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Borough ballot propositions touch on tax exemption, school projects, term limits

Posted: September 18, 2013 - 5:11pm  |  Updated: September 19, 2013 - 9:23am

With the Oct. 1 municipal election less than two weeks away, Kenai Peninsula Borough voters have time to do their homework before stepping into the ballot booth. Understanding the three borough propositions is a good place to start.

Proposition No. 1

Ballot language: Shall Kenai Peninsula Borough Initiative Ordinance 2013-02, Section 1, be ratified? Initiative Ordinance 2013-02, Section 1, would increase the allowable residential property tax exemption for qualifying taxpayers from $20,000 to $50,000. If approved by a majority of the voters, voting on the question, the ordinance shall take effect January 1 of 2014.

In the 2012 Primary Election, voters across the state agreed to allow municipalities to raise the
property tax exemption for homeowners from $20,000 to $50,000, with cities or boroughs able to adjust the exemption to reflect increased costs of living. Whether or not municipalities put the increased exemption into effect is a question for voters of each area to decide. 

In August, the Kenai Peninsula Borough clerk certified an initiative petition seeking to raise the exemption to $50,000. It applies only to borough property tax, not to property taxes set by cities within the borough.

The fiscal note provided by the borough in the voter pamphlet notes the increased exemption would result in the loss of approximately $1.3 million in annual tax revenues to the borough’s general fund. It also would result in a decrease to the borough’s 13 service areas. According to information provided by Craig Chapman, the borough’s finance director, the increased exemption would have the following impact on southern peninsula service areas:

• Anchor Point Fire and Emergency Service Area: A loss of $35,503 or 6 percent of the service area’s current budget of $600,252;

• Kachemak Emergency Services: A loss of $78,659 or 9.8 percent of the service area’s current budget of $803,333;

• Seldovia Recreational Service Area: A loss of $1,628 or 3.1 percent of the service area’s current budget of $51,989;

• South Kenai Peninsula Hospital Service Area: A loss of $174,268 or 4.7 percent of the service area’s current budget of $3.7 million.

“We support Proposition 1 because we believe that it provides tax relief from higher assessments homeowners have faced over the past decade,” said James Price of Kenai, one of the initiative supporters.

Price is critical of the fiscal note included in the voter pamphlet, which lists the service area and tax revenue loss. 

“It’s very misleading,” said Price. Using the North Peninsula Recreation Service Area as an example, he said, “On the one hand, you look at it and it says $27,124 reduction. That sounds serious, but when you look in the context of $1.4 million revenue, it’s less than a 2 percent figure. It’s really not that significant at all.”

According to Price and co-initiative sponsor Fred Sturman, the increased exemption would result in annual tax savings of $313 for each property owner in Anchor Point, $204 per property owner within the city of Homer and $246 for Ninilchik property owners.

“The property tax levy has increased by more than $3.6 million between 2009 and 2012,” said Price. “This initiative turns back to the homeowners about $2.5 million annually, so basically we’re just dialing back some of the increase that we’ve had over time.” 

Assembly member Bill Smith of Homer said seemingly small differences could have large impacts, however.

“We could reduce the borough budget by 4 percent and pretty soon we wouldn’t be able to maintain the fund balance,” said Smith. “Typically if you do that, the tool is adjusting the mill rate. If we do that, larger houses and bigger businesses will pick up the slack that is created by this initiative. 

Assembly member Mako Haggerty, who represents the southern peninsula, with the exception of the city of Homer, said increasing exemptions means “we’re going to have to make up the difference somewhere else. If we don’t, we’ll take a drastic cut in services and I’m opposed to that.”

Figuring out the impact the increased exemption would have on individual areas of the borough “seems counter productive” to Smith.

“I tried to figure out what the dollar number would be, but what happens is that you have multiple districts,” said Smith. “There’s something like 31 different varieties of mixtures of the mill rate across the borough. … I wanted to put a dollar figure for individual homeowners, but it just didn’t prove to be feasible.”

Using Anchor Point as an example, Craig Chapman, the borough’s finance director, said four mill rates would have to be considered to figure out the savings with the increased exemption: Anchor Point Fire and Emergency Service area, South Kenai Peninsula Hospital Service Area, the Road Service Area and the borough, for a total mill rate of 10.45.

“With a $100,000 home, the current exemption means a taxable $80,000. Based upon a mill rate of 10.45, that would be $836 in taxes,” said Chapman. “If the exemption increased to $50,000, the tax is now $522.50, for a net savings of $313.50.” 

While Chapman’s figure matches that provided by Price, it also illustrates the numerous factors that have to be taken into consideration, as Smith noted.

“It’s just not a simple yes or no,” said Chapman.

 

Proposition 2

Ballot language: Shall the Kenai Peninsula Borough borrow up to $22,987,000 through the issuance of general obligation bonds?

If passed by voters, the bond proceeds would pay for planning, designing, site preparation, construction, acquiring, renovating, installing and equipping of 10 school roofs costing a total of $20.9 million and installing a $2 million turf field at Homer High School. The projects have been approved by the Alaska Department of Education for 70 percent reimbursement, which means the borough will pay the remaining 30 percent.

In 2010, borough voters approved Phase I schools bonds of $16.9 million for roof work at 14 schools and a district warehouse. On the southern peninsula, that included Chapman, Homer Middle and McNeil Canyon Elementary schools, as well as a partial reroofing of Ninilchik School. That work has been completed. 

Phase II includes roofs constructed in 1967, with work spread over three years:

• 2014: Homer High turf field and roofs at Kenai Alternative High, Kenai Middle, Skyview High and Tustumena Elementary schools;

• 2015: Homer Middle, Kenai Central High, Paul Banks Elementary and Soldotna Middle schools;

• 2016: Ninilchik and Soldotna High schools.

“That’s a great thing,” said Haggerty. “The state’s going to reimburse at 70 percent, so it’s a win-win.”

Smith agreed. 

“My take is that the borough has the responsibility of maintaining school facilities, and at the current time, the state reimburses 70 percent of the cost of bonding for school capital improvements,” said Smith. “So, because we have the obligation to maintain facilities, it behooves us to move forward with that maintenance when we have 70 percent reimbursement.”

At 70 percent reimbursement and using 2014 values, the remaining 30 percent equals a cost to individual borough taxpayers of approximately $6.77 per $100,000 assessed real or personal property value.

“I can’t speak for the assembly, but the administration does not plan on making any changes to the mill rate. They plan on absorbing that (cost),” said Chapman. 

Smith said KPB Mayor Mike Navarre has made it clear very little capital is available for these types of projects, “but other districts have bonded their field improvements and it’s like, well, 70 percent of the cost is a lot better than no capital improvement money at all,” said Smith. “This is a good way for us to do this.”

 

Proposition 3A and 3B

Ballot language (3A): Shall Ordinance 2013-20 (Smith) Substitute, Section 1, which repeals term limits for assembly members, be enacted?

Ballot language (3B): Shall Ordinance 2013-20 (Smith) Substitute, providing for an increase in assembly term limits form two to three consecutive full terms with a required 180-day break in service before further service is allowed, be ratified?

To have term limits on the ballot is a bit like déjà vu all over again for borough voters. This time, it’s a two-parter, giving voters some new considerations, however.

First, some background. The limit of two consecutive terms for assembly members was adopted by borough voters in 1993 and then repealed by the assembly in 1999. An initiative-driven proposition put the two-consecutive-terms limit back on the ballot in 2007 and it passed by 53.72 percent of the votes. 

In June of this year, Hal Smalley, an assembly member from Kenai, introduced an ordinance to repeal that limit.

“There are those folks in the borough, especially in my voting district, that feel that elections are the true term limit,” Smalley told the Homer News. “When voters go to the polls, they have the freedom to choose who they want to vote for or not. ... So I was requested to, in fact, put in ordinance to have it repealed.”

Assembly President Linda Murphy of Soldotna offered a substitute ordinance that would repeal the term limit and put the question before voters. Then, Smith offered another substitute to Ordinance 2013-20, which was approved by the assembly. It amended borough code by repealing the two-term limit for assembly members or alternatively amended the code to increase the term limit from two to three terms and placed both questions before peninsula voters.

“I was intrigued by the idea that voters have never had the opportunity to weigh in on how many terms,” said Smith. 

A “yes” vote for 3A shall repeal the current limit of two consecutive full terms an assembly member can serve without taking a 180-day break in service; a “no” vote shall not repeal the current two-consecutive-terms limit. A “yes” vote on 3B shall approve an increase from two consecutive three-year terms to three; a “no” vote shall not approve the increase.  

“If (voters) eliminate term limits, the second part won’t matter, but if they vote to maintain term limits, then the second part says two or three terms,” said Smith.

Smalley did not support Smith’s ordinance.

“In my own opinion, the more you put on the ballot, the more confusing it is,” said Smalley.

Assembly member Haggerty is “actually kind of sorry” to see term limits back on the ballot.

“We’ve got to give it a break for awhile and then maybe come back when we’ve got a whole new generation of voters,” said Haggerty.

If the question were before the assembly, Haggerty would favor term limits because “I’d be representing my constituency, which seems to be in favor of term limits. But this is going out to the public, so I’m going to oppose it because I’ll be speaking for myself at the ballot box.” 

The reason Haggerty opposes term limits is because it limits the service of “really good assembly people, like Bill Smith, someone I think Homer’s lucky to have. Because of term limits we’ll lose him, so that’s why I’m opposed to term limits.”

Smith was elected to the assembly in 2007, 2008 and 2011; his term expires in 2014. Haggerty was elected in 2009 and 2012; his term expires in 2015. 

McKibben Jackinsky can be reached at mckibben.jackinsky@homernews.com.

 

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