Property tax cap decisions belong at municipal level

Posted: Sunday, February 06, 2000

Voters love to pass property tax caps. It's an emotional thing, a knee-jerk reaction to rising property valuation and a sense among citizens that government gets too much money from us.

Voters in California capped their property taxes when they passed Proposition 13, with disastrous results. Juneau voters capped Juneau's property tax rate at 12 mills back in 1995. Juneau property owners currently pay 10.7 mills for city operations and

another 1.52 mills for voter-approved debt, bringing our total mill rate to 12.22. Voter-approved debt isn't included in Juneau's property tax cap.

This fall, Alaskans will have a chance to pass a statewide property tax cap when they vote on a question being placed on the ballot through the voter initiative process. Lt. Gov. Fran Ulmer certified the ballot question, which would limit property taxes statewide to 10 mills - 1 percent of the assessed value.

That may be a good thing for some communities, but it would not be a good thing for all of them. It would also hamstring the ability of communities to set their own tax rates, and that's just not fair. Communities should have the right to cap their property taxes, but they should also have the right to set them where they wish - whether that be higher or lower than the state average - through the majority vote process.

This voter initiative implies that every city and town is identical in its resources and needs, and we know that is not the case. Towns have varying needs and varying tax bases. Some have property taxes and no sales taxes, while others use a mix of both property and sales taxes to come up with the money to keep city operations running.

Sen. Kim Elton of Juneau has proposed a measure that would amend the initiative so that cities could opt out of the tax cap if voters so choose. Senate Bill 227 would allow municipalities with residents who want to pay higher taxes to do so by overriding the state tax cap, if the initiative passes. That's the correct way to set property taxes - not at the state level, but at the municipal level.

If the initiative passes in November, Juneau's property tax rate would drop and that drop would cancel out the will of Juneau voters. Because people in Wasilla or Palmer want to have their property taxes capped, should their will be imposed on the rest of the state? We think not. Juneau would lose about $1.5 million in revenues at a time when the city is already reeling from state municipal revenue sharing cuts.

There's yet another problem with the voter initiative that will appear on the ballot. It sets the overall mill rate at 10, and that applies not only to operations, but to voter-approved debt. This unusual and foolhardy wording would pretty much disable municipalities from being able to issue bonds for projects like schools and police stations. Voters would essentially not be able to build public projects through the issuance of municipal bonds.

An example is the bond issue voters in Juneau approved to build a new high school, if and when the state agrees to pay for half of the cost. Under the initiative, it's doubtful that bonds could be sold, because bond buyers would perceive greater risk in doing business with a community that could not meet its obligation by raising its mill rate, if necessary. In other words, the concept that a community pledges its ``full faith and credit'' behind bonds it issues would be seriously eroded, and bonds would likely cost a great deal more for the municipality.

Sen. Elton's bill would also address that problem - partially at least - by removing school bonds from the overall mill-rate calculation used in the proposed cap. But his bill would not address the other problems associated with the initiative.

The tax cap initiative hamstrings local governments and would be harmful to communities across the state. Let's keep the control with local communities, where it belongs. Senate Bill 227 allows voters to do just that.

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