By Rodney Dial
November 17, 2016
First, the positives. Borough employees are dedicated, professional and are doing a great job for our community. One of the benefits of being elected is that I can request information and obtain accurate data on community issues. Borough staff has been very helpful in this regard and I appreciate the time they have spent on my requests.
After several meetings, review of the borough budget and presentations by staff, here is my take on the boroughs fiscal position:
As I mentioned prior to the election the borough is currently in deficit mode with increasing deficits for years to come. This negative outlook could be a little “Rosy” for reasons I will go into later; however assumes a 1.5% annual increase in departmental budgets that is likely underestimating a few of the drivers of local government increases; rapidly increasing health care costs and reduced state/federal funding.
Realizing that we need to find savings and efficiencies to prevent future tax increases I have done the following:
Recommended postponing the “Charter Commission” election until the next regular election to save on special election costs. Other assembly members agreed and because of a lack of interest to service on the commission this issue has now been tabled. Savings, tens of thousands.
Turned down a training opportunity in Anchorage. Even though the borough would have paid for me to go, I want to serve my 3-year commitment on the Assembly without costing the taxpayers any funds for my travel. If I need to go somewhere for borough business I will pay my own way.
Reviewed the “Dues and Publications” budgets for all departments and offered recommendations on ways to save over two thousand dollars.
Currently working on a scheduling proposal and policy change with one department that could save tens of thousands in overtime costs.
Recommended elimination of items deemed non-essential (amount varies).
I was sworn in on October 10th, as a new Assembly member, and on that very day I listened to the single most budget damaging threat our borough government is likely to face in the near future….a state mandated INCREASE in the Required Local Contribution. A tax our citizens are already paying that could result in a doubling (perhaps even more) of our taxes over the next few years.
Let me explain what the RLC is. In Alaska, if you live in a borough, the State requires residents in those areas, who own a home or property to contribute 2.65 mills of property tax towards the operation of their schools. For residents who do not live in boroughs, the amount of property tax they are required to contribute to their schools is ZERO… nothing.
What is means is that there are numerous places in the state such as areas on Prince of Wales Island, Glennallen, and many others (mainly rural areas), where a homeowner on one side of a road will pay hundreds to thousands in yearly taxes to support their schools, and a homeowner on the other side of the road will pay nothing.
We could go to Prince of Wales tomorrow, and stand on the borders of Craig, Klawock, Hydaburg and see houses and properties that pay and look in the other direction and see ones that don’t pay. This amounts to arbitrary and discriminatory taxation based only upon the location of a citizens home or business. This also means that large Mining operations or other major businesses in some locations pay no property tax because they are not part of boroughs.
The problems caused by the scores of communities and commercial enterprises in the 19 Alaskan school districts that currently contribute nothing towards education, is… less money for education, a larger State budget deficit, and higher taxes for citizens in urban areas like ours. If you are a true supporter of our schools, the simple fact is the more Alaskans/businesses that contribute, the more money education has and the less each taxpayer has to pay.
Here is the one thing I need everyone reading this to understand. If the state increases our Required Local Contribution, our schools do not get more money…. all that happens is that the state pays less, and we pay more. That’s it. In fact, if the Required Local Contribution is raised to what it was years ago, that would translate into a 51% RLC property tax increase for Ketchikan citizens. We are talking about hundreds to even thousands of dollars MORE for our citizens and businesses in extra taxes, each year!
Tax increases of this magnitude would be devastating to many of our people and businesses. That is why on October 13th, when the Governor visited, I expressed my concern, in an open forum at the Ted Ferry Center, that it was not acceptable for the State to force our citizens to pay more, so that Alaskans in other areas of the state could continue to pay nothing. Further, it is not acceptable for the state to balance the budget deficit on the backs of our (urban) citizens alone.
In response, the Governor did not deny that the tax increase was coming and in response to the fairness question I asked he said “they (meaning the state) would look for some parity”. To me that not only means that the state is planning to increase our local tax burden, but that parity was not part of that plan.
Many communities, currently not contributing anything towards education, have the ability to contribute, however their citizens know that if they were to form a borough government the free ride from the state would end, so they simply refuse. Because they refuse, the burden on our citizens is higher and the state budget deficit is larger.
Literally, in less than 30 seconds of searching, I found a great example; a nearly million dollar home on Prince of Wales Island, walking distance from the City of Craig boundaries, and right on the listing it says “No Property Tax”. This particular home is only 2.9 miles away from the Craig School. You can see on line, countless examples just like this, in many communities statewide.
My first question to those reading this is: should our citizens be asked to pay more so that the person who owns this million dollar home (and many others) be allowed to continue to pay nothing? If your answer is no, then you should realize that is currently happening all over our state (one of the reasons our state spending is double the national average).
But there is more… I can actually prove that other areas of the state, that currently contribute nothing towards education, have a sufficient tax base to help and reduce the burden on urban citizens. I can prove this because many areas/communities have actually hired firms to examine the feasibility of borough formation.
For example, The Prince of Wales Island Community Advisory Council hired a firm to conduct a feasibility study just three years ago. Not only did that study show that the community had ample ability to raise local taxes, it specifically concluded, and this is a quote from the report:
“The region has the capacity to raise local revenue to balance its budget and fill the gap between funding that state and federal governments provide, and what would be needed to run a borough government and school district. However, to do this requires willingness by the majority of voters to undertake this effort and support some level of local taxation”.
This report goes on to say that even the smallest eight communities of POW Coffman Cove, Edna Bay, Hollis, Kasaan, Naukati, Point Baker, Port Protection, and Whale Pass, plus the major lodges there have an estimated total sales of $72 million annually that could be taxed, plus nearly ½ billion dollars in taxable property, including one mine.
I only used POW as an example because they are close. Numerous areas of the state have the ability to contribute towards education however current state rules and procedures allow them to refuse to contribute, by refusing to form boroughs. Because they refuse, the tax burden on our citizens is currently 100% higher and likely to go even higher.
Realizing this problem and how Ketchikan citizens (and other urban residents) are currently taxed unfairly, I directed the borough manager to prepare a resolution for the Governor and Representatives expressing our concern with this disparity.
I would like to say a few things about what this resolution is and what it is not.
It’s a statement that says; do not tax our citizens and businesses unfairly. It doesn’t say we don’t want to pay our share; we are already paying 100% more than citizens who live in 19 other school districts. It doesn’t even say don’t raise our taxes.
For those of you concerned with the state budget deficit, consider that what we are asking for “Fairness and Parity” could greatly reduce the state deficit and help keep the State tax increases to our citizens more manageable.
Here are a few observations (my opinion) of what is going on, on a state level.
First, our Governor and many of our Representatives act like the budget deficit is an urban problem, not an Alaskan Problem. Cuts are mainly affecting urban areas and the costly programs that benefit rural Alaska, like the Governor’s welfare for life program (TANF) have not been cut one dime. At the same time the Governor is advocating for spending INCREASES in rural Alaska; his attempt to expand the National Guard in Rural Alaska (at a cost of millions) is a prime example. Unfortunately, this one-sided policy is bad news for Ketchikan and other major communities in the state.
Another example would be the actions taken at the start of the state fiscal crisis, when the legislature stopped all school bond debt reimbursement for urban areas like Ketchikan. This means that citizens who live in boroughs like ours are now responsible for 100% of school construction and maintenance costs while residents who do not live in boroughs continue to have 100% of school constructions needs paid by the state (free for them). This was the first of the “Urban only Taxes”.
The RLC increase will amount to the second, major, urban only tax.
Anyway, I am doing my best to protect the people of our island from massive tax increases and will continue to do so. You can help by making sure that Rep. Ortiz and the Governor know that you expect real cuts and fiscal reform that treats all Alaskans the same.
Thank you again for your support and the trust you have given me.
Received November 16, 2016 - Published November 17, 2016
About: Rodney Dial is a member of the Ketchikan Borough Assembly. Dial is not speaking for the Ketchikan Borough Assembly in this commentary, the views expressed are his own.
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