News from Patrick Flynn

No, thank you

As you may have read, last night the Assembly approved four of six proposed bond measures for consideration on the April 6 ballot.  That same evening, we decided against adding an advisory vote regarding property tax exemptions to the ballot.  Readers might be surprised to know that I opposed each of these items, but not because I was in a contrarian mood.

Regarding the bonds, the concept of  a bond holiday has iteratively arisen since I discussed the concept more than a year ago.  And, while this year’s bond proposals are relatively small, I wrestled whether they were appropriate.  It’s not that the projects therein aren’t needed, they certainly are.  And it’s not that I feel the projects selected somehow slight one part of town or another.  Rather, the role I played working with the Anchorage School District to limit their spending and the School Board‘s subsequent decision to forgo any bond proposals this spring impacted my thinking.  Quite simply, I felt it would be hypocritical for me to seek reductions in ASD expenditures without moving in the same direction on the city side.  I’d previously done so on the operating budget and felt it was now time to step up on the capital.  All that said, I’ll leave it to you whether to approve or decline the items appearing on the ballot, you don’t need my advice!

As to the advisory vote, it would’ve asked the question as to whether Anchorage voters would like to see the owner-occupied residential property tax exemption raised from the current $20,000 to $50,000.  The vote would have been theoretical in that the adjustment would require a change to state law before it could proceed but proposals before the Alaska State Legislature, if approved, would allow for the change.  But it’s darn complicated.  Here are a few of the issues:

  • Current law only allows exemptions for owner-occupied homes.  That means renters don’t share in the exemption and, to the extent landlords can add tax costs to rent (which, according to two that testified last night, they are able to do), that increases tax burdens for renters.
  • Depending on how the exemption is structured it can have a disproportionate effect on lower-value homes, typically inhabited by lower income families, which results in their actually paying slightly higher taxes than they would otherwise.  Those structural problems can be mitigated, but it takes some doing and how that might occur was not part of the advisory vote language.
  • Commercial properties end up picking up much of the tax burden shed by owner-occupied homes with a partial exemptions.  Those commercial entities, in turn, charge consumers more for their goods and services.  The result is a quasi-sales tax but without exemptions for things like food or prescription drugs that blunt the inherently regressive nature of sales taxes.

So, rather than try and chart a path through all the above challenges, the Assembly decided this advisory vote won’t appear on the April 6 municipal ballot.  But it very well may end up on the 2012 state ballot via an initiative because other local jurisdictions (e.g. the Fairbanks North Star borough and Valdez) with property taxes and much higher value industrial properties (think oil industry-related) see a change in state law as an opportunity to shift costs from their residents to corporate entities whose expenses wouldn’t necessarily be passed back to residents.  In other words, this discussion may simply be the first in a long series.



This contribution was made on Wednesday, 03. February 2010 at 16:13 and was published under the category Fiscal matters. You can follow comments on this entry through the RSS-Feed.

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  1. Thank you Patrick Flynn. Your writings are very well received.

    Comment: Del Baldwin – 03. February 2010 @ 8:57 pm

  2. Thank you Mr. Flynn, but I was hoping you would explain your reasons for delaying again discussion about the audit, and why you feel the resolution’s language must be “compromised.”?

    Comment: Kurt Sorensen – 03. February 2010 @ 10:46 pm

  3. Kurt,

    Thanks for the question. Here’s the cliff notes version from an e-mail I sent to someone with a similar question:

    “Thank you for your note and your comments. As to the audit, Mr. Coffey & I spent parts of the weekend, Monday & Tuesday refining the scope and administration of the audit in consultation with the administration. We were pretty close but, at the administration’s recommendation, decided to spend a little more time to ensure we got it right.”

    In other words, we weren’t really working on “compromise” language, merely trying to ensure the audit answers the questions we want answered.



    Comment: Patrick Flynn – 04. February 2010 @ 1:07 pm

  4. To beg the question: Does this mean the questions you want answered are different than the questions the administration wants answered? Is the administration insisting you to keep working on this until you answer questions they want answered as well as your questions?

    Comment: donnliston – 05. February 2010 @ 2:21 pm

  5. Uh Oh…

    City finds fund depleted, bill unpaid

    Anchorage Daily Planet

    City officials huddled Friday to discuss a $550,000 bill owed on a 2007 software project that was left unpaid by former Mayor Mark Begich’s administration in 2008, a move that would temporarily have improved the appearance of the city’s finances.

    Greg Jones, director of Community Planning and Development, said the “Hansen Project” originally was approved for a $1.6 million expenditure to upgrade building permit software and create a “paperless environment.”

    In 2007, funds to make monthly payments to Hansen Software Corp. to pay for the new software were set aside. In 2008, Jones said, the money for the monthly payments was freed up for other expenditures and the company was not paid. The city ended up in default in 2009.

    “The other administration had other plans for the funds,” Jones said Friday. “Unencumbered funds would improve the fund balances and show the financial strength of the city in a better light.”

    Funds for the project originally were taken out of Anchorage Building Safety Fund 181. Chief Financial Officer Lucinda Mahoney said the city has taken out a $504,000 loan to pay Hansen, and the remainder of the debt was to have been paid from Fund 181. Since that fund now is $2 million in the red, Mahoney said the city would, instead, borrow the money from its general cash pool.

    While Jones said Hansen has not yet taken any action against the city, Municipal Attorney Dennis Wheeler said he questioned the legality of defaulting on scheduled payments.

    “The unencumbering of funds doesn’t seem to conform with municipal code,” Wheeler said.

    Jones said Hansen stopped software installation when the city failed to make payments in 2009, but the company was scheduled to resume work this year.

    “What we’re asking for now is $550,000 to pay arrears,” Jones said. “The big thing is to get the contract back on track and pay our obligations.”

    Comment: donnliston – 26. February 2010 @ 4:21 pm

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