Tax measures focus on borough’s response to growth
Published Sunday, October 5, 2008
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Stumble It!FAIRBANKS — Voters on Tuesday will see a pair of tax-related measures on the municipal ballot.
The questions offer a critique of the 21-year-old laws used to control public spending at the Fairbanks North Star Borough. The technical difference between them amounts to a few sentences. The practical difference is yet to be seen and would depend on the number of nail guns, air compressors and construction machines we hear running in the next couple of years.
Proposition A calls for affirming the borough’s tax cap, a voter-approved control on the taxes collected from one year to the next, by leaving it unchanged.
Proposition B would change the cap: It calls for dissolving a clause that lets the tax cap expand when the community grows. If voters pass one and reject the other — an outcome not guaranteed — the winning measure becomes cemented in law for two years.
The difference between the two amounts to its treatment of what might best be termed the “growth clause,” which measures the value of buildings, homes, garages, warehouses and other structures that construction crews build from one year to the next.
The rules are designed to take that annual construction work as a signal that new people have arrived in Fairbanks or are coming, and, because of that, will be driving the community’s roads, borrowing more DVDs from the library, using neighborhood parks and trails, sending their kids to school and filling more seats on the public bus.
Proposition B would erase the clause and, starting next year, hold taxes flat — aside from adjustments for inflation and a couple of other factors — regardless of whether or not Fairbanks’ population grows. If it does grow, the change would distribute the community’s tax burden among more property owners and, in time, force the average real property tax bill lower.
Leaders from a collection of union groups, nonprofits and other organizations are supporting the current tax laws and Proposition A, saying a change would create a subtle, long-term threat to school funding and quality-of-life issues.
“When we see growth, we’ve got to support it,” labor leader Jay Quakenbush said. “And if the revenue isn’t there to support it, we’re all impacted.”
The Interior Taxpayers’ Association and president Donna Gilbert are taking a new stance this year with their effort to change the tax cap — which she originally helped champion and has lobbied to protect since — through Proposition B. Gilbert said her effort aims partly to slow the growth of public spending, adding that her opponents are offering the same arguments they offered 21 years ago — arguments she said were proven wrong — this time around.
“Our (proposal) worked in ’87 as we promised the people, and we would like them to give this one a chance,” she said.
Growth factor
Property taxes account for roughly two-thirds of the borough’s annual budget. The budget two years ago reached the $120 million mark for the first time, the same year borough tax officials collected more than $80 million in property taxes.
That tax allowance grows by a fraction of a percent each time a construction crew builds a new home, warehouse or other project.
Organizers in Fairbanks crafted the tax laws, including the growth clause for new construction, two decades ago. Former city official Jerry Cleworth said he and others in the group modeled it after the same laws in place in Anchorage, a move meant to enforce discipline on public officials’ spending habits.
“The pressures on government to grow are incredible,” he said Thursday when explaining the tax cap’s purpose. “If money is readily available, there is not a lot of incentive to control that budget. Until you hit a wall.”
The new-construction growth clause built into tax caps, said Tony Knowles, a former governor who was serving his first term as mayor of Anchorage in 1983 when that municipality’s cap went into law, is there to help gauge the number of businesses and families moving to town, an influx that nudges the demand for public services upward.
The flexibility prevents an imbalance where demand for services grow while the supply of tax money stands still.
“These people require more services from transportation, from police, from fire and from schools,” Knowles said Thursday, speaking of new residents in a community. “That’s why keeping the additional funds from real growth does not insult or compromise the principle of having a tax cap.”
Quakenbush said that aside from long-term school funding, his biggest concern with the proposed change is that Fairbanks could miss the potential tax benefits that would come from a big project — a long-discussed, proposed multi-billion-dollar natural gas pipeline.
But, of course, it’s anyone’s guess as to how much new construction Fairbanks will actually see in the next two years — or 20 years.
The residential housing market is already slow, although companies continue to build stores. Steve Shuttleworth, the city’s building official, said his office roughly estimates the city will see $50 million or more in construction next year.
The arguments
Public officials estimate that had Proposition B’s proposed change been in place during the past 10 years — a decade that saw significant growth in Fairbanks — the revised tax cap would have left public schools and other general government services operating with only two-thirds the funding they see now, a difference equivalent to the cost of abouit 150 teachers.
“This is what opened our eyes,” Quakenbush said of himself and other supporters of Proposition A.
The borough’s tax laws also govern management of Fairbanks’ five volunteer fire departments and 100-plus road service areas, each of which levy an individual tax rate to maintain their respective department or road system. Commissioners for fire service areas have recently raised concerns over Proposition B, saying it would slowly dilute their budgets and resources.
But Gilbert pointed to signals that Fairbanks could be due for an economic downturn that could justify a long-term tax break.
School enrollment figures fell steadily for a decade until this fall, and far more homes sit for sale on the market than two years prior, which Gilbert said could point to a high cost of living that could be accelerating to the point of pricing people out of town.
“We took a very realistic approach to make it more affordable for people to live here,” she said.
Community Discussion
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Homeowners are under a financial burden unlike ever before. It is imperative that voters approve Tax Cap "B" on Tuesday.
Here's why:
Fuel oil costs are significantly greater today. So are electricity costs. Homeowners with adjustable rate mortgages may have an ever greater burden.
On top of these massive cost increases, homeowners are being asked by unions to pay the highest property taxes in the state to borough government. It is a fact that homeowners in the borough today are paying significantly HIGHER property taxes than they should because borough spending has been growing significantly above the rate of inflation- because the borough has been exploiting a loophole in the existing tax cap.
The average homeowner is paying almost $1,000 dollar more in property taxes on a $150,000 home than they should have to because borough spending has been growing above the rate of inflation.
That is not fair to homeowners and it is incredibly destructive to not only families but our local economy. People are afraid to build nice homes here because of the excessively high cost of property taxes. Others are moving.
We know without doubt that school district enrollment has been declining for most of the last ten years. We also have heard projections by elected officials that our local population will be contracting as a result of our massively increased energy costs. The idea that our population will be growing soon is very, very unlikely.
The way to help control borough spending and keep more of your hard earned dollars in your bank account is by supporting proposition "B".
Under the improved tax cap, borough spending will still be able to grow at the rate of inflation, and it will still be able to tax more for voter approved bonds and emergencies. They just will not be able to exploit the new construction loophole for unsustainable spending growth.
Face it, the rate that borough spending has been increasing over the last 20 years is unsustainable- they are spending tens of millions of dollars more per year because they have been growing their spending way beyond inflation. Maybe it is time that senior borough employees not be given almost of two months of paid time off at your expense. Or maybe property owners should not be asked to provide such generous health care benefits- borough employees only pay a token portion of a policy that gives them one million dollars in coverage- the rest comes out of property owners pockets.
Proposition "B" will help restore some sanity.
But only with your vote.
I am going to vote for Prop. B this time. I am tired of the Mayor and assembly telling me they approved a budget under the tax cap every year. Course they spent several million in new construction taxes from the year before to raise the tax cap so now they can spend those millions again and be legal under the tax cap. This just made them force new money into the budget so the tax cap law was maintained without breaking it. We won't be loosing any teachers and the fire and road service districts don't get their money from new construction outside their districts anyway so knock off the scare tactics.
The old tax cap, the original tax cap, was passed with good intentions and it didn't hurt services one bit. But the budget writers learned how to use the tax cap to artificially inflate the budget spending each year. Time to take that toy away from them. Time to change to a Prop. B tax cap
We need Proposition B to plug the hole that allows the Borough to keep spending other people's money with impunity. The Borough needs a tighter budget, and it's been proven they can live on it if they're forced to.
I agree with you, thewayiseeit. The borough does not even supply new services to people building new. If they build in the city, the city gets more taxes under the city cap and supplies services like fire and police. The borough, however, does not even have police powers. New Schools come in when people vote them in, and fire service areas can vote themselve more taxes if they want to. And the article does not go into all the ways the tax cap (A & B) can be raised. Prop B does not change that! It only drops ONE exception. I agree, we need to vote YES for B.
I am voting against B for 2 main reasons.
1.The borough has attained a certain level of services, including all the better ISO ratings for the fire departments. The quality of those services would go down if their budgets are cut under Prop B. People want the borough bus system to expand, but don't want to pay for it.
2. ITA has admitted that their prop is NOT based on crunching numbers, but on observation. I want to see some proof that the Borough is outspending inflation, and by how much. People have continually cited the fact that the number of students in the borough hasn't been growing as a justification for Prop B. There are a lot more things going on in the borough than just education, also just because the number of students in the Borough hasn't been growing doesn't mean they haven't had a legitimate increase in expenses. With No Child Left Behind in place the Borough is going to be spending more money per student in order to meet the requirements. All the borough services are being hit by the increase in fuel and electricity prices also, that is going to cause budget increases.
Think before you vote! Prop A is better than Prop B, because it allows for growth PLUS quality of life. I've talked to emergency services folks -- Prop B scares them. Already they have 30-year old equipment they cannot afford to replace & are hemorrhaging budgets filling the tanks on those gas-guzzling fire trucks & ambulances. If B passes, they plan to mothball outlying stations, which will jack up homeowners' insurance rates. Prop B won't save residents money -- homeowners can pay insurance companies instead of the borough. Then maybe if their houses catch fire they can call their insurance agents -- or the dimwits behind Prop B who think you can get something for nothing.
Yes on B, NO on A.
One thing to keep in mind is that these caps have to be renewed ever two years. If we experience record growth and need to increase our taxes we will have a chance to do so in two years. I think that the borough officials are trying to scare us and they don't want to have to keep their spending of our money in check. It is easy to find ways to spend other peoples money.
Yes on "B". We, the people, need to take power back from the government.
"That tax allowance grows by a fraction of a percent each time a construction crew builds a new home, warehouse or other project."
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Fannie Mae and Freddie Mac have been bailed out by the taxpayers via the bail-out package. I heard on the news it was because they gave loans to people who were not credit worthy and/or bought too much home for their income level.
Well, how many mortgage loans in the FNSB are backed by these entities? How many take out huge mortgages they know they can't afford? And just because they build new hotels, homes, and warehouses, doesn't mean new people will show up to use them. Our nation's economy is in real trouble and if anyone denies it won't effect our community....well, they aren't thinking rationally.
My point is, just because there is construction growth doesn't mean it's good for our community. Our family lives within a realistic budget based on our current monthly income. Why can't the borough do the same? We're all tightening our spending habits not expanding them. Government needs to do the same and that's why I'm voting for Proposition B.
Neferet has hit the nail on the head, are people really prepared to give up the quality of services we have? I know for a fact that I will save more money on my homeowners insurance than I will in taxes if Prop B passes.
Who says the Borough isn't tightening their belts? Why are we going to the most extreme measure rather than taking some intermediate steps to allow the borough to save money?
Marie, perhaps if you were better informed, you would be voting for proposition "B".
Lets address your misunderstanding of the borough. First, the borough does not have a fire department. The different fire departments within our borough are independent entities with their own boards and service areas. Those service areas are free to adjust their mill levy for fire service at any time. So you are factually incorrect when you suggest that the quality of service would decline.
You also suggest that the improved tax cap would "cut" funding. Again, you are incorrect. The improved tax cap allows for revenue increases at the CPI, or inflation. And we know borough spending will increase at least four percent next year because that is the current CPI rate. (Four percent is a large increase). The cap also allows for spending increases for voter approve bonds, and for emergencies.
Let me repeat- the new revenue cap, prop "B" allows for increased borough revenue. An increase is not a "cut".
As for the bus system- the people that do not want to pay for the full cost of the bus system are the riders. Homeowners are asked to subsidize that system year after year after year because the riders do not pay anywhere close to what it takes to fund the system. Many believe the system should pay its own way.
As far as borough spending being above inflation- too bad you are not willing to do your homework before you vote. Borough budgets are available on line and at the library. They are not secret documents. If you get off your fanny and actually read, and compare borough spending over the years you would see we are spending tens of millions of dollars over what we should have to because borough spending has been growing at a fast clip over inflation. The budget in '92 was about 70 million. The budget today should be a little over 102 million- if borough spending had been grown responsibly. Instead the current budget is well over 120 million.
Marie- you need to realize what this unsustainable spending will do if it ultimately crashes our economy. The value you have in your home may be wiped out as real estate prices plunge in a collapse.
A little restraint in the GROWTH of borough spending for two years will not hurt- it can only help.
Marie, why do you continue with your scare mongering and disinformation? You know darn well that Prop B does no such thing. It will not cut the budget and it will not prevent growth. Plain and simple. If service areas have equipment that is old and needs to be replaced they can go to the voters that live in that area and get approval to do it. They're not going to mothball any stations. I pay for the fire service in my area. Unless you live in mine, your taxes go to your service area (assuming you live in one), they don't go to pay for mine.
Speaking of tax and our present financial situation; if you do your research
into Obama's background, you will find that 'he' was the Senator who
introduce a Bill, forcing the banks to loan money to subprime borrowers,
under penalty of law, if they didn't. This opened the flood gates to
bad credit borrowers who couldn't afford to pay for their mortgage and
the housing bubble eventually collapsed, along with banks; etc.
In my opinion, he and his friends at Fanny Mae, did this to put the
blame on the Republicans, so he could use it to win votes. Even then
he was plotting and nothing would stop him, not even the total collapse
of our financial market and ruination of America. He cause ALL of our
problems and now wants us to elect him a President, so can ruin us
even more??? You decide. Do your research and you will find
HIGH TREASON.
Vote No on Proposition A!
Vote Yes on Proposition B!
I can't support anything the ITA initiates or supports. Donna Gilbert and her clan of cronies never use facts or statistics...only assumptions. She hides behind the guise of fighting for the taxpayer while really only using the initiative process to impose her personal agenda on us. (interstingly she was guily of not paying her city sales taxes when they had one). She is not for efficient govenrment, she is for No government.
She has done nothing but damage to what the City and Borough. I imagine the progressive prospering place we could live in, if not for her misguided interference.
This prop will not reduce your property taxes or cut spending.
Respected, intellegent leaders in our community support Prop A.
VOTE YES ON A, NO ON B.
NO ON A
YES ON B
Wish the NM would explain why they publish an article, edit it a little, then change its name so all the prior comments are lost. Seems like a questionable procedure, somehow...
Prior article: "Jim Whitaker could be deciding factor if both tax measures pass" (http://www.newsminer.com/news/2008/oct/0...)
Whittaker sent the bourough attorny to SUE Donna Gilbert and get prop B off the Ballot ! Sued two elderly ladies excersizing their free speech rights by introducing their tax cap, prop B....the arrogance, mean spiritedness and down right cowardness of Mayor Whitaker is beyond comprehension to anybody with a sense of dignaty. That man should be run out of town on a rail along with all the Borough assembly members that stood by and watched.
Mayor Whitaker also SAID if both pass he will honor prop A and disregard prop B......Send a clear message to him and this worthless assembly and VOTE NO on A and YES on B...
YES ON "A"
NO ON "B"
Three YES to B votes from my household. Agree with most of you about the waste of money to tax payers the borough is.
Two YES votes for B from our household!! Donna, thank you for your service to our community for so many years.
1AkFox ... has been around for a while.
In recent years borough spending has increased at the rate of about 10 million per year (close to 30 million). Because of the new construction of Wal-Mart / Home Depot / Low's store area and now across the street.
Some day there will be another pipe line resulting in billions of dollars in new construction.
Prop "B", if passed will start lowering everyone's property TAXES NOW no mater where you live. And, when the big pipeline is built.... property taxes off that line will mean a very substantial reduction.
The theory of "economic development" is to benefit the people. Benefiting "the people" means me and my neighbors paying less property tax!!!!
Passage of "B" increases your non-taxable income by reducing your cost of living.
You must vote correctly on BOTH props. In order to protect and increase your standard of living.
Vote NO prop "A"
~~~~~ Vote YES on prop "B"
Contact all your friends and urge them to do the same.
My thanks to Donna!!!!! She has earned her statue in the park for leader ship and bravery.
If we don't hang together, we will certainly hang individually.
I see there are folks who what to help the borough get more money to waste hiring people to water flowers while it is raining.
I am absolutely certain taxpayers will freely donate extra money after they pay for heat, food, fuel, mortgage, school cloths, medical care, car insurance, property insurance.
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If I remember correctly, the borough assessed valuation before the pipeline was around 800 million dollars; after the pipeline it was around 3 billion dollars.
The extra borough tax income never reduced anyone's tax burden.
NOW is our chance to have "economic development" benefit us in known and measurable way.
No on A and Yes on B.
I have a great idea. We should penalize long-term residents by making them pay more taxes. What is the perfect plan?? What tax plan allows for little to no contribution (except bed tax) from tourist, allows for lower taxes paid for seasonal residents, and lower taxes for vagabonds?? I got it!! Residential property tax! We should vote in a bunch of Enron Execs to cook the books no matter what cap we place on taxes, and allow for increased appraisals despite devalued property values!! Hey, if you hold your home on the market for the next five years you should expect to receive $#,###,###. To keep this plan in place we must allow everybody to vote for the system despite only a small portion paying the bill.
Glad the government and borough residents agree...
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