Alaska News

For some, property taxes are too low

Anchorage property taxes are too low -- at least for some property owners.

The original evidence comes from the University of Alaska Anchorage Institute for Social and Economic Research, in a paper issued a number of years ago. Entitled "Anchorage Budgets and Property Taxes," the paper found that the contribution of property taxes paid by commercial property owners was falling, while the contribution of property taxes paid by residential home owners was rising year after year.

The researchers noted that, "By any measure the growth in commercial assessed value has not kept up with residential. ... The total assessed value of commercial property is less today [the year 2000] than it was in 1980, after adjusting for inflation.

"As a consequence of this stagnation, the commercial share of assessed property value has fallen steadily while the residential share ... trended upward. In the early 1970s the shares were 33 percent commercial and 50 percent residential (with personal property the balance). By 1999 the shares were 24 percent commercial and 65 percent residential."

Unfortunately, the authors of this study did not pursue the critical question of why property taxes on commercial properties were falling so dramatically while taxes on residential properties were rising.

They did, however, offer some possibilities.

One, for example, was that "a large portion of the economic activity in the city is exempt from the property tax" including "the military, federal civilian, state and local government, and the non-profit sector." Another was that "there could be under-assessment of commercial property compared to market value."

The latter explanation is within our control, it can be political, and it deserves a much closer look.

A few weeks ago Mayor Sullivan invited me to his office so that I could conduct an interview about his views on health policy. At the end of that interview, I asked if I might ask a question on a completely different topic -- property taxes. He graciously agreed.

I briefly summarized the ISER research findings, and asked the mayor if he would comment on that. The mayor responded in part:

"It's hard to assess commercial property as accurately as residential property. ... That's one of the things we've been working on, we want to get commercial properties assessed near their full value, just like residential property is. I think that will make up some of that gap."

In recent months I have also brought this issue up to several members of the Assembly. One, who has considerable budget experience, expressed no knowledge of the ISER study or the issue. Others have not responded to my inquiries. A municipal employee with knowledge about the issue indicated that the situation is essentially unchanged.

In sum, it appears that for decades commercial properties have been undervalued in Anchorage, and that property taxes paid by homeowners have been increasingly subsidizing commercial properties.

In recent decades how many hundreds of millions of dollars in property taxes have failed to be collected from the owners of commercial properties?

In and of itself, this is unfair to homeowners, but it is unconscionable at a time when the funding for libraries, parks, and health and social services is being slashed.

Certainly it is easier for the mayor and the Assembly to cut services for working families than it is to collect the fair share of property taxes from wealthy and politically influential developers. But is this what we elected them to do?

Lawrence D. Weiss Ph.D., is executive director of the Alaska Center for Public Policy.