City votes to keep property tax rate level

Posted: Thursday, May 29, 2008

The city's lawmakers voted Wednesday to keep next fiscal year's property tax rates the same as they are this year, and rejected using money from an emergency fund to cover next month's electrical rate surcharges.

Meeting as the city's Finance Committee, Assembly members rejected by a vote of 5 to 2 a proposal to use a $2 million chunk from its sales tax budget reserve, or the so-called "Rainy-Day Fund," to cover residents' additional electrical costs next month.

The money would have been paid directly to Alaska Electric Light & Power Co., the private utility that provides the city's electricity, to cover the cost of the extra diesel fuel needed to power the city for next month's billing cycle.

AEL&P has had to use diesel fuel for most of its electrical generation since avalanches wiped out part of the transmission line that connect Juneau with its main source of hydroelectric power last month.

The Juneau Chamber of Commerce, of which AEL&P is listed as a "platinum member," suggested the idea, saying it would help everyone in town, including all of the city's businesses, cope with sharply increased electric rates.

"Everybody's as vulnerable as everybody else" to high electric rates, said Chamber of Commerce CEO Cathie Roemmich. She added that the rainy day fund could be replenished over time, but the economic effect of the energy crisis, which has raised residential rates by about four and a half times their normal level for this month but is expected to come down significantly next month, will have long-lasting effects.

"This would be a one-time help for many who have been hit one time," said Assembly member Jonathan Anderson, who voted with Assembly member Johan Dybdahl in favor of the proposal.

Mayor Bruce Botelho, who was away in Anchorage for a conference on climate change, sent a memo to Assembly members laying out why he was against using the proposal.

He said the energy crisis was too short to merit taking money from the rainy day fund and there were already programs in place "to address those most in distress."

AEL&P has said it expects the transmission line to be fixed by June 8, significantly earlier than its initial estimate of mid-July. And the city has approved allocating $3 million to help lower-income residents, nonprofits and needy businesses.

The mayor said the rainy day fund was designed to sustain the city in the event of a collapse of state or federal funding. The idea for the fund, Botelho said, came after declining oil revenues in the 1980s and 1990s left the city with less state funding.

The mayor reminded Assembly members that voters had approved, by wide margins, four propositions since 1990 putting money into the fund.

"I recite this history to emphasize that the underlying purpose was to make sure that there was an adequate continuity of local government services in the event of a precipitous decline in revenues to the city," Botelho said.

Assembly member Merrill Sanford agreed.

"It wasn't for this," Sanford said, suggesting that a better way to help offset the high electric costs would be to lower the city's property tax rates instead.

Sanford was one of three Assembly members who voted against City Manager Rod Swope's proposal to keep property taxes level for the next fiscal year.

The committee voted 5 to 3 in favor of Swope's proposal that would lower the property tax rate the city uses to pay for its operational costs in fiscal year '09 to "neutralize" the increase in property taxes voters approved to pay for building projects.

Sanford said property tax rates needed to be reduced, and suggested the city put $1.2 million toward lowering property tax rates next year. Botelho's proposed budget recommended the city put $1.5 million toward property tax rate reductions.

But the Finance Committee rejected those reductions, on advice from city employees, because it would mean the city would have less money in the 2010 fiscal year to offset debt payments for capital projects already approved by voters. The city staff said that would mean an increase in property tax rates for that year.

Assembly member Sara Chambers said Juneau's voters needed to understand that property taxes pay for the debt on bonds that voters approved, and the projects they vote for affect the Assembly's ability to lower property taxes.

"When you vote to approve a swimming pool, a high school, a parking garage, whatever it is you want to enjoy, there's a cost," she said.

The committee also approved several additional budget requests that add up to about $2.7 million for the next two fiscal years, including increased city spending for high school sports and activities, the Juneau Alliance for Mental Health and Eaglecrest Ski Area.

The Assembly members are scheduled to vote again on the budget Monday, when they meet as the formal Juneau Assembly.

• Contact reporter Alan Suderman at 523-2268 or e-mail

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