Kenai Peninsula voters will decide whether to continue the borough’s optional senior property tax exemption in this fall’s election.
The proposal comes out of a comprehensive review of the borough’s tax code that Borough Mayor Mike Navarre’s office has been engaged in since last year. It joins another proposal on the ballot that would raise the purchasing cap for sales tax from $500 to $1,000 in the borough, also part of the mayor’s rewrite.
Seniors older than 65 currently qualify for up to $350,000 in property tax exemptions — a $150,000 state-mandated senior exemption, a $50,000 borough residential property exemption and another $150,000 optional borough senior property tax exemption. Under the phase-out plan, starting next year, new applicants would qualify for $300,000 in exemptions, as the borough would reduce its optional portion to $100,000. The gradual reductions would continue until 2024, when the borough would phase out its portion completely.
The state’s mandatory $150,000 exemption for seniors and an additional $50,000 exemption for residential property would remain, and those who are currently receiving a property tax exemption would not lose it if the measure passes. A hardship clause for seniors would also remain in place, which caps property tax payments at 2 percent of a qualifying senior’s income.
“This would not change (the hardship clause),” said Larry Persily, special assistant to the mayor, in a presentation to the borough assembly Tuesday. “It’s a protection for truly needy seniors, lower income seniors, seniors who live in a home that has appreciated in value over the years through no fault of their own, it maintains this provision that caps their property tax at two percent of their gross annual income.”
Navarre said the phase-out will help spread the tax burden more equally among the population, especially as the demographics of the peninsula continue to skew toward those older than 65. He said the ordinance was crafted to accommodate the changing demographics without negatively impacting anyone who gets the exemption now.
“If you look at statistics, the age demographic with the largest accumulation of wealth is seniors,” Navarre said. “That’s not a reason to go after them — that’s just a fact. We’re not going after anybody, we’re putting this out as a policy change for people to look at in this borough and vote on.”
The Kenai Peninsula does not have the highest concentration of seniors in the state — Wrangell and Haines, both smaller towns, lead the state with about 19 percent — but about 14.8 percent of the borough’s population was age 65 or older in July 2015, the latest estimates from the Alaska Department of Labor and Workforce Development. Adding in those between age 60 and 64 bumps that percentage up to more than 23 percent.
Seniors have had the most chance to accumulate wealth over time, and the property tax exemption will remain for properties worth less than $200,000, Navarre said. Young people and families also have bills, and as the population ages, they will have to bear more of the burden as the population changes, he said. The public response to the proposal has been mixed. Some commenters have felt strongly that reducing the exemption amount would unfairly single out seniors to pay an additional tax; others have said it is only fair to ask everyone to pay equally when the state is facing a deficit and the economy has weakened due to decreased oil prices, among other factors, and seniors already have a number of other exemptions.
The assembly supported placing the proposition on the ballot 7-1 at its Tuesday meeting, with assembly member Stan Welles absent. Assembly member Wayne Ogle voted against it.
The mayor also introduced a raft of changes to the property tax code in general at the assembly’s Tuesday meeting, intended to update and simplify the code administration. Some of the changes include allowing the borough clerk to communicate via electronic communication rather than requiring it to be done by mail; expanding the pool of alternates for the borough’s Board of Equalization and allowing for the board to go into an adjudicative session to make a decision, among other changes to the board process; requiring that any property tax exemption for a property for “community purposes” have to be approved by the assessor by March 31 of the tax year and defining “community purposes;” reporting requirements for property sale.
The change would also require that a property owner be at least two years behind or $200 behind on property taxes before the property could be subject to foreclosure, updating the amount from $20. Two new provisions would also disqualify anyone from obtaining either a senior citizen or disabled veteran property tax exemption or the $50,000 residential property tax exemption if they have claimed one in another jurisdiction outside the borough.
The tax code changes will come up for public hearing at the assembly’s Aug. 23 meeting.
Reach Elizabeth Earl at firstname.lastname@example.org.