A resolution modifying state bills that could repeal the levy of tax by municipalities on oil and gas exploration, production and pipeline transportation property was introduced at Tuesday’s Kenai Peninsula Borough Assembly meeting.
When Gov. Mike Dunleavy released his proposed state budget, he submitted two bills, SB 57 and HB 59 to the Legislature, which would repeal the credit for municipal payments against the state levy of tax on oil property and allow the state to retain all tax on oil and gas exploration, production and pipeline transportation property, with estimated tax revenues of $450 million to the state next fiscal year.
Revenues from oil and gas properties provide the borough with an estimated $15 million per year — more than 18 percent of the borough’s revenues for 2020.
The loss in revenue would cripple the borough’s ability to fund education, maintain and improve roads throughout the borough, provide services like 911, hospital, solid waste, fire and emergency medical, senior citizen, and recreational services to visitors and residents in the borough, according to the borough’s resolution.
“This measure would cause the Kenai Peninsula Borough to seek other sources of revenue to fund basic services, which would likely be in the form of radical increases in local taxes and fees,” the resolution said.
The general property tax levied by the borough is currently 4.7 mils with service area mils added on to the property located in service areas and city taxes added on to property located within city boundaries. The highest property tax rate levied against any oil and gas property in the borough is 10.33 mils and the lowest is 4.7 mils.
The resolution calls for a more equitable approach, allowing municipalities to levy a tax up to 10 mils on oil and gas property. The resolution said this would ensure the state would receive half of the 20 mils allowed.
The resolution was brought to the assembly by Mayor Charlie Pierce and Assembly Vice President Dale Bagley.