What the future holds for local, national business scene

What the future holds in store for local, national business scene

Here are a couple of economic/business predictions and comments. I believe that the federal tax code will get simplified this year. It’s about time, as even certified public accountants and other tax planning professionals have been mired with the complexity of the tax code. A federal tax law change before year end will include tax cuts for the middle incomes (low income folks don't pay federal income taxes). Many tax deductions will be eliminated, except for mortgage interest and charitable donations.

Small business and large corporations will both be stimulated from reduced government regulations. Less regulation will result in more competitive U. S. employers. Businesses must all maintain high ethical standards during relaxed government oversight.

Interest rates will continue to rise beginning in another week or two. The Federal Reserve will raise rates another one-quarter percent and then again later in the year. The Fed fiscal policy of higher interest rates to help ensure only moderate economic growth in order to check inflationary economic tendencies.

Alaska has significant economic challenges, but the Mat-Su Valley will continue to grow at just over a 2% annual rate (population and jobs). More and more Alaskans are turning their attention to the Mat-Su, yahoo! The Valley has some the lowest health care costs in the State, which are the highest in the nation. Accordingly, millions of dollars in new health care facilities are being constructed on Seward Meridian Parkway near Wasilla. I believe the regional hospital is also planning to expand by 55 beds and adding millions more in rehabilitation and other related medical services. Health care expansion continues to be a positive development for the Borough.

The regional hospital pays over $1 million a year in property taxes to the local government – very nice and thank you. In addition the hospital pays over $300,000 in local property taxes for the attached medical office building. Over a third (34.8%) of the hospital is owned by the Mat-Su Health Foundation, a non-profit which doesn’t pay property taxes. The good news is that the Health Foundation has over $150 million in assets and soon will have the equity of approximately $200 million. The Health Foundation is already huge by Valley standards. I expect the Foundation will soon build a $10 million headquarters that will be exempt from the Borough’s property tax base. In theory, if the Foundation leased spacious quarters from a private sector landlord, significant property taxes for the Borough would not be circumvented.

The Health Foundation is a good case study of on non-profit growth in the Valley. In fact, several nonprofit organizations continue to grow, having already built multi-million dollar facilities, stimulated by grants. Such exempt organizations do not contribute to the property tax revenues of the Borough. As population grows, the demand for government services increases, especially school enrollment, but no additional Borough revenues are collected from the property tax base until the private sector buys or builds property. We are providing more social services to a growing population while putting more economic pressure on the local government for services. I project a Borough population of over 105,000 by year end.

The Mat-Su Borough fiscal crisis can be partially solved with limiting the nonprofit and senior citizen property tax exemptions. I’m not opposed to a Borough wide sales tax. If the big city to the south would also implement a sales tax, more Valley residents would shop the home town.

The State budget fiscal crisis must have a long term fiscal plan now. Our family business has communicated many times encouraging the state government to adopt a plan. The private sector cares about the future of the governmental sector. We really need a governmental fiscal plan. I believe that specific elements are less important than having a solid trail forward – we are used to paying taxes for necessary government services. However private sector leaders state that the operating budget remains grossly bloated compared to anywhere in the country.

The nation’s economy looks favorable – same with the Valley. However, the State remains in a recession.

Dan F. Kennedy is a certified public accountant in Alaska since 1981. He serves on a pair of billion dollar public entity boards and teaches business law at UAA’s Mat-Su College.