow municipal governments to impose property taxes on blighted buildings that are not a person’s primary residence. The tax would be incurred until the building is renovated or remediated.
Both measures would be optional for local governments and would only apply to a small number of municipalities across Alaska that levy property taxes.
Senate Bill 77 was introduced by freshman Sen. Forrest Dunbar, a Democrat and former member of the Anchorage Assembly. He said both measures were intended to address Alaska’s housing crisis, and incentivize new development. Dunbar also raised concerns that old and abandoned buildings can become a public safety problem and magnets for crime.
The details of what constitutes a blighted property and what constitutes remediation would be left up to local governments to define, along with any new tax rates and how long a property tax abatement would be in place. As an example, Dunbar cited how the Assembly passed an ordinance in 2019 that offered housing developers a 12-year property tax break for construction in downtown Anchorage.
Property taxes can currently be exempted by local governments for new construction up to 2.65 mills, which represents the minimum amount set in statute that municipalities are required to collect to contribute for public schools. Dunbar said removing that cap could incentivize new construction because developers operate on such tight margins.
SB77 received support from Mike Robbins, executive director of the Anchorage Community Development Authority, who said it would help “stimulate economic and housing development around the state.” Robbins, a former conservative candidate for Anchorage mayor, said it would be a “multiple win” for the economy and could help arrest the state’s population losses.
Bill Popp, president and CEO of the Anchorage Economic Development Corp., said he believed the bill could be an important tool for “multifamily development” and that local communities could get to work in tailoring their own ordinances.
On the Senate floor, Palmer Republican Shelley Hughes raised concerns that local governments could potentially abuse the definition of what constituted an old and derelict building. Hughes introduced an amendment to say that a blighted property would have to include conditions that endangered health or safety. But it was solidly rejected.
Dunbar said that there would be an appeals process written in state statute, and that some local governments may also want a “public nuisance” property to be defined as blighted.
SB77 advanced from the Senate on a 13-6 vote. All six of the no votes were from Republicans. Wasilla Republican Rep. Jesse Sumner introduced a similar version of the same bill in the House of Representatives in February, but it has yet to have a hearing in that chamber.