$20,000 homeowner tax exemption proposed

I am as painfully aware as the rest of you that Aug. 15 is coming. This is the time of year when the taxman comes knocking for Mat-Su Borough property taxes. This is the time of year when life-changing decisions are made to cope with the tax burden.

I remember after we shut down the dairy on our farm back in the 1980s we found that we were left with an annual tax bill that was in the thousands of dollars for a vacant building, which in its day was the largest completely self-contained dairy barn in the state. The long and short of it was that we tore down the building and burned the rest, ironically, to make ends meet.

In the borough budget, if you exclude the Education Fund, the largest category of revenues is taxes. This includes taxes on property ($102,349,297), vehicles ($3,564,810), excise taxes on tobacco ($4,766,137) and bed taxes on visitors ($1,026,113).

At the last assembly meeting, we became poignantly aware of the final impact of property taxes as we authorized the foreclosure sale of more than 50 properties in the borough. Most of them were unimproved properties, and a handful with houses and residents were postponed.

We will never know the detail of the maneuvers that property owners go through to adjust to the tax bill before it comes to the point of letting it go into foreclosure. How many personal dreams are simply put on the market and sold to avoid the very public process of foreclosure? I do know that the most difficult correspondence coming across my desk has to do with individuals who cannot make their tax payments.

With that sensitivity we mitigate the tax burden in a variety of ways.

No. 1 is to minimize spending to the maximum degree possible. Most of my vetoes are to stop what I consider to be inappropriate spending. If it is spending that does not justify putting someone out of a home, it is wrong spending, in my judgment.

The short list that escapes my veto pen is emergency services, education, roads and the government and infrastructure necessary to make those three services work. We can be more discretionary with bed tax money and tobacco taxes, but property tax money is getting pretty close to the essence of personhood in our free democracy and should be as close as possible to sacrosanct.

A second mitigation has been to maximize the influence and voice of property owners, particularly on land-use legislation that affects property rights. I have been criticized for that, but make no apologies.

A third mitigation strategy is to dilute the personal property burden by growing the commercial sector.

New economic development director Don Dyer recently concluded a review at my request of the balance of taxes between personal and commercial properties in the Anchorage, Kenai, Fairbanks and Mat-Su municipalities.

Our tax environment for businesses is one of the healthiest in Alaska. In the first six months of 2012, some 660 companies filed for new business licenses in the Mat-Su. But there are not enough commercial and industrial businesses here to call our economy diverse.

Only 20 percent of our tax base is comprised of commercial and industrial businesses. By contrast, Anchorage’s is more than 35 percent. As a consequence, the Mat-Su homeowner carries 89 percent of our tax burden. The Mat-Su still has a ways to go in diversifying its economy.

As long as we are satisfied to remain a bedroom community, this is how the tax balance will remain. It has been my strategy to build our own local economy, one that will not only shift proportionally the tax load to the commercial sector, but also continue attracting local jobs and services.

I am convinced that we have all the necessary elements to eventually be a community that can stand on its own, regardless of global economics, federal dollars or the price or supply of oil.

A fourth mitigation is to use an unused provision of state law to lighten the assessment on properties with primary residences.

I am proposing a ballot proposition that will directly impact personal property taxes by granting a tax exemption on $20,000 of assessed value to homeowners in their primary house. A tax exemption will give some measure of economic relief and help families that aren’t faring the global recession so well stay in their homes.

The proposal goes before the assembly Aug. 7. Read it at bit.ly/hometaxexemption and give me your thoughts.

Larry DeVilbiss has been Mat-Su Borough mayor since January 2011.