Wednesday, October 04, 2006

Voters In Fairbanks, Alaska Stage Proposition 13-Style Tax Revolt

Voters in the Fairbanks, Alaska area expressed satisfaction with the Fairbanks North Star Borough government (Borough Mayor Jim Whitaker, pictured at left) and the Fairbanks North Star Borough School District, but gave a big thumbs down to the Fairbanks city government in local elections held last night (October 5th, 2006). The most dramatic decision was voter approval of measures slashing the city’s property tax rate and transferring the ability to approve sales taxes from the Fairbanks City Council to the voters. Full story published in the October 4th edition of the Fairbanks Daily News-Miner. Full results of the election, with 97.62% of the votes counted, can be found on KTVF Channel 11 Fairbanks' Webcenter 11 site.

Proposition 3, which caps the Fairbanks city property tax rate at 0.5 mills, drew 56% of the vote, while Proposition 4, which transfers the authority to approve or reject any sales taxes from the six-member Fairbanks City Council to the voters, attracted 61% of the vote. With 13 out of 14 precincts reporting, absentee and question ballots are unlikely to change the outcome.

Since property taxes constitute the source of nearly half of Fairbanks' annual budget, passage of Proposition 3 alone creates a prospective $13 million budget gap for the community just weeks before the review of next year’s budget is set to begin. Passage of Proposition 4 hamstrings the City Council's ability to respond expeditiously through sales taxation, because not only did the City Council lose the ability to pass a sales tax on their own, but Proposition 4, in transferring the authority to voters, only allows voters to consider a sales tax at a general election, the next of which is scheduled in October 2007. There is no authority to call an interim special election to propose a sales tax sooner.

Understandably, Fairbanks City Mayor Steve Thompson (pictured at left), who was not up for re-election, was disappointed. “There’s a lot of work to be done in the next few weeks,” Thompson said. The Fairbanks City Council typically approves its budget by mid-December. Thompson suggested the city and the council might consider alternative taxes like an employment head tax or a tax on gross receipts, but said it’s too early to identify a solution.

Proposition 3 sponsor Nelson Miles, who also finished second in one of the City Council races, applauded the results of his initiative. He suggested the elimination of the city’s property taxes will encourage more Fairbanks North Star Borough residents to start to move inside the city limits over the next few years. Apparently, Fairbanks residents had been moving outside city limits to avoid paying property taxes.

However, Chad Roberts, who was elected to a three-year council seat Tuesday, was more subdued and worried the passage of both propositions could lead to severe budget cuts. Roberts, however, hopes a solution can be reached that avoids major cuts. “People don’t want to have a city in disrepair,” Roberts said.

Vivian Stiver, who was also elected to a three-year council seat, campaigned heavily against the idea of a sales tax and said Tuesday’s election results failed to change her mind. “Voters have said no to a sales tax,” she said, and the City Council needs to find another option, Stiver said.

The measures—both voter initiatives—led to visible campaigns from citizen groups in the weeks prior to Tuesday’s election. Supporters of Proposition 3, many organized under the auspices of the City of Fairbanks for Property Tax Reform Committee, blanketed the city with an estimated 23,000 campaign flyers during the weeks leading up to the election. Nelson Miles, who organized this effort, saw the momentum first hand as he walked door-to-door collecting signatures to put the proposition on the ballot. The possibility of a resultant fiscal crisis failed to sufficiently deter support. “People felt property taxes were too high, and that’s what kept me going all summer,” Miles said.

In response, another group opposed to the idea of abolishing property taxes spent over $5,000 on television ads asking voters to toss Proposition 3 and to approve Proposition 4, according to reports filed with the state of Alaska. By urging people to approve Proposition 4, they hoped to induce people to reject Proposition 3. The group, the Good Sense Committee, has organized a handful of times in recent years against various proposed sales taxes.

This year’s campaign was difficult, said contributor and Fairbanks City Councilman Jerry Cleworth, because Proposition 3 failed to mention the words “sales tax” despite its organizers admitted aim of forcing the City Council to institute one to replace property taxes. While his group wanted to identify the downside of a sales taxes, its ads could only imply that a sales tax would result if Proposition 3 passed, Cleworth said, noting that the word’s “sales tax” did not appear anywhere in the proposition’s language. “The average person might not have seen it as a sales tax,” Cleworth said. “What you’ve got on the ballot (only mentioned) getting rid of property taxes.”

In a related Daily News-Miner story, Fairbanks city voters further indulged their newborn passion for political housecleaning by electing two political neophytes to the City Council. Political newcomers Chad Roberts and Vivian Stiver were tapped by voters Tuesday to three-year seats on the six-member council. Neither have run for an elected office—much less held one—until this fall, and both admitted they face a learning curve as they prepare to oversee the city’s business. But both also promised to bring a serious approach to the council, which is facing a significant financial question mark after voters on Tuesday slashed property taxes, which account for almost half the city’s revenue.

Vivian Stiver was a staunch opponent of the ballot initiative, Proposition 3, which its organizers admitted was aimed to force the City Council to institute a sales tax. She interpreted Tuesday’s results not as support for a sales tax, however, but merely as voter frustration with high property taxes. With all but one precinct reporting, Stiver had collected 42 percent of the vote in a three-way race. Ironically, her closest opponent was the man behind Proposition 3—Nelson Miles, who collected 31 percent of the vote. Jim Dieringer collected 26 percent to come in third.

In the second race, Roberts collected 54 percent of the vote to Don Eagle’s 44 percent, with 2 percent of the electorate casting write-in votes. “I’m honored. I’m excited about the job ahead,” Roberts said, and also promised to study hard and quickly overcome the learning curve that comes with entering public service.

Stiver and Roberts are set to enter office with the city facing an estimated $13 million shortfall in next year’s budget. Roberts said it was too early for him to suggest ways to fill the gap—and hinted there could be no options aside from major cuts. “If you take all the money away, how do you pay for services? You don’t. You cut services,” he said. He said he hoped the council and city can find a solution. Roberts, a commercial real estate agent, had previously suggested his business background could help the city make smart real estate decisions, particularly as it considers options for revitalizing the downtown area and entertains proposals for city-owned land under a deteriorating Airport Road apartment complex.

Incumbent council members John Eberhart and Howard Thies did not run for re-election. Eberhart chose not to run, and Thies, who was elected to a Fairbanks North Star Borough Board of Education seat Tuesday, was disqualified from seeking another City Council term due to term limits.

In another related Daily News-Miner story, voters expressed much more satisfaction with their borough government, handily re-electing incumbent Fairbanks North Star Borough Mayor Jim Whitaker to another term. Whitaker is a former state lawmaker with a knowledge of oil and gas issues. He said the borough and the port authority should continue to have a role as the state works toward developing its supply of natural gas.
We have every intention of pursuing an energy policy that will benefit the borough as well as the state,” Whitaker said. “It will be broader than usage of natural gas and encompass a new approach to the utilization of natural gas and will result in significantly lower energy costs in the Interior. And that’s why we’re doing it.” His extensive political experience combined with strong advocacy for Interior Alaska earned him 77% of the vote. (For those who are unfamiliar with Alaska's governmental organization: A borough is our equivalent to a county in the lower 48.)

And finally, in yet another related Fairbanks Daily News-Miner story, voters approved a pair of school bond measures allowing the borough to raise $23.1 million in bonds for maintenance and renovation projects at 10 schools spread across the Fairbanks North Star Borough School District.

Proposition 1, which focused on eight of those schools and allocated $14.7 million towards sundry repairs and upgrades, got 7,533 votes out of 11,790 counted as of press time. Proposition 2, which allocates $8.1 million for renovation projects at the other two schools, performed nearly as well, receiving 7,299 votes. Facilitating passage was the possibility of 70 percent debt reimbursement from the state. If the state follows through with this reimbursement, property owners in the borough will see their property taxes increase $9.94 for every $100,000 of their property’s assessed value. Without the reimbursement the additional cost per $100,000 will be $33.13. “It was a wise decision on the part of the voters,” Borough Mayor Jim Whitaker said, since now the borough can share the cost with the state. “It makes sense and I’m pleased that the voters agreed.”

Superintendent Ann Shortt, at the regular School Board meeting on Tuesday night, was pleased to hear the news as it became clear both bond issues would pass. “This community is so supportive of our facilities and having a good solid place for children to learn,” Shortt said.

Other related Daily News-Miner Fairbanks election stories:

North Pole mayor race undecided
Assembly race remains close
Thies pulls ahead in tight school board race
Jacobson, Wilson win North Pole seats

Commentary: It may be premature and unfair to denounce Fairbanks voters as "cheapskates" and "skinflints" because they capped property taxes and made sales taxes more difficult to implement. The passage of both school bonds by impressive margins implies that Fairbanks voters are willing to pay for more government, particularly when it involves education. But the possibility of debt reimbursement from the state is a definite pot-sweetener.

However, it appears Fairbanks city voters have serious issues with their government and decided to discipline them by curtailing their allowance. While North Star Borough property taxes have doubled and, in some cases, even quintupled during the past 21 years, the Borough Assembly recently passed measures to reduce those property taxes. In contrast, the Fairbanks City Council apparently took no similar measures. Fairbanks city residents may also be dissatisfied with the level of local police protection, as they cope with a rash of recent burglaries. We also cannot discount the possibility that the vote might also have been in part a reaction against Federal taxes; according to the website, Tax Freedom Day occurred on April 26th of this year, later than in previous years, but still short of the historic high of May 3rd achieved during the Clinton regime.

At the same time, not only do we Alaskans pay no statewide income or sales taxes, but eligible Alaskans even receive a Permanent Fund Dividend every year. Outsiders already whine constantly about how we Alaskans don't want to pay for anything and how our Federal lawmakers are "porkmeisters". Consequently, when voters pass seemingly extreme measures like Propositions 3 and 4, it makes us look like cheapskates and inhibits our ability defend our state against these Outsiders. The "strategic value" and "resource treasure trove" arguments can only carry us so far.

Consequently, if I was a Fairbanks resident, I would have voted against both Props 3 and 4. Proposition 3 sets the mill rate cap too low and denies the City Council flexibility to seamlessly adjust to changing requirements. Proposition 4 should have, at the very least, allowed the City Council to call a special election for sales tax initiatives at any time and not force the city to wait until the next general election. A flexible tax cap similar to Anchorage's Municipal Tax Cap would have been a better alternative; while considerably more complicated, it provides much more flexibility to the municipal government.

Fairbanks voters may feel good now about their judgment, but what hasn't been mentioned by anyone is that the City Council may end up being forced to raise fines and fees to help cover the impending shortfall. We'll see how Fairbanks voters feel about these propositions if they have to start paying $50 for parking tickets or see platting fees jump by 1000%. These are tactics that were employed by the Begich Administration in Anchorage in a quest toward property tax relief there. Fairbanks state lawmakers better start pushing for restoration of state revenue-sharing if they want to reduce the chance of windfall increases in fines and fees in Fairbanks.

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