Property Tax Exemptions – Can we afford them?

This chart is part of the MSB Manager’s 2018 budget presentation.exemptions by value

Properties that are used for educational, religious, or charitable purposes are not assessed any property taxes at all.  (Interestingly, private air strips are also exempt from any property taxes if the owner allows public use.)

The Mat-Su Borough offers partial tax exemptions to some homeowners – Senior Citizens (people over age 65) and Disabled Veterans (any age; must have a 50% or more disability rating).  Home owners who qualify do not have to pay property taxes on the first $218,000 value of their homes.

Note: The State of Alaska mandates an exemption of 150K and the MatSu Borough voters  a few years ago voted to add another 68K, for a total of $218K per exemption.

https://www.adn.com/alaska-news/article/mat-su-voters-decide-property-tax-exemption-seniors-vets/2014/06/22/

The amount of “homeowner exempt” property has grown steadily in recent years, especially after the exemption amount was increased to 218K.

In 2012, the total assessed value of homeowner exempted property was $644 million for a loss of $9 million in tax revenue. By 2017, it was $909 million and a loss of $13.6 million in tax revenue. 

4,957 people applied for these exemptions in 2012 while 6,756 people applied in 2017.  That is an increase of 1799 people or 36.29% – in just 5 years!

Property exemptions

Senior and Vet property exemptions are intended to help seniors and disabled vets with fixed incomes stay in their homes.  However, these exemptions do not always target low income people because they are not needs-based.

riverbend

This is River Bend.  (Above) It is a newer high-end but smaller subdivision in Palmer.  The custom built homes in this subdivision, which range in value from approx. 450K up to $2 million, have all been constructed within the past 10 years.  (So these homes are NOT your grandma’s colony house! They are new luxury homes.) Most have outstanding views of the mountains and river.  The subdivision also has common walking and biking trails leading down to the river.  There are approximately 30 homes in this subdivision.  7 of these homes are owned by folks who get property tax breaks.  These 7 homeowners claim the full 218K property tax exemption.

This is Sky Ranch (below). It is also a high-end but older subdivision in Palmer.  It is a gated community with a private airstrip.  Many of the homeowners have airplanes and airplane hangers (right next to their houses.) There are approximately 45 – 50 homes in this subdivision.  Eleven of the home owners get the full 218K property tax exemptions. (Some of the exemptions are vets; more are seniors.)

sky ranch

Update on other high-end locations in the Valley:

I did some more checking and in CLOUD’s REST, I checked the approx. 15 big homes with views (I did not check the homes with the lesser views) and you guessed it, 3 had the full exemptions. One home was originally assessed at $853! But with the exemption of course, the owners only pay property taxes on approx. 630K.

FINGER LAKE – lakefront homes – there are a lot of exemptions there too. Now, I know a few may be homesteads and not worth a LOT, but most of the homes on Finger Lake are super nice high end homes.

There is a house on WOLF LAKE (the aero community) that is assessed at over $1 million which gets the full senior exemption (so they pay taxes on approx 800k). And all told, I counted about 19 lots right on Wolf lake – there may only be about 15 hours because of empty lots and public lands – and about 5 have the full exemptions.

Do these wealthy people really need property tax breaks? NO WAY.

It is time to think about eliminating these property tax exemptions.

https://itep.org/state-tax-preferences-for-elderly-taxapayers/

“Few demographic groups receive more attention from state lawmakers than fixed-income seniors. There is a virtual consensus among elected officials that retirees should not be “taxed out of their homes,” for example. Yet state income tax breaks for elderly taxpayers typically reserve the lion’s share of their benefits for better-off elderly taxpayers. These poorly targeted tax breaks shift the cost of funding public services towards non-elderly taxpayers, many of whom are worse off than the seniors benefiting from the tax breaks. Retooling elderly tax breaks to better target the neediest seniors will help states, in the long run, to achieve a fairer and more sustainable tax system.”

Here are State of Alaska charts showing the increase in Senior citizen and Disabled Vet tax exemptions over the years:

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More background information.

The MSB already had an existing hardship ordinance on the books. 

OBFUSCATION: 

None of the senior tax drain needed to happen.  The MSB chose not to advertise the needs based senior/disabled vet program already in borough code.
The existing hardship code was neither referred to in public meetings about enacting the additional exemptions nor was it cited in the ballot language.  How many voters assumed as a result there was no program in place at the time they voted for the additional exemptions?
At the times of the two consecutive optional exemption votes, there should have been full disclosure and comparison of the hardship exemption and the projected cost of the giveaways for the smaller pool of remaining taxpayers under 65.  Voters had a misrepresented picture of the issue they were voting on.
Note: The projected loss of $2.4 million was included in the Informational Memorandum that went along with the proposed Ordinance, but most members of the public do not bother to read through the Assembly Meeting Packets.
Assembly Member Jim Sykes tried to get this information (the projected loss of $2.4 million) included on the ballot so the public would have the full story of what could happen but he was voted down. Only Sykes and Beck voted yes on this Amendment.
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The increased exemptions were pushed by Assembly members Colvin and Arvin right around the time both ran for the State legislature.  (Perhaps they were currying favor with seniors and veterans for votes?)
The hardship exemption is fair to all.  Young and middle age families need to consider their own needs and the dangers of foreclosure to themselves against the reduced financial obligations of many healthy seniors with steady retirement incomes – especially those recently moved here with the partial or whole attraction of not paying property tax.  Just because they’re old, should the payments of seniors who can afford it be paid by families that cannot afford it? Why should only families tighten their belts? And what is the income distribution and length of home ownership of taxpayers by age group?
RE: the facile poor old homesteader stereotype. Poor old homesteaders could have been grandfathered in regardless of income and their numbers would have been much smaller and declining to extinction over time.
3.15.033 SENIOR CITIZEN/DISABLED VETERAN HARDSHIP TAX EXEMPTION.

(A)    Intent. It is the intent of the Matanuska-Susitna Borough Assembly to provide optional tax relief to those senior citizens/disabled veterans who qualify for a hardship tax exemption, recognizing that such relief should only be provided to those in need and should only be granted in a manner which is equitable for all citizens of the Matanuska-Susitna Borough. If granted, a hardship tax exemption can reduce a senior citizen/disabled veteran’s real property taxes to two percent of their gross household income.

(B)    Criteria. The following criteria are adopted in making determinations for hardship exemptions:

(1)    The applicant must meet the standards set forth in 3 AAC 135.040(b) and (c).

(2)    The hardship tax exemption is limited to the applicant’s place of residence.

(3)    The applicant’s gross family income, from all sources in the prior year, must not exceed 135 percent of the poverty guideline as established by the United States Department of Health and Human Services for a similar sized household in the state of Alaska for the year requested.

(4)    The applicant must either:

(a)    be eligible for a permanent fund dividend under A.S. 43.23.005 for the same year or for the immediately preceding year; or

(b)    if the applicant has not applied or does not apply for one or both of the permanent fund dividends, the applicant must show that they would have been eligible for one of the permanent fund dividends identified in subsection (B)(4)(a) of this section had the applicant applied.

(5)    The applicant must not own more than one parcel on the date of application, excluding an adjacent parcel that is necessary for the use of the primary residence.

(6)    The net worth of the applicant on the date of application may not exceed $250,000 including the first $150,000 of the market value of the principal residence of the applicant for which the hardship tax exemption is requested.

(7)    The hardship tax exemption will be apportioned in the same manner and formula as applied to the standard senior citizen/disabled veteran exemption previously granted.

(8)    The borough assessor may require additional proof under this section at any time. If the applicant fails to respond to a request for additional proof, such failure may be considered by the assessor in determining whether to grant the exemption.

(C)    Procedure.

(1)    An application for hardship exemption shall be filed no later than April 20 of the assessment year for which the hardship exemption is requested.

(2)    The applicant must submit an application required by 3 AAC 135.040, and supply additional information on a form supplied by the borough, to the borough assessor.

(3)    The applicant must also submit an affidavit, supplied by the borough, attesting that the applicant meets the subscribed criteria, to the borough assessor.

(4)    Upon submittal of an application, additional information and affidavit, the borough assessor shall determine whether proof, as per subsection (B)(8) of this section, is required and inform the applicant within 15 borough business days of any such proof required.

(5)    Upon receipt of the completed application, additional information, affidavit and any proof required, the borough assessor shall evaluate the request and grant or deny the hardship exemption within 15 borough business days.

(a)    If granted, the borough assessor shall grant the exemption in an amount as provided in subsection (B)(7) of this section.

(b)    If denied, the borough assessor shall specify the reasons for the denial.

(D)    Appeals.

(1)    A person may appeal the apportionment of a hardship exemption granted under this chapter or a denial of an application as an administrative appeal to the superior court in accordance with Rules 601 through 612 of the Alaska Rules of Appellate Procedure. Such administrative appeal shall be based on the record upon which the borough assessor based the determination.

(2)    Notwithstanding any other provisions of the borough code, the borough assessor’s determination of tax liability under an application filed pursuant to this chapter is not stayed pending the appeal.

(E)    Penalties.

(1)    Should the applicant make a false statement(s) regarding their eligibility or any question contained in the applications, a $500 infraction fine shall be imposed. In addition, the applicant is liable for immediate payment of an amount equal to the levy multiplied times the exempted amount of the hardship exemption.

(Ord. 07-017(AM), § 2, 2007)

https://www.codepublishing.com/AK/MatanuskaSusitnaBorough/

 

 

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