A bill introduced Feb. 24 by Rep. Paul Seaton, R-Homer, would allow local governments to choose whether they wanted to grant a property tax exemption for resident seniors age 65 and older. 

House Bill 338 would amend a current state law that mandates a $150,000 exemption on property assessments for seniors. For example, if a senior owned a house and property worth $200,000, the exemption would reduce the taxable assessment to $50,000.

HB 338 would allow governments like the Kenai Peninsula Borough and the city of Homer to reduce or eliminate that exemption. Governments could do this by ordinance. Citizens could still challenge the ordinance through a voter initiative.

“This is a state unfunded mandate which limits the ability of municipalities to fund their local budgets for schools, public safety and roads,” Seaton wrote in his sponsor statement.

According to Seaton’s statement, the senior exemption came about in 1972 when the Legislature created the exemption program. It was income based for seniors with a gross annual income of $10,000 or less. A year later, lawmakers eliminated the income requirement.

“The state never provided the promised reimbursement to municipalities for the amount of lost property tax,” Seaton wrote in his sponsor statement.

Peter Zuyus, 70, called Seaton’s bill “a bad idea.” Zuyus has written opinion pieces to the Homer News and other papers advocating for seniors and their contribution to local economies. Zuyus said seniors are less of a tax burden on a community than other age groups.

“It’s the reverse,” he said. “They’re considered an economic engine in the state of Alaska because of the way they spend their money.”

Zuyus cited a McDowell Group report for the Alaska Council on Aging that says the economic multiplier effect for seniors is 3.4 times that of other groups — in other words, their money circulates more in local communities.

Seniors contribute from $4 to $5 billion to the state, Zuyus said.

Wayne Aderhold, 66, who qualified for the senior exemption in the 2015 tax year, said he approved of Seaton’s bill.

“It’s step one in what needs to be a multi-step process,” he said.

Aderhold said at the time the state mandated the senior exemption, it was a great idea and seniors were a small minority.

“It’s grown out of proportion to the point we have essentially created a privileged class,” Aderhold said. “I think it’s unfair and it’s unsustainable. If I don’t pay, somebody else has to.”

In Homer with a $150,000 senior exemption and a $20,000 homeowner exemption, Aderhold paid $540 in 2015 compared to $1,231 in 2014. For borough property taxes, he paid nothing in 2015 compared to $1,600 in 2014. The borough has a $300,000 senior exemption and a $50,000 homeowner exemption. 

That raises another inequity, Aderhold said. If the borough put a bond to expand South Peninsula Hospital, he could vote for it but not pay anything to the hospital service area.

“That’s pretty stark for me. I can hang somebody else who is going to pay. Is that fair? I don’t think so,” Aderhold said.

In his sponsor statement, Seaton said he introduced HB 338 at the request of the city of Homer. At its Dec. 7, 2015, meeting, the Homer City Council passed unanimously Resolution 15-111 asking the Legislature to allow municipalities to determine the value of property tax exemptions for resident seniors. That resolution noted the value of mandatory senior property tax exemption in Homer was $61 million for 2014, or $275,000 in uncollected property tax revenue for the city. The borough also collects property taxes for general borough funding as well as service areas like the South Peninsula Hospital service area.

Aderhold’s wife, Donna, is on the Homer City Council and voted for the resolution.

Homer City Council member Catriona Reynolds introduced the resolution. The idea came up in city meetings last summer to discuss revenue options.

“When we were looking at that spreadsheet of possible places where we could find more revenues, we couldn’t even have that as one of the considerations until it was changed at the state level,” Reynolds said of the senior exemption. “That’s why we requested that.”

Eliminating the state mandate doesn’t mean the city would do away with the $150,000 exemption, Reynolds said. It gives the city more choices on how to raise revenues.

“How it was before, we couldn’t even put that in our quiver of options,” she said.

If the city did reduce or eliminate the exemption, one idea Reynolds said might be worth considering is to make the exemption needs-based. 

Zuyus said that pioneer Alaskans have paid their share of taxes over the decades since the exemption started.

“The seniors built the city and now you want to destroy the people who built the city,” he said.

Zuyus said the McDowell report on seniors projected that 38 percent of seniors would leave Alaska if they lost the property tax exemption.

The Alaska Democratic Party picked up on that theme in criticizing another Republican Party proposal to make drastic budget cuts to low-income senior benefits. Citing a defense of those cuts, Casey Steinau, chair of the Alaska Democratic Party, said, “Rep. Lynn Gattis (R-Wasilla) says those seniors living on a fixed income should just move. What’s next? Ask seniors to pay for a wall to keep them from returning to Alaska?” 

HB 338 has been referred to the House Community and Regional Affairs Committee. 

Jenny Martin, an aide to Seaton, said that under current legislative rules, the House of Representatives won’t consider other bills until it first deals with the operating budget and revenue bills. Most likely the bill won’t even come up for action until at least mid-March, she said.

Michael Armstrong can be reached at michael.armstrong@homernews.com.