Assembly members met Friday at a work session to discuss an idea that could find its way onto the Anchorage ballot in April. The idea is intended to clarify how the city’s tax cap – a formula that determines how much money the city can charge in taxes that ultimately affect your tax bill – should be calculated.
Those in favor of the proposition argue that if it isn’t passed, tens of millions of dollars could be “artificially” added to the tax cap over time – giving city government the potential authority to charge taxpayers a lot of extra money.
The tax cap formula takes into account all sorts of variables, including population increases, changes in the Anchorage economy, and money that voters have approved in bonds – but the formula always starts with one number – the base.
That base number is the topic of a proposition that assembly member Chris Birch proposed.
Birch and Mayor Dan Sullivan’s administration who support the voter proposition contend ever since voters approved the tax cap in 1983, the intent was that the base number in the formula would be “the amount of taxes to be collected” in the previous year – the amount of all the tax money brought in, including property taxes and other taxes the city collects.
The other variables like population changes and approved bonds would then change that amount.
Birch’s proposition would put those specific words, “the amount of taxes to be collected,” in the city’s tax cap laws regarding the base amount.
“It’s to protect taxpayers against a huge increase based on what they paid this year,” said Cheryl Frasca, the city’s budget director.
WHY THE NEEDED CHANGE?
Supporters of the change say it would prevent what occurred in the years prior to Sullivan’s arrival, when Sen. Mark Begich was mayor.
To understand that, it requires an explanation of how the city dealt with revenue sharing money it received from the state during that time.
During the period when Begich was Anchorage mayor from 2003-2009, revenue sharing – state money given to cities as a cut of the state’s oil wealth – was reinstated by Governor Frank Murkowski, much of it intended to give property taxpayers extra help.
In 2006, then-Anchorage Assembly member Dan Sullivan asked the city’s municipal attorney at the time, Fred Boness, about the implications of revenue sharing money on the city’s tax cap – does money received as revenue sharing (and given to taxpayers in the form of property tax relief) reduce the “amount approved by the assembly,” and thus, the tax cap base, resulting in a smaller rise in the tax cap?
Boness responded in a memo, saying that if revenue sharing is used as a credit to reduce property taxes after the assembly has approved the tax levies in April, it does not reduce the tax cap base because technically, the assembly has already approved the tax levy – or, “the amount to be collected” – before applying the revenue sharing credit.
It was that legal opinion that Begich operated under, keeping the tax cap base higher than what it would have been if revenue sharing totals were subtracted from the total tax amount. Begich’s spokesperson, Julie Hasquet, says that was a smart idea because it guarded against future years when revenue sharing from the state might not come through.
Birch and the Sullivan administration want to avoid Begich’s interpretation in the future. During interviews on Friday, Frasca called the practice a “trick,” and Birch referred to it as an “artificial inflation.” They say that the purpose of the proposition is to make sure that any taxpayer credit like revenue sharing is deducted from the “amount approved by the assembly,” thus making the tax cap base a lower amount.
WOULD THE CHANGE WORK?
At Friday’s assembly work session, Assemblyman Mike Gutierrez raised concerns that – as the ordinance is currently written – it may not prevent a mayor from removing the revenue sharing deduction from the tax cap base in the future.
Gutierrez directly asked Dennis Wheeler, the municipal attorney on Friday: “In this ordinance, show me the language that would prevent that. Show me the language that would invalidate that legal opinion and prevent any future mayor from doing the same thing. It’s not there.”
In fact, the proposition does not specifically mention anything about how revenue sharing is to be applied, only stating that the tax cap base will be “the amount of taxes to be collected,” without any definition of what the phrase can include.
But Wheeler, Frasca and Birch all say they are confident that the intent of the proposition could not be misinterpreted by anyone in the future.
“If you respect the intent of the tax cap, you’ll use the amount collected, which is what was intended,” Frasca said, before adding a caveat: “But, if you’re clever, you can get around certain things, if you really try hard.”
“I think the voters need to have the opportunity to affirm in the tax cap language that the amount that can be carried forward – the base amount – is the actual taxes collected, not a number that’s massaged by the assembly or the mayor, but the actual taxes collected,” said Birch.
The phrase “actual taxes collected” does not appear in Birch’s ordinance.
The Anchorage Assembly is set to vote on the tax-cap proposition on Tuesday. If 8 assembly members approve of the idea, the issue will be forwarded to voters in April.