Where does fantasy meet reality?

To the editor:

Mayoral hopeful Kevin Brown’s latest campaign revelation that Palmer can abolish property taxes by diving into the steam heat utility business is where fantasy meets reality.

Mr. Brown announced to voters at the recent Palmer chamber candidates forum that if elected, he’ll back city involvement in constructing a power plant near the Alaska State Fairgrounds because it will result in the elimination of property taxes in Palmer over the next five years.

That’s the fantasy part; here’s reality: If Palmer were to create a utility to sell byproduct steam purchased from this power plant, the endeavor must be designated as an “enterprise” activity, just like the current city-owned airport, golf course and water and sewer operations. Since enterprise income is not transferable to the general fund, it is unlikely that revenue from this steam utility could replace property tax income to the city’s operating budget.

Further, for steam heat to be economically viable, it has to be competitive with natural gas. Based on present and predicted natural gas prices, a steam heat utility would be marginally competitive at best, and could not begin to generate the kind of surplus income that would be necessary to supplant the $1.4 million in annual property tax revenue currently taken in by the city.

Still, there is a more basic problem with Mr. Brown’s magical disappearing property tax pitch. It’s called the Regulatory Commission of Alaska, which oversees utility operations.

Put simply, utilities may charge rates that cover such things as operating costs, emergency reserves, capital improvements and a reasonable margin (profit). Even as an exempt municipal utility, if the operation were to produce surplus income on the magnitude necessary to make Mr. Brown’s plan work, the utility would likely be pressured to lower its rates by the RCA. In effect, the income from Mr. Brown’s proposed utility scheme would be capped long before it could ever begin to offset anyone’s property taxes.

Also glossed over has been the fact that the cost of installing a steam line grid into the city would run into the millions of dollars before one dime of revenue would materialize. City investment in developing a local energy producer could create many benefits and should be investigated in a responsible and thoughtful way, but Mr. Brown’s attempt to shine the public on with promises of Palmer becoming a taxpayers utopia is nothing short of shameless electioneering.

Andrew Evans

Palmer