Discount days at local businesses aren’t the only perks older residents enjoy.
More and more property owners age 65 and older are applying for senior property tax exemptions, and that’s costing the Haines Borough.
The borough estimates the state-mandated exemption will cost the municipality $310,000 in lost property taxes in fiscal year 2015, up from $270,000 last year. Borough property taxes brought in $52,500 less this year than the borough projected.
Though several applications are still being processed, approved applications are expected to total 236 this year. That’s up from 210 last year, and 206 the year prior, said chief fiscal officer Jila Stuart.
“Assuming senior exemptions continue to increase or hold steady, we will need to address this issue in the next budget cycle with a slightly increased mill rate, decreased expenditures, or supplemental revenue sources,” manager David Sosa said this week.
An exemption, if approved, relieves an applicant from paying taxes on the first $150,000 of their home’s assessed value.
For example, an eligible senior with a townsite home assessed at $250,000 pays taxes only on $100,000. That amounts to an annual property tax payment of $1,017 instead of $2,542.
With a median age of 48, Haines is the oldest town in the state, according to the Alaska Department of Labor.
The Alaska Legislature created the exemption in 1972 and fully reimbursed communities for their lost income until 1986. Reimbursements declined until they were completely eliminated in 1996. But legislators left the requirement for the exemption on the books, effectively saddling municipalities with the cost of the program.
Several legislators have unsuccessfully tried to change the law, including former House Rep. Bill Thomas, R-Haines.
In 2005, Thomas sponsored House Bill 212, which would have granted municipalities the option to phase out the senior tax exemption.
According to minutes from a 2005 meeting of the House Special Committee on Military and Veterans’ Affairs, “Thomas expressed concern that when the Baby Boomers, of which he is a member, reaches the tax base at the same time, it will be a big problem statewide.”
The bill would have given municipalities several years to decide how to deal with the exemption and would have allowed municipalities to base the exemption on need.
Thomas did not return calls for comment this week on what happened to the legislation.
According to state assessor Ron Brown, several pieces of legislation are introduced each year to either eliminate the exemption or to increase the exempted amount of property.
“The number of qualified senior citizens continues to grow statewide and that has to do with the fact that Alaska has one of the fastest aging populations in the country,” Brown said. “We’ve got the Baby Boomers coming along, and as more and more people qualify, there are more and more exemptions, and more exemptions means more reductions of the tax base.”
Assembly member Dave Berry said while he thinks a program should still exist on some level, the current system isn’t working. “It started very good, but it’s a program forced on us. That’s something we’re going to seriously have to discuss.”
Berry said he would like to see more rigorous investigation of the application materials, specifically seniors claiming homes in Haines as their primary dwellings.
Assembly member Debra Schnabel said if she had things her way, the exemption would be based on financial need.
“Alaska has always made a mythology of its pioneers and so we as a white culture tend to revere people who came to Alaska with $14.59 in their pocket and pulled themselves up by their bootstraps and homesteaded,” Schnabel said. “But the people who can most afford (to pay full property taxes) are people who now don’t pay it.”
Mayor Stephanie Scott said while she has been “concerned about this for years,” she applied for and received an exemption this year.
“It was instituted to help elders and seniors stay in the state longer, and now so many of us qualify and it’s hard to elect to not take advantage of a benefit like that, because one can always find someplace else to spend one’s money regardless of how much money one has,” Scott said.
In August, Scott will attend an Alaska Municipal League conference in Nome. One of the items on the agenda, according to AML president Karen Crane, is senior property tax exemptions.
“We can lobby the state to pay what they originally said they would pay, we can ask for them to do away with it, we can ask for local communities to opt in or opt out of it, or we can ask for some flexibility – for instance, making it income-based,” Crane said.
If the board comes to a decision, it will take that position to AML’s annual meeting in November.
According to state demographers, Southeast has had a large proportion of older residents for decades and the trend is expected to continue.