Assessment, construction are up -- why are property taxes?

MAT-SU -- Assessments are up, more property was under construction in the Valley in the past year, and several new businesses either moved to or expanded within the Mat-Su. So why are taxes also going up?

"The bottom line is, when a new family moves into the borough with more than one child, that generated tax base is not enough to cover the cost of schooling for one child," Assemblymember Jim Colver said at a Mat-Su Borough budget worksession Tuesday.

Mat-Su Borough Finance Director Tammy Clayton said Colver is correct. The average homeowner pays about $2,070 in taxes and the cost of a year's schooling for one child is about $2,300.

Under the manager-proposed budget now being considered by the assembly, the areawide mill rate would increase from 11.48 to 12.95. That doesn't include an added .8 mill or $2.7 million the school district requested in anticipation of a new per-student funding formula expected to pass the Legislature.

Assessments are up. According to figures from Clayton, private property in the Valley increased in assessed value from $3.95 billion in 2004 to $4.4 billion in 2005. Most of that increase, Clayton said, came in the form of private property. About $2.5 million more is expected to be generated through residential property taxes this year than last year, and more than $400,000 more in retail property.

The projected total revenue coming into the borough, including local taxes, state and federal funding for 2005 is $205.7 million, nearly $25 million over last year's $181.2 million in revenue. Of those figures, about $54.1 million was generated in 2004 from real property, personal property and vehicle taxes, compared with $68.4 million expected to be generated this year. The borough is also expecting more funding in other areas -- the school district has budgeted about $1 million more from the federal government than was received last year and, assuming proposed state legislation will pass, the district budgeted for an additional $8 million from the state.

The borough budget assumes an additional $300,000 in payments in lieu of taxes from the federal government, and the remaining increase will come largely from increased property taxes.

Although Clayton said the borough budget shows increased revenues, she said costs have increased in other areas that offset the added revenue -- and the borough assembly doesn't, this year, have the option of dipping into unexpected funds to help offset the problem.

"We have new debt," Clayton said, noting that the first payments on two school bonds passed last year, totaling about $700,000, will come due this year. The borough lost $800,000 this year in revenue sharing from the state, and an increase in the Public Employee Retirement System of between $700,000 and $800,000 bit a large chunk out of the new budget. New worker's compensation claims were made over the year as well, leading to a 25 percent increase in workers' compensation funding. Clayton said Health Insurance Portability and Accountability Act, or HIPPA, laws prevent discussing what types of claims were made over the year, but the borough hopes to reduce the volume of claims over the next year. But because the insurance rates are based on the previous year's performance, she said, it may take some time for those rates to drop.

In previous budget meetings, Borough Manager John Duffy has added to those numbers about $5.3 million in unfunded state mandates -- cuts in revenue sharing and increased requests for property tax exemptions for disabled veterans and seniors, a state-mandated exemption the state hasn't funded since 1995.

But perhaps one of the largest things affecting this year's budget was a decision made last year by the assembly.

"Last year, the mill rate was decreased 1.38 mills," Clayton said. "We were able to take $4.7 million and reduce the 2004 mill rate -- the 2003 tax bill."

Several things contributed to that $4.7 million, Clayton said. A few accounting changes took place that allowed the borough to accrue 14 months of revenue in 12 months' time. That happened not only once, Clayton said, but a second time when the state changed how it pays out vehicle registration taxes to municipalities, leaving the borough with 13 months of revenue in 12 months' time. Lawsuit settlements and interest earned above what was projected also figured into that $4.7 million, she said. During last year's budget cycle, there was considerable discussion about how the money should be used.

"We recommended they use half this year and half last year," Clayton said. "Had that occurred, the mill rate would be .7 less."

Last year's mill rate, Clayton projected, would have been 12.183 and this year's would have been 12.25 mills.

Although it's not possible to change decisions made last year, Clayton said changes happening both now and on the horizon will have a direct effect on future revenue. Although several new retail stores either recently opened or are on their way to opening, not much of the increased property values from construction of those new businesses was recorded on this year's tax rolls.

Since the assessed value is what a particular property was worth on Jan. 1, 2004, neither the new Fred Meyer in Palmer, the new Spenard Builders' Supply in Palmer, nor the new MicroTel hotel being built in Wasilla, for example, will be listed as completed until next year's tax assessments are done on Jan. 1, 2005. By that time, a new project will be underway as well.

"If the hospital were 100 percent built by January 1, we'd see an entire mill and a half (increase) next year," Clayton said. "We're not going to see it entirely until the year in which, on January first, it's built."

Contact Rindi White at rindi.white@frontiersman.com.