Session: State Capitol, Room 121 Juneau, AK 99801-1182 Phone: (907) 465-4797 Fax: (907) 465-3884 Interim: post office: 119 N. Cushman, Suite 101 Fairbanks, AK 99701-2879 location: 3340 Badger Road. North Pole, AK 99705 Phone: (907) 488-0857 Fax: (907) 488-4271

Sponsor Statement for SB 4
Municipal Property Tax Exemption

An Act relating to optional exemptions from municipal property taxes on residential property and limiting an optional exclusion or exemption to the assessed value of $10,000 for a residence in a municipality with a total bonded indebtedness that equals or exceeds $15,000 multiplied by the number of residents in the municipality; and providing for an effective date.

Senate Bill 4 stems from discussions in 2000 over the ballot measure proposing a 10 mill cap on property taxes. During debate leading up to the election, many residents expressed their belief that property owners bear an unfair portion of government expenses. Senate Bill 4 raises the ceiling on the amount a municipality may offer in residential property tax exemptions.

Under current law, municipalities may exempt up to $10,000 of the assessed value of any single residential property. For example, if a house has an assessed value of $100,000, the municipality would assess taxes on $90,000. Five municipalities offer this exemption: Kenai, Bristol Bay, the Fairbanks North Star Borough, the North Slope Borough and Valdez. All except the Fairbanks North Star Borough give an across-the-board $10,000 exemption, regardless of the value of the property. The North Star Borough allows an exemption of 20 percent of the assessed value of the residence, up to a maximum of $10,000.

SB 4 continues the $10,000 residential exemption for all municipalities. In addition, it allows those municipalities in which the total per capita bonded indebtedness is less than $15,000 to exempt an additional $5,000, up to a total of $15,000, or 20% of the assessed value of the residence, whichever is less. As is currently the case, the exemption is optional and up to the discretion of local taxing authorities. Considering that the current $10,000 cap has been on the books since 1974, I believe it is time to look at adjusting the property exemption allowance to give local governments more flexibility in their taxing decisions. Section (q) adds a new section allowing municipalities to exempt up to $5,000 of the assessed value of a residence owned and occupied by a resident who volunteers fire fighting or emergency medical services.

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