Fairbanks City Council to put property tax change on October ballot

Council Member Jerry Cleworth's amendment would remove the fixed mill rate on the city's charter.
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FAIRBANKS, Alaska Fairbanks City Council is trying to put a charter-altering amendment on the October ballot that would change property taxes.

Property taxes are determined by a mill levy. What a mill levy means, is that for every $1000 of assessed property value, you owe $1 of taxes. There are three factors that determine the mill levy for property taxes for the city. Voter approved services, which is at a fixed amount of $695,280 annually. The legal claims made against the city, which is currently the only factor with a fluctuating mill rate. Lastly, the charter approved cap, which is a set 4.9 mill rate.

The proposed amendment would remove the 4.9 rate from the city's charter, and allow the property rates to change. If the amendment is approved by the voters, it will allow property taxes to fluctuate with inflation known as the Consumer Price Index, or CPI. The CPI rate is determined by the Bureau of Labor, they evaluate the city of Anchorage to determine the CPI amount for the state. The charter amendment makes the mill rate change with each year's CPI, whether it inflates or deflates.

The proposal comes as the city continues to look at new forms of revenue. The tax cap on Fairbanks limits how much money the city can collect from most taxes. Alcohol, tobacco, and property taxes all fall underneath this cap. One reason why City Mayor Jim Matherly put forth a bill to increase the bed tax is because it is one of the few taxes in Fairbanks that is not limited by the cap. Property taxes have an additional limitation on what can be collected. The set 4.9 mill rate acts as a cap within the overarching taxes cap. Every year the city could collect more property taxes if the additional limitation in place.

According to the city's Acting Chief Financial Officer, Margarita Bell, if the set mill rate was not in affect for this year, citizens would have paid an additional $23.80 for every $100,000 of assessed property value. An owner of a $200,000 valued property would have paid an additional $4 a month. Although the number seems small, it adds up. The mill rate cap is preventing the city from collecting over $650,000 from property taxes this year.

The amendment was discussed at this morning’s city finance meeting. Council Member and former City Mayor Jerry Cleworth is the primary sponsor of the bill, but after today's meeting, every city council member, including the mayor, announced they would co-sponsor the bill. Cleworth says this is an alternative to creating a new tax.

"The Council is looking at option rather than create any new fees or licenses that try to stay up with the inflation rate," said Council Member Cleworth. "This is probably the simplest methodology of doing that without creating yet another fee or another tax."

The amendment will have its first reading at next week's city council on June 24th. The second reading and public comment will be held in July. If the bill is approved in October, it will go into effect for next year’s property taxes.