Increase will raise $5 million in additional debt reduction
The Valdez City Council voted 4-2 last Thursday to raise the property taxes to 20 mills.
The move came during a special meeting held Thursday, June 6.
Last year, council lowered the rate to 18.3 mills for 2012.
Council members Donna Schantz and Karen Ables had argued for a property tax reduction to 13 mills and voted against the 20 mill rate. Council member Chris Moulton, an often fiscally conservative in his council votes, was absent.
Schantz argued the reduction would stimulate new business in Valdez; Ables, a businesswoman, lamented the high cost of doing business in Valdez.
Schantz noted the city’s permanent fund exceeds $100 million and expressed fears oil tax litigation uncertainties.
Property tax mills are calculated by multiplying the assessed value of property by the mill rate and then divide by 1,000. At 20 mills, property with an assessed value of $50,000 will have a property tax bill of $1,000 per year.
“I think we should go back up to 20” mills, council member Mike Wells said after stating that the city has a unique opportunity to buy down bond debt for new infrastructure - such as the new $39 million middle school - if the increase was passed. He also cited the city’s maintenance estimates that were deferred in years past that now total tens of millions of dollars. He also talked about infrastructure improvements such as a new harbor and expanding the current hospital facility that will require the city acquire debt.
He said after doing the math, his own property tax will rise by about $300 a year and he feels that he gets more back from city services than he pays yearly in property tax.
“I think it’s the right thing to do,” Wells said.
Council member Jeremy Miner said he would support the increase to 20 mills if the city’s energy rebate program could be increased. Hozey said the $550 per year allocated to qualified residents is set at that amount due to IRS reporting requirements; he also stated that new options could be reviewed by council to return benefits to Valdez tax payers. He said he was torn on raising it, but felt the real reason Valdez business interests often struggle is the high cost of utilities. He also lamented the fact that the increase could have very real impacts on families that struggle to put food on the table.
“I don’t think the amount of money saved would be spent locally,” council member Dorothy Moore said, alluding to the fact large numbers of people from Valdez spend much of their consumer dollars in Anchorage.
In the agenda statement Hozey gave to council member, he argued that municipal finances in Valdez are unique.
The statement said the Valdez assessor, Appraisal Company of Alaska, certified the city’s tax roll at $2,936,374,893 worth of taxable property. Less than $300 million is from non-oil related properties.
At 20 mills, tax revenues in 2013 can be expected to exceed $58 million.
City manager John Hozey argued that increasing the mill rate to 20 will add an additional $5 million to the city’s account dedicated to buying down debt. Valdez has exceeded the amount of property tax it is allowed to spend based on its population and can only use the excess to pay down municipal debt.
“If we stay where we’re at we’ll get five million less,” Hozey said.
The city can expect $18.4 million in debt reduction allocation from the 20 mill tax.