Leaders of local nonprofits say proposed changes to how their organizations apply and qualify for property tax exemptions would put financial and administrative strain on them, jeopardizing their effectiveness and ability to operate in the community.

The Haines Borough Assembly introduced an ordinance Tuesday that would change how the municipality grants community purpose exemptions to nonprofits.

The issue of rewriting the portion of code dealing with community purpose exemptions arose when the assembly in October denied an application by the Soboleff-McRae Veterans Village, with manager David Sosa stating the facility’s definition for who could live in the apartments was too broad.

Under current code, six properties have community purpose exemptions: The Southeast Alaska State Fair, Port Chilkoot Parade Ground (owned by Alaska Indian Arts), American Bald Eagle Foundation, Haines Animal Rescue Kennel, Charles Anway Cabin (owned by the Chilkat Valley Historical Foundation) and Takshanuk Watershed Council.

The proposed ordinance would remove those nonprofits from code and make them reapply for community purpose exemption status every year. It also would more narrowly define what qualifies as a “community purpose,” which is worrying for some nonprofits, including the Southeast Alaska State Fair.

According to a policy developed alongside the ordinance, activities which require a membership fee don’t qualify for an exemption. Neither do activities which are not open or available to the general public.

Fair director Jessica Edwards said she is concerned this could disqualify the fair, as it has a membership program and charges entrance fees for its annual event every year. But the Southeast Alaska State Fair – the 42 acres it encompasses – doesn’t just exist for the four-day festival traditionally held in July or August.

The fair also includes the community garden, a disc golf course, Dalton City, a playground, a little league field, Payson’s Pavilion, Harriett Hall and other buildings and pieces of land used for various purposes by various groups of people. How would those uses and properties be assessed in terms of “community-wide benefit,” Edwards asked in an interview.

Under the new ordinance, Edwards said she would have to separately justify different fair activities and structures.

“All of the nonprofits in town are doing a lot with a little. It is a pretty onerous-looking set of requirements to have to meet every year,” Edwards said.

Current code allows the assembly to decide what nonprofits should get the exemption, with very little official criteria for what qualifies. It is essentially the assembly’s choice whether they think granting the exemption is in the best interest of the borough.

Making that political process into an administrative process adjudicated by borough staff just complicates the matter, said Haines Assisted Living board president Jim Studley, who advocated for the Veterans Village exemption before the assembly eventually shot it down.

“To me the borough has a really simple choice: Yes, we are going to make it exempt. No, we are not going to make it exempt. Why would we make it more complicated than that?”

Studley said the new process would be “burdensome” for nonprofits.

“There seems to be some desire on the part of somebody to make it more difficult than it already is for the nonprofits to operate in Haines,” Studley said. “What’s the point? How much taxation are we really losing because of that, and what is the benefit that we gain from it? And which is more advantageous to this community?”

(Edwards said the fair has never been assessed, so it is unclear how much the borough would receive in property taxes if the land and structures were taxed).

Edwards said she sees the ordinance tied to a larger question about how the borough feels about supporting nonprofits through its annual grant funding. The amount of borough grants has been decreasing in recent years.

“I think the borough has always recognized the immense public benefit and value they have received in return for $100,000 in community grants, a few property tax exemptions and a few sales tax exemptions. It’s a pretty great return on a pretty small investment,” she said.

At Tuesday’s meeting, assembly members expressed concern about the ordinance’s wording. Assembly member Ron Jackson called it “very difficult to interpret,” while Campbell called it “very confusing.”

“The average person can’t understand it when they read it,” Campbell said.

While Campbell wanted to send the ordinance to committee for more work, the assembly ultimately voted to advance it to its first public hearing after urging from assembly member Joanne Waterman to keep the process moving forward.

Waterman acknowledged the new ordinance would represent “a drastic change from what this community has done over the years.”

“It’s not going to be what it was,” Waterman said. “You’re in a situation here where I don’t think there is any organization (on the exemption list) that this community doesn’t love and support, but at the same time things need to change, and it is always hard to be the one to make the change. It’s hard to be the one to stand up and say, ‘This doesn’t qualify.’”

Sosa reiterated his belief that changing the community purpose exemption process will “establish a clear policy for exemptions that ensures fair and consistent treatment for all applicants.”

“If you’re a property owner, you pay property tax. Those who receive exemptions to property tax, their portion of it is paid for by everyone else. So what you need to ensure, then, is that if someone is receiving an exemption, that the exemption is justified and it is clear,” Sosa said.

The ordinance will have its first public hearing at the assembly’s March 10 meeting.