Revised Fairbanks tax cap scheduled for October ballot
Originally published Monday, March 31, 2008 at 12:01 a.m.
Updated Monday, March 31, 2008 at 11:43 a.m.
Regular voters are familiar with the “tax cap” by now. The law, a lid automatically placed on annual taxes from local sources, resurfaces every couple of years on the Fairbanks North Star Borough ballot.
But this October’s tax cap question will be more controversial than past years’. If approved, it would mark the first major change to the cap since its inception two decades ago.
Borough clerk Mona Drexler said Thursday that organizers of the measure, a public initiative, have submitted enough signatures to place it on the Oct. 7 ballot. The proposal, if approved, would freeze one of three moving parts in the cap, a change its organizer hopes will halt a growing borough budget.
Currently, the cap can grow for three things — to keep up with inflation, to account for more people and more businesses (a trend tracked by the collective value of new homes and buildings), and to account for voter-approved bonds. The second condition — the “growth” factor — works under the assumption that a growing community needs more librarians, park employees and other public services.
Under the initiative, the growth factor would be eliminated.
Public officials, who were not the ones to propose the change — it’s a citizen initiative, submitted by the Interior Taxpayers Association — are beginning to mull its possible consequences. ITA president Donna Gilbert, who is largely responsible for past years’ cap-focused ballot measures, said the new one aims to force government cuts. The borough has added workers in recent years, “but we haven’t added any services,” she said.
Fairbanks’ city and borough governments both have tax caps, and they are basically identical. October’s measure, if approved, would make them different animals. Borough Mayor Jim Whitaker has said he opposes the measure, questioning why a working tax cap would need fixing. School district finance chief Mike Fisher said education leaders worry the change could slowly degrade school funding — the state reduces a community’s education aid as a community grows — recognizing that bigger cities and boroughs can better care for themselves. Because of this, opponents fear that by removing the tax cap’s growth factor, voters would leave future school administrators watching classroom needs grow, state assistance shrink and a stagnant tax cap making it tough for the Borough Assembly to respond.
Public spending at the borough has increased in recent years, as has the population. The borough’s annual budget grew by about 10 percent, after inflation adjustments are made, over the three fiscal years ending with 2007’s $116.3 million budget, faster than the population growth of 6.5 percent tracked by the state.
This year’s tax cap measure, which is beginning to draw attention six months before the election, will likely see far more debate than a pair of 2006 initiatives that spun the city of Fairbanks into a yearlong fiscal crisis. Mary Nordale, a Fairbanks resident and former state revenue commissioner, asked the Borough Assembly last week to consider a third-party analysis of the initiative’s potential impacts. “I think it’s extremely important people get the facts ... I don’t want the borough to go through the problems that the city of Fairbanks created for itself,” she said.
Contact Christopher Eshleman at 459-7582.
Community Discussion
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Chris, let me add to your article. The Revenue Cap (it is not a tax cap) also allows for increased spending for emergencies. You neglected to mention that.
Second, FNSB spending has- as you pointed out- grown significantly faster than inflation. For almost all fiscal years over the last 17 years, FNSB spending grew much faster than inflation.
The consequence?
Homeowners have watched their borough property taxes more than quadruple over the last 20 years. FNSB spending has grown recklessly and unsustainably. The mill levy that was about 7 mills until about 1985 is almost double that level today. Combined with a more than doubling of most home's assessed valuation- we've had a massive increase in property taxation for most homeowners. (While school enrollment has been declining.)
One component of this excessive increase in costs are benefits paid to FNSB employees. Those with over seven years service get about two months of paid time off.
How many in the private sector get such generous benefits?
FNSB employees also get one million dollars in health coverage for a token payment- of 10-20 bucks per paycheck plus 1% of gross salary (last time I checked).
So now the special interests will have a big boo- hoo party to complain that any real limits on FNSB spending through an improved revenue cap is so unfair.
Homeowners are being squeezed by excessive FNSB taxes, electricity costs, and heating costs. This is reducing the quality of life in the FNSB and driving people away- particularly those trying to live on fixed incomes.
If Nordale really wanted a fair study, she would ask that we study what the excessive growth in FNSB property taxes, along with a non-diversified tax base, has done to decrease the quality of life in this community.
At best, the improved revenue cap will be in place for two years. After nearly 20 years of excessive spending increases, the improvement is well justified. In two short years we can revisit the revenue cap if needed.
5050 - Well said, thank you.
Was this a news article or an opinion piece?
I think the NM's bias once again shines through. They're never meet a tax they didn't like (except, of course, a sales tax, because that's "regressive", but that's a topic for a different conversation), and they never fail to show it. Instead of writing a balanced article presenting the reader with all sides to the story, they immediately engage in hand-wringing, "What's the poor government going to do with less revenue?".
You leave it to your readers to point out that most home owners are struggling with rising energy costs, yet you have no problem opposing across the board energy rebates, favoring instead "targeted rebates" for low income homeowners.
You make no mention that housing prices are falling across the country, while our assessments keep going up and up. Why aren't you calling for the borough to reexamine their assessments? Why aren't you writing opinion piece after opinion piece urging the Legislature to get moving and pass the increase to the homeowner's exemption?
I'm sure you'd be the first to tell people they must live within their means, but you never call upon the government to do the same.
Your readers are the ones that bring up the fact that people are seriously considering moving out because the cost of living is rising faster than their incomes. What will happen to tax revenue when people start leaving because they can no longer afford to live here?
I totally agree with the other comments and must add that the school district is the biggest debacle of the century.
The cost of education (or non-education is more like it) is pitiful. We have been through all of the classroom size business to the need to pay more to attract better teachers .... all a bunch of hocus pocus. The fact is that NEA has stated publicly that they do NOT care about education .... only about pay and benefits. It shows. Looks at Fairbanks track record in the testing ...
The very firs areas to trim is the school district closely followed by the free benefits for employees. We pay over $600 a month (after tax dollars) for two healthy adults just for basic major medical health insurance. These employees are receiving in excess of a free $600 coverage and for the entire family. They should pay their own with after tax dollars just like I do. As long as the revenue is there it will get spent, quietly like this so they can point to the lower salary. Don’t they also get some sort of free day care as well.
Good comments! I would also like to ask. Why would the newsminer would be against a sales tax, after all they are exempt aren't they? NM motto everybody should pay their fair share septin us.
What no one has mentioned is that we NEED the state budget to be $10 BILLION dollars for Alaska's economy to grow. As of December 2007 employment statistics, 28% of all employment is government jobs. When you factor in all the contractors that work directly for the government that figure is closer to 40-50%. Of the 300,000+ jobs in Alaska 90% of them are in the service industry with only 10% classified as goods producing. When you divide the $10 billion by the 304,000 Alaska jobs you get $33,000 which is just short of the per capita average income of $38,622.
http://www.labor.state.ak.us/research/tr...
When you look at these numbers it is very clear the government is the largest industry Alaska has. Oil may give us the cash, but government is what makes the economy run.
With a total population of 670,000 we have 304,000 jobs? Those #'s don't sound clearly to me.
Growing government does not grow the economy, since the money ALL comes from the economy. It only redistributes the money, taking a cut for their inefficiency. After housing costs, taxes are the biggest drain in my budget, and that's probably true for a lot of other people also.
The main problem with this town is the fact that when they put out a sales tax option (that is suppose to reduce property taxes) they allow every body to vote. Does it seem fair that a person that does not own property in this town would be allowed to vote on a matter having to do with the ownership of property?
That said, even though I am a property owner (to the tune of $12,000 yearly in property taxes) I would never consider voting for a sales tax. The only reason I say that is the fact that although the borough claims they would lower our property tax, we all know they wouldn't. All the FNSB would do is increase their spending. So then we are all strapped with one more tax and no advantage.
I say make it fair!! Drop the property tax 100% and put the sales tax out there. At least a person would feel as if they had some control over how much they pay.....
Lance--- Sure it does just ask george w.
I agree with sherry29. I think property tax is an abhorrent idea. I would certainly vote to do away with property tax and implement a sales tax. Like sherry29 says though, I would ONLY do this if property taxes were eliminated completely.
I love you all.. really.. I love that I'm not the only one who reads articles like this and feel the NewsMiner seems to be quite biased in it's news reporting.
I also chuckle when I see people touting statistics. Anyone with any education in numbers will tell you just how quickly they can be manipulated or interpreted to support various sides of the same argument.
Thank you again fairbanks.. for paying attention to the issues.. you're great!
The dog catcher in the FNSB makes $95,000 a year. Do we really need added taxes to fund more FNSB workers? Let's cut the salaries of all FNSB workers before we tax the citizens for more dog catcher incomes.
Hi snowjob, do you have a link to these salaries? I would like to see those and others if posted? Thanks
The salaries of all FNSB employees are found within the FNSB budget. The hard-copy budgets may be purchased for about ten dollars. You might also be able to get the electronic version (BIG file) by contacting Treasury Budget at the FNSB.
I encourage folks to go through the annual budget. It is eye-opening. Last time I went through the budget I found scores of employees making well over $100,000 per year- plus benefits.
The News-Miner really dropped the ball in the way they reported this story. It is not that Chris got the facts wrong- he does a good job- but the way the News-Miner spins this. The better article would have been about the excessive costs and benefits that have driven FNSB budgets to grow faster than inflation for most of the last two decades.
The better question would have been, "Why do the residents of the FNSB work so hard to renew the Revenue Cap every two years?"
To my knowledge, the News-Miner has never, not once, taken a hard look at these questions. That, combined with the fact that they have never challenged the growth of FNSB spending, I believe, shows a real bias and has been a major disservice to this community. Taxes can, and do, destroy. The damage the excessive growth in FNSB spending has done could have been avoided if the News-Miner had done a better job.
Do you think the FNSB would want this information accessible to the public via a website? Call 459-1300 and request FNSB worker compensation and exact salaries for individual workers. I came across this information in a court hearing. The court was separating benefits between parties.
Some at the FNSB are very uncomfortable when their salaries are published. But the FNSB does release the budget information, as they are required by law to do so.
BTW- The FNSB has many outstanding people... The problem is with the assembly. They are the ones that pass the budgets and approve the generous contracts.
James -
You might want to check your data. School District employees DO NOT get free healthcare or childcare. They pay for a portion of their monthly premiums and the school district pays the other portion. That is the way that most employers do it. I don't know where you got your information about free childcare, as that is definitely not true.
I've been properly scolded for using the wrong budget figure when I crunched numbers for this story. The second-to-last paragraph above has been corrected. (The borough’s annual budget grew by about 10 percent, not 16 percent, after inflation adjustments, between 2004 and 2007, faster than the population growth of 6.5 percent tracked by the state.)
To add to comments by 5050 and sherry29: My look at the budget showed that, yes, borough budgets have outpaced inflation in recent years. Remember, though, that the borough can't spend more simply by increasing taxes — the tax cap discussed in this story broadly disallows a "tax increase" on existing homes and businesses and prevents the borough from, as sherry29 suggests it could, just adding a sales tax without reducing property taxes. It would be impossible and, under the tax ("revenue") cap, illegal.
To Lance Roberts, growing the government does grow industry. We need infastructure for businesses and industry to exist. These include education, roads, fire and police service, airports, et al. Only mines and oil wells set up in stark wilderness.
Chris, Thanks for your comments. Note that the FNSB can raise taxes by raising assessed valuations on homes. That has been the loophole used by the FNSB for most of the last two decades to grow its budgets-much faster than the rate of inflation.
Do this, graph the growth in FNSB spending over the last 16-20 years comparing the FNSB budget growth the to rate of inflation.
The FNSB is spending ten's of millions of dollars more per year now than they should if the growth in its spending had simply grown with inflation.
Homeowners are paying substantially more in property taxes- about the better part of $1,000 dollars more, each, because of the excess growth in FNSB spending.
As far as population growth being a justification to grow FNSB spending- that is not really a reasonable comparison. School district enrolment has been declining for most of the last ten years. And the size of FNSB government really does not need to grow based on the modest increases in our population. An economy of scale needs to be factored in.
And advances in technology that have allowed the private sector to downsize- do more work with greater efficiency- have not been employed at the FNSB. The number of FNSB employees has been steadily growing year after year.
Batman- you wrote "...education, roads, fire and police service, airports,..." are all reasons to grow the cost of government.
The problem is, the FNSB does not provide roads, or fire, - those are done by services areas that have their own mill levy. The FNSB does not provide police or airports. And as far as education- FNSB school district enrollment has been declining. The FNSB drop out factories only have about 60% of the kids earning a diploma.
Who or what is BTW, I'm still a nontexter.
seven51 - BTW - by the way
There's one other point I'd like to make that I failed to do when I posted earlier this morning.
The article states "This year’s tax cap measure, which is beginning to draw attention six months before the election, will likely see far more debate than a pair of 2006 initiatives that spun the city of Fairbanks into a yearlong fiscal crisis."
Christopher fails to mention that the rules for submitting initiatives have recently been changed. I don't know exactly what all the changes were, but I do know that one of the results is that iniatives must be submitted earlier than before. Could this be the reason why its beginning to "draw attention" earlier than usual?
Could it be that the city's lack of planning and lethargy in doing anything about its financial situation caused the city's crisis? Its not fair nor accurate to blame it entirely on the ballot initiatives.
I'm disappointed, but not surprised, but it appears that the NM doens't want to give its readers a "balanced" point of view.
Photodude, you make an excellent point. In past years the ITA turned in the Revenue Cap initiative signatures in August, at the end of the Tanana Valley State Fair- about two months prior to the October election. The legislature has made it even more difficult to do initiatives, and the ITA is now left with no choice but to turn the signatures in one year early. Absurd.
If 2008 was like 2006, this would not even be an issue at this point.
Photodude... Thanks for the info, I'm in californ,IA right now enjoying being a snowbird. But I will be back home in time to carry some petitions around.
5050 apparently has too much time at his job to gab on here. It is unfair to catagorically say FNSB employees make too much. Sure, some may. But studies, including citizen review committees for the City of Fairbanks (whom many of you also complain about) show wages and benefits comparable to similar private sector jobs (lower in many cases) and well within industry standards for those without comparable jobs. Quit being jealous of those who aspire, work hard, and get good paying jobs. Todays 95K job is the same as making 50K 12 years ago. We all tend to live in the past, using old perspective, and when considering what high wages are. 100K used to be the benchmark...not anymore. I have a great idea...instead of blindly attacking people you don't know over jobs you may not comprehend, cut them a break. Many people are good, not inherently bad and deserve fair wages. They are probably overworked...and obviously under appreciated for their efforts. As for the Sales tax...great idea if anyone would vote for it. Instead we live in an area that expects great service when they need it...but don't want to pay in advance.
Sherry29 - Non-property owners pay property taxes indirectly through their rent. But I do generally support sales taxes over property taxes.
5050 - I recall that the drop-out rate for FNSB was distorted because the statistic included students who were simply switching schools (because of Army parents and charter schools). But I am generally disdainful of public education and union teachers, especially those in the NEA.
First the fuel costs rise, then our power bills, property tax continue to climb, now they again want to mess with the tax cap. Would the last person leaving Alaska please turn off the lights.
Do to climbing costs the light at the end of the tunnel has been turned off.
seven51, petitions have already been turned in for this year.
alaskastoryteller... Reading your comment I,m not sure if your against or for the tax cap
The idea of a sales tax is so appealing to us property owners that it is also easy to forget that our borough and city are always looking for ways to fund the things we need. As much as I agree with a sales tax being needed I also am cautious to approve any new tax based on the simple history of any place having a new tax, nothing elso will go down we will just have another tax. The mill rate from the borough might ( I say might) dip for a short time but it will go back up to present levels and or higher and once the sales tax is on the books it will be a source of revenue that the city will use and eventually that will be going up also. When the city and borough start showing some fiscal responsability with the funds that they have now I will support this, but not until then.
Mel- I respectfully tend to disagree with you on the renters paying inadvertently to the property taxes. I do see the line being drawn but I dont think that it accurate to say that part of rental payments go to taxes in any kind of scale with larger housing units (ie wedgewood, jillian, sophies, etc) Property taxes are based off of the value of the property not the amount of income or number of people living on the property, so it isnt quite the same in my opinion. If that is way off base, please explain why.
JB - The property taxes are part of the cost of doing business for apartment complexes and the rental prices charged reflect that. As property taxes increase, all else equal, rental prices will also increase. However it is true that only part of the tax will be passed on to renters unless the demand for apartments is much more inelastic than the supply of apartments.
The charge on the property that has larg complexes makes the cost less per unit - $10,000 in taxes spred over 10 units compared to the same amount spred over 200 units. The cost of doing buisness in that ratio is not comparative to what a property owner has to pay, not even close. I also question how that breaks down when a buisness takes in all expenses and then determines a profit margin off of those expenses (25% markup on $1,000 in bill or 25% on $1200) the rent went up but the cost of property taxes will be a small amount of that, again not on the same scale to the normal property owner. I see what your saying but I dont know...
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