Borough to pay $450,336 for school debt reimbursement
July 25, 2019
The borough is set to pay $450,336 for school debt this year, bond payments which had largely been covered by the state since 2005.
On Monday, the Alaska House Finance Committee passed a bill reversing $92 million of Gov. Mike Dunleavy’s $444 million in vetoes, but failed to reverse the governor’s veto of $48.9 million for school debt reimbursement. Of the governor’s vetoes, school debt reimbursement will have the most significant effect on the Haines Borough economy this year. It is also the largest veto preserved by the legislature thus far.
In 2005, to finance the $17 million Haines School construction, the borough entered into a bond agreement with the state in which the borough would cover 30 percent and the state would cover 70 percent of the building’s loan payments annually.
“We always have to pay 30 percent,” borough manager Debra Schnabel said. “In addition to the 30 percent, (with the governor’s veto) we have to pay for 50 percent of the 70 percent.”
No additional funds have been allocated to pay off school debt reimbursement in the 2020 operating budget passed by the Haines Borough Assembly in June. Initially, the manager’s budget proposed a higher property tax mill rate to pay up to $1 million of school bonds. In the assembly’s revised budget, they lowered mill rates, gambling that school debt reimbursement would receive full funding.
“What happened is (the assembly) took the approach that we would continue as is,” assembly member Brenda Josephson said. “We knew we had the funds to cover (school debt) from overtaxing in prior years.”
Josephson said that borough’s $2.7 million in reserve funds was generated from overtaxing residents in prior years. “I felt that it was an appropriate time, since we didn’t have any cost alternatives, to not affect the tax payers this year.”
In June, the Alaska legislature’s budget had provided full funding for school debt reimbursement, and the Haines Chamber of Commerce had submitted comments to the assembly that supported a lowered property tax mill rate.
“At this point in time (I) will advance the concept of taking ($450,336) from the reserves,” Schnabel said. “Next year we will most likely pay for it with an increase in property tax.”
Property tax mill rates for the 2020 fiscal year were established by the operating budget passed in June and cannot be increased to pay for school debt reimbursement this year.
The office of representative Neal Foster, co-chair of the state house finance committee, said it was not aware of any other bills to reverse the governor’s veto of school debt reimbursement. The other co-chair of the finance committee, representative Jennifer Johnston, did not respond for comment.