Kenai Peninsula Borough voters will decide whether future seniors should continue to get $350,000 in property tax exemptions or if the borough’s portion of the exemption should be phased out.

Ballot Proposition 4 asks voters whether the borough should phase out its optional portion of the senior property tax exemption, reducing the total exemption available to Kenai Peninsula seniors to $200,000 by 2024. The state requires a $150,000 property tax exemption for seniors, and the borough offers another $50,000 residential property tax exemption, which would not change if the proposition passes.

No current recipient would lose the $350,000 exemption. Nor would the benefits change for disabled veterans, who receive an unlimited personal property tax exemption. The borough’s tax code also has a hardship clause, which limits annual property tax payments to 2 percent of a person’s gross household income.

Bonnie Juliussen of Kenai said she currently has the property tax exemption on her home, which dropped her annual tax bill significantly. Once a qualifying senior is approved, he or she keeps the exemption each subsequent year unless something changes, like moving to a primary residence out of state or the value of the property increasing beyond the exemption.

“You just put in the application … it’s not too hard,” she said.

The proposition came out of a comprehensive sales and property tax review by Borough Mayor Mike Navarre’s administration over the last year. In light of the changing demographics of the Kenai Peninsula — the Alaska Department of Labor and Workforce Development projects that approximately 23 percent of the borough’s population will be 65 or older by 2030 — the mayor proposed reducing the property tax exemption to balance out taxes among the residents.

“The borough makes approximately twice as much from property taxes as from sales taxes,” said Larry Persily, the special assistant to the mayor, who worked on the tax revision project.

The borough collects approximately $66.9 million in property taxes, as compared to $30.2 million in sales taxes annually, according to the fiscal year 2017 budget. Navarre has said he is concerned that in the future, as the senior population grows, more of the tax burden might be shifted to the younger generation, which has not had the time to accumulate wealth and may struggle with an increasing tax burden.

Participation in the senior and disabled veteran property tax exemption program has expanded by about 13,000 participants statewide since 2006, according to state records. Program costs have exceeded funding levels from the state since 1986, when the Legislature placed a $150,000 mandatory minimum for eligible residential properties.

The state used to reimburse municipalities for the cost of the senior property tax exemption until 1986. The Legislature has not funded the reimbursement program since fiscal year 1997.

In 2015, 4,439 applicants were approved for the senior and disabled veteran property tax exemption, according to state records. That came out to approximately $5.4 million in property value exempt from taxes, according to state records.

If the proposition passes, seniors who turn 65 on or after Jan. 1, 2018 would still be able to apply for $300,000 in total exemptions, with the borough’s optional portion reduced to $100,000. For those who turn 65 on or after Jan. 1, 2021, the borough’s optional portion would be reduced to $50,000, for a total of $250,000 exemption. Those who turn 65 on or after Jan. 1, 2024 would still be able to qualify for the $200,000 exemption, but the borough’s optional portion would zero out.

Changes to the senior property tax exemption have stirred controversy, with some opponents saying the borough should cut its budget elsewhere before cutting something that affects seniors.

Others have backed the proposition, saying it is a more fair way to distribute taxes in the borough as demographics change. Linda Hutchings, a Soldotna resident, told the borough assembly at its July 26 meeting that balancing taxes between senior citizens and young families may encourage younger people to stay or move back to the peninsula.

“As a senior, I like my exemption, but I understand that we need to tighten our belt and give more to our younger people to encourage them to come back our area and build our economy,” she said.

Voters can cast their ballot on the senior property tax exemption reduction on the Oct. 4 ballot in the municipal election. Absentee ballots became available Monday, either by mail or in person at the Kenai Peninsula Borough building in Soldotna, the Borough Annex Building in Homer or the City Clerk’s office in all the cities of the peninsula except Soldotna.

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.