Homer, Alaska - Oped - A new approach to property taxes, but avoiding disparities of Prop 13 05/07/08

Story last updated at 11:53 PM on Wednesday, May 7, 2008

A new approach to property taxes, but avoiding disparities of Prop 13

What adds to the beauty of the Homer area is the abundance of homeowners who own a few acres or more of undeveloped land giving the landscape a rural, relatively uncrowded look. As Mossy Kilcher pointed out in a recent letter, many homeowners intend to keep their elbow room just as it is. But while their land may not be changing much, their recent property tax assessments certainly are, threatening their financial ability to maintain the status quo. The irony is that those who don't develop their land and thereby maintain Homer's bucolic setting are paying a price (i.e., higher taxes) as the value for nearby subdivided and developed land continues to escalate.

The culprit is not borough tax appraisers, but state laws they must follow which require that property assessments be at made at "full and true value." State statutes define this as the "estimated price that the property would bring in an open market." This is highly speculative. Besides being just an estimate, it wildly assumes that there is a "willing seller and a willing buyer" for every piece of property being assessed. If all assessed land in the borough were actually available for sale, according to the laws of supply and demand, prices (and assessments) should plummet since there would be many more sellers than buyers.

Obviously, tax theory is not meeting practical reality and those who own more land than just the footprint of their home are suffering. Part of the problem is that some land is considered view property and thereby given a higher assessment. But if the land is undeveloped (i.e., no house) who besides the squirrels is enjoying the view? I agree that view property should be considered more valuable, providing someone is actually there to enjoy the view.

According to borough assembly representative Milli Martin's article in last week's paper, the borough has heard the chorus of complaints and will be forming a task force to address the property tax assessment issue. Accordingly, I would like to suggest what I think is a more equitable approach. This approach would tax property based on its current use but avoid the disparities that grew out of California's Proposition 13 in 1978 to cap property taxes. Also, my intent isn't to put a stranglehold on local government which some might use this issue for.

The truest assessment for a property is the price last paid. What I suggest is that property owners be given a choice; either report the sales price of the property, minus Realtor commissions, or be faced with a market-based assessment. (Currently, only 30 percent of borough property sales are voluntarily reported). This then becomes the ongoing basis for the property's tax assessment. Unless there are improvements to the property, or it is subdivided or sold, the only changes will be to annually adjust for increases or decreases in the Anchorage CPI. This should help prevent the tax disparity between neighboring properties that California experienced.

Those who now own property and haven't previously reported the sales price would be given an opportunity to demonstrate if the price they paid, adjusted for inflation, is any less than their current assessment. There will be a lot of appeals initially, but things should soon get back to normal. If the property was not obtained at market price (e.g., inherited) or the home was substantially built by the owner, some type of market assessment, based on the year of acquisition or completion, might still be needed. This might be hard in cases where home construction is an ongoing event.

All in all, I think this approach would bring much needed stability to borough property tax assessments and insulate those who are not changing how they use their property from changes occurring around them.

George Matz lives in Fritz Creek.

Homer Alaska - Oped -