Senior tax exemption may be safe

A bill that would remove a state mandatory property-tax exemption for Alaska seniors failed to advance out of the House Community and Regional Affairs Committee and is unlikely to pass in its current form in the Alaska Legislature this session.

Under legislative rules, as the Legislature is within two weeks of adjournment, any house bill that does not move this week to the full house for consideration is off the table.

“It’s basically dead,” said Jenny Martin, a legislative aide to Rep. Paul Seaton, R-Homer, of House Bill 338.

Seaton introduced HB 338 at the request of the Homer City Council and other Kenai Peninsula governments to give city councils flexibility in balancing budgets. HB 338 would not remove the exemption, but instead take away the state mandate and allow local governments to raise, lower or eliminate the senior exemption. The bill also would let cities make the exemption needs based.

However, a bill introduced last week by the Senate Finance Committee, Senate Bill 210, Community Revenue Sharing and Property Tax Exemption, also would remove a state mandate that local governments grant a $150,000 exemption on property assessments for homes owned by a qualifying senior age 65 or older. SB 210 would remove a mandatory $150,000 exemption for disabled military veterans as well. HB 338 let stand the mandatory exemption for disabled military veterans. SB 210 would change the rules for widows or widowers of disabled veterans, removing an age requirement that would allow surviving spouses of veterans to get the exemption after the wife or husband died. That could create a scenario similar to what happened after the Civil War, where young women married elderly veterans to care for them and collect their pensions.

In transition language for removing the mandatory senior exemption, HB 338 preserves the exemption until a city takes action to remove or change the exemption. SB 210 doesn’t do that, according to an analysis of the bill by Seaton.

If SB 210 moves out of the Senate Finance Committee and passes the Senate, it could go back to the House. In that case, it would return to the House Community and Regional Affairs Committee, where Seaton is a member.

SB 210 also could affect how the state calculates a municipality’s required local contribution to its school district. HB 338 maintains the exclusion of the first $150,000 in senior property for determination of that required local contribution. Seaton said in his analysis that SB 210 doesn’t do that.

In its early years, the mandatory senior property tax exemption came with revenue sharing from the state. When he introduced his bill in February, Seaton said he couldn’t find any record that the state reimbursed municipalities for the exemption, but later said he found that from 1973 to 1985 the state reimbursed the full amount. In 1973 when the senior exemption was needs based, 911 seniors statewide received the exemption, costing municipalities about $200,000 in lost taxes. By 1997, when reimbursements stopped, 13,692 seniors qualified, costing municipalities $20 million in lost taxes. In 2015, 35,561 seniors qualified, costing municipalities $66 million in lost taxes.

In supporting documents for Homer Resolution 15-111, the Homer City Council’s resolution asking the Legislature to remove the mandatory exemption for seniors, the city said $61 million in senior-owned residential property was exempt, costing it $275,000 in taxes. 

According to a spreadsheet prepared by the Kenai Peninsula Borough, of the $1 billion in property value for the city of Homer, about $380 million receives mandatory exemptions with another $33 million in optional exemptions, for $413 million total in property exempt from taxes. Exemptions include $272 million for government properties, $16 million in religious properties, $1.4 million for disabled veterans and $9.5 million for charitable exemptions.

The council passed Resolution 15-111 unanimously and Homer Mayor Beth Wythe signed it. Wythe is running against Seaton for the Republican Party nomination for District 31 Representative.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

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