Proposed state legislation could give borough assemblies more power to exempt specific property from taxes; lawmakers and the public disagree on how that power should be used.
Under current state law, when municipalities like Haines implement property tax exemptions, it must be from a menu of pre-approved exemptions in state statute.
House Bill 291, introduced last month by Anchorage Republican Julie Coulombe, would remove those state restrictions, giving municipal leaders free rein to implement any exemption they choose.
The bill would also change the approval process for new exemptions, which currently must be approved by municipal voters at the ballot. Under HB 291, the assembly would gain the power to create exemptions by simple majority vote, so long as exemptions were below a certain threshold. As currently drafted, exemptions over the $75,000 mark for a single property would still go to the ballot.
Rescinding exemptions, however, would still have to be done by ballot referendum.
In initial debate at the Legislature, Coulombe has presented her bill largely as a matter of principle — increasing local control and chopping down what she sees as unnecessary state regulations. At one point in the hearing she dubbed it the “free the municipality bill.”
“I’m always for cutting red tape,” she said.
But her colleagues hearing the bill in committee have focused more on outcomes, what communities will do with their increased power.
In Haines, recent history suggests an appetite for broad-based exemptions. Two years ago, residents voted by a large margin to double the size of the exemption for seniors and disabled veterans, raising the total exempt from taxes to $300,000 of a home’s assessed value.
It’s that kind of scenario House members seem concerned about, revealing a gap between Chilkat Valley public opinion and sentiment in the Capitol. The concern in the Capitol doesn’t fall clearly along partisan lines, either.
During a hearing last week in the House Regional and Community Affairs Committee, Sitka independent Rebecca Himschoot raised the specter of voters, for instance, putting into place a tax exemption for everyone under the age of 30. That’s not currently on the list of state-approved exemptions. But if the bill successfully eliminates the state-approval requirement, it would be fair game.
“When you ask the voters if they want to pay more tax, the answer is no,” Himschoot said. “And yet, people want certain services.”
On the other side of the aisle, North Pole Republican Mike Prax focused on fairness, describing tax exemptions as “how do you cheat the other guy and pass savings on to me.”
Perhaps not surprisingly, cutting out large chunks of the tax base is more popular with taxpayers than it is with budget-makers.
In Haines, the extra senior tax exemption has made a significant dent in borough revenue, accounting for $316,768 of lost revenue in its first year of implementation. According to data from the state tax assessor, the percentage of taxable property in Haine held by seniors is the fourth highest of any municipality in the state.
Like some other municipal revenue challenges, it’s downstream of problems at the state level.
The state government is required by law to reimburse Haines for half its senior exemption, the portion all municipalities are required to exempt. But the Legislature has ignored that statute and hasn’t reimbursed municipalities at all since 1997, currently totalling nearly $8 billion annually that the state owes to individual communities.
Both sides of the debate — taxpayers and budget-makers — say there’s nuance to their position.
Many in Haines maintain the vote to double the senior exemption was a way to protect older residents on fixed incomes. They also say it’s a matter of respect. In recent months, assembly members have faced outrage when they’ve pointed to the exemption as a factor in borough budget challenges.
“People on our assembly want to point fingers at seniors,” former assembly member Brenda Josephson said in an interview last week. “Disrespecting our seniors and wanting to give all the money to nonprofits — it’s so contrary to everything I was taught and what people in our region believe.” Josephson was an organizer in a 2023 campaign to change property tax assessment procedures in both the borough and the state.
On the budget-maker side, some say there could be more targeted ways to protect vulnerable taxpayers.
“The senior tax exemption is based on age, so it’s not those that need it most that are benefitting first,” said Alaska Municipal League director Nils Andreassen in an interview Thursday. “Someone else in the community is paying the difference. The mill rate is going to go up with additional exemptions.”
Instead, Andreassen argues municipalities should implement property tax “circuit breakers,” which would offer tax breaks based on specific income thresholds.
With senior tax exemptions already allowed in state statute and Haines municipal code, that specific debate in Haines will continue regardless of the outcome of HB 291. House Community and Regional Affairs chair Donna Mears said last week her committee will continue to hear the bill, but won’t consider advancing it this legislative session.