Assembly eliminates
business, boat taxes

By Jessica Edwards

The Haines Borough Assembly Tuesday voted 5-1 to adopt a $14.6 million budget, and voted 5-1 to eliminate taxes on business property and boats that had been on the books for decades.

Eliminating the business property and boats taxes leaves the borough with a $194,000 budget shortfall, which the assembly voted to draw from its $4.7 million general fund balance.

Assemblyman Norm Smith opposed eliminating taxes on boats and business property, and assemblyman Doug Olerud opposed adoption of the budget.

The $14.6 million budget sets property taxes at last year’s levels and draws about $615,000 out of fund reserves to address revenue shortfalls and deferred maintenance.

A $2 million increase in the budget over last year reflects major capital projects as well as increased borough wages.

Borough manager Tom Bolen’s proposed budget had raised property tax rates slightly to balance the budget.

The total impact of Bolen’s proposed mill rate increase to the borough’s general fund revenue would have been about $58,000, but assembly members resisted raising taxes, drawing instead on the $4 million fund balance.

The fund balance is budgeted but unspent money rolled over year after year, a combination of left over tax dollars from items such as unfilled borough positions and money from outside the community.

While tax rates in the townsite and borough were kept at last year’s levels, taxes in road maintenance service areas did increase as a result of residents’ request to tax themselves at a higher rate to pay for snow removal services.

Eagle Vista RMSA mill rates increased to 12.59, up from 11.71 in 2009; Riverview RMSA will be taxed at a 13.32 mill rate, up from 10 mills in 2009; and Chilkat Lake RMSA’s mill rate is 8.18, up from 7.6. Tax rates for Fire District Three increased to 8.38, up from 8.15 last year, at the district’s request.

Grants to community organizations were funded at last year’s levels, without requested increases.

A decision Tuesday to eliminate business property and boat taxes left an additional $200,000 gap in revenue, which the assembly also decided to draw out of fund balances.

Assemblyman Scott Rossman pushed to spend $300,000 in fund balances on deferred maintenance of borough facilities. The assembly agreed to spend $150,000 for demolition of old school buildings, $20,000 for ventilation systems at the Chilkat Center, $80,000 to repair the roof at the borough administration building, $25,000 for boiler upgrades and a $25,000 contingency.

“We’re spending too much money,” said Olerud, who voted against adopting the budget. “Just overall.”

Olerud said although spending on capital projects, such as $5 million on boat harbor upgrades, inflated total budget expenditures this year, the borough budget was too dependent on outside sources of revenue.            

For example, nearly $500,000 in the budget comes from federal secure schools money, and a similar amount comes from state revenue sharing dollars, a source that fluctuates annually.

Olerud said the assembly should be anticipating loss of those revenue streams by paring down the budget.

Olerud said he was also concerned about dipping so deeply into the borough’s budget reserves, though he said addressing deferred maintenance was a positive step.

The assembly’s decision Tuesday to eliminate the business and personal property tax and a flat tax on boats is effective immediately. Members said honor system reporting made the tax unfair, and said it unfairly penalized business owners for upgrading equipment.

Combined borough revenue from the taxes was projected at about $194,000, with about $180,000 coming from business and personal property and $24,000 levied on boats.

The business tax is applied to business equipment, excluding buildings, assets fixed to the ground, and inventory.

Records show local taxes on business property date at least to 1948, when the Haines Independent School District levied taxes on real and personal property to pay for the school. A historic flat tax of $5-$15 personal and commercial boats, size dependent, was raised in 1989 to $55-$165 amid heated resistance, particularly from commercial fishermen, and months of debate.

Smith said he wouldn’t vote to abolish the business property and boat taxes until he knew where the lost revenue to this year’s budget could be recouped.

Assemblyman Steve Vick, who Tuesday voted in favor of dumping the taxes, said at a budget committee workshop June 4 he was concerned about the lost revenue stream and said perhaps the tax could be eliminated next year to give the assembly time to budget accordingly.

Chief fiscal officer Jila Stuart said drawing on fund balance reserves was not a long-term solution for recouping the revenue lost by eliminating the tax. Options for recouping the money were raising property tax mill rates or levying a new sort tax, she said.

Assemblyman Scott Rossman spoke in favor of cutting the budget next year instead. “We should cut instead of spending. We’re only talking about $194,000. That’s 1.4 percent of the total budget.”

Assemblyman Jerry Lapp said the borough lands department would be updating property appraisals in the townsite this year, adding income to the borough’s tax rolls.

Stuart said taxable values in the borough had increased 6 percent this year as a result of updated assessments, and said the assessor estimated reappraising townsite properties would increase property tax roles an additional 6 percent.

Borough manager Tom Bolen said some property, including fixed infrastructure like telephone poles owned by the local utility, were currently taxed as business property but may actually be real property.

Reevaluating and recategorizing some property designations could soften the impact. Business property taxes paid by Alaska Power and Telephone account for nearly 25 percent, or $73,000, of that income stream, Bolen said.

Vick said Tuesday he was convinced increased property taxes and possibly recategorizing some business property wouldn’t leave too big a hole in the budget.

Resident Nancy Nash was an assemblywoman when the boat tax was increased in 1989. In an interview this week, Nash said passing the tax had been controversial, but she had felt it fair and thought it remained so.

“I would go home crying from meetings. It was one of the hardest things I did on the assembly.”

Nash said she opposed repealing the tax, in part because she thought it fair, but also because it wasn’t the individuals affected that brought its repeal. It wouldn’t be easy to reinstate another such tax, she said. “(Repealing it) should be done advisedly.”