Let's Have a "Non-Bias" Discussion on Repealing Property Taxes in Craig - P.O.W. Report

Tuesday, August 28, 2018

Let's Have a "Non-Bias" Discussion on Repealing Property Taxes in Craig


Earlier in the month I wrote an article on the referendum to repeal property taxes in Craig. It stimulated a lot of discussion and even accusations that your dearest 'umble editor wrote a biased article that mis-characterized Andy Deering's ambitious referendum.

Because POW Report  is the only online news source for POW--with exemplary journalistic etiquette--let's hear all sides of the issue. Below I will post:

1. My Original Article on SitNews

2. Andy Deering's Response

3. A letter to the SitNews Editor from a Craig Resident.

So, you decide after reading this [lengthy] article, what should happen in the upcoming election? Should property taxes be repealed in Craig?


1. No Property Taxes in the City of Craig? A Referendum May Make this a Reality.


Andy Deering and Lisa Radke have taken the initiative and went to the City of Craig to create a petition, that with enough signatures, will become a referendum in the upcoming election this year to get rid of property taxes. 

Property taxes have been a standard way for cities (and boroughs) to get revenue for hundreds of years and is a relatively simple formula: x amount of houses multiplied by x amount of 'mills' per house value = your property tax revenue. The 2019 estimated revenue for the City of Craig, for example, based on '6 mills' is about $650,000. For a small city like Craig, which has an average budget of about $3 million, this is a substantial amount of money for the city to continue and function at its current rate. Unlike, many cities through out the country, the City of Craig has been successful at balancing it's budget for at least a decade and not having to take out substantial loans to make up shortfalls.

 The millage rate in local government language is synonymous with the property tax rate. “Millage” is based on a Latin word that means “thousandth.” So 1 mill is equivalent to 1/1000th.

Applied to taxes, that means 1 mill is equivalent to $1 in taxes per $1,000 in taxable value. If your property has a taxable value of $100,000, and you’re assessed a 1 mill tax rate, you’ll pay $100 in taxes.
The standard way to figure your actual tax bill based on the millage rate is to take that rate, multiply it by the taxable value of your property, then divide the result by 1,000. (1.) 

The controversy that is at play (should this referendum actually pass by the voters) is, 'Will the City of Craig actually be able to operate normally?' 

The answer is simply no. 

Attached below is Andy's budget proposal for the future should the taxes be cut and it's a humbling proposal; it will cut the police department from 5 to 3 officers, shut down the swimming pool for half the year, eliminate a couple of city jobs, and cut health benefits for the city council.


Item no.
Description
Est. Cost Savings / Revenue
Status / Notes
1
Apply the city council health benefits elimination to the first year. 
$100,000
Completed.
2
Eliminate / limit health benefits for mayor.
$20,000
($12,000 - $30,000) plan dependent
3.
Eliminate DC lobbyist.
$36,000

Revenue
Possible tax windfall from proposed 1% increase in city sales tax
$300,000
Craig city council is considering a 1% increase in city sales tax.
Revenue
Possible windfall from internet sales tax collected by City of Craig
$100,000*
Recent U.S. Supreme Court decision allows states to collect sales tax on internet purchases; municipal corporations are also investigating receipt of local internet sales tax.

*This a low estimate
4.
Through attrition, decrease City of Craig patrol officers from 5 to 3. 
$200,000
$100,000 - $200,000 as officers resign from position
5.
Close public pool for 6 months / summer.

Pool personnel reassigned to various departments during the closure, i.e. administration, library, harbor, recreation, parks, and facilities. 

$150,000
$150 - $200,000

These reassignments will alleviate the burden of increased work-loads of other departments during the summer months.
6.
Decrease number of administrative positions by at least 0.5 FTE due to elimination of property tax accounting.
$35,000

7.
No need to pay for property tax assessors.
$25,000

8.
Sunset the recreation position.
$80,000
Retirement.





Estimated Budget Reduction Savings Total:
$1,046,000






FY2019 Property Tax 6 Mills Revenue Budget Est.:
$650,000






Having a city operate without collecting property tax isn't a new concept either, for example, the cities of Klawock, Thorne Bay and Coffman Cove on Prince of Wales Island rely primarily on sales tax and do not impose a property tax. The difference between these towns and Craig, is that Craig is considered the 'hub' of the island with the biggest high school (that students from these areas shuttle to), a pool, and a large community gymnasium that doubles as a host for many community events.

In a letter that Andy and Lisa sent out titled, '10 Good Reasons to Repeal Property Tax in the City of  Craig' they address some of the more common criticism to their proposal (2.):

 1. True land ownership: Without property tax, people can actually own their land and homes without threat of tax forfeiture. Property tax makes land ownership impossible – “rent” must be paid to the city corporation in the form of property tax or the land is forfeit.

2. School funding: A common misconception is that property tax is required to pay for schools. This is false. First class cities are required to fund their schools, by whatever funding source(s) they wish, no less than 2.65 mills of the assessed value of property within the municipality. Without property tax in Craig the amount of school funding can continue as before.

3. Outside money inflates real estate prices: In areas subject to property tax, a common problem arises when outside money inflates property values. Local families and small businesses on a limited income or fixed retirement income can be forced to pay exorbitant property taxes when property values become inflated, sometimes forcing them to leave the area. With no property tax, any increase in property value is seen only as a positive to landowners. Your children need not worry about losing the family property because they cannot pay the taxes.

4. Keep your hard earned money: More money is kept in the hands of those who know best how to spend it – the land owners.

5. Trickle-down effect: More than $600,000 dollars per year will be kept in the hands of land owners in Craig, much of which will be spent buying goods and services locally – and this will encourage more local businesses.

Your humble journalist did reach out to a couple of Craig residents asking for their opinion on the petition,

One property owning resident was against the petition saying, 'we all have to pay our fair share and while I don't use the pool and never have and my kids are full grown adults, what I don't like is someone like Andy coming along, who doesn't have property and doesn't pay any real taxes, to dictate to long-time residents what should or shouldn't happen in this city.... and a functional town should have things like a library, a pool, and a fully funded school even though I don't use these services but the entire Island does benefit from these things.'

Another quipped, 'Govt’ and the taxes it needs to exist are necessary evils. The desired goal is, Better govt’ not more govt...Our swimming pool does not pay for itself. But if one child learns to swim in our pool and then doesn’t drown when they fall overboard it is worth it. When our seniors get much needed exercise in the pool and stay alive to see that kid who survived his fall over board, it’s worth it.'

A long time resident with kids wrote, 'The other night we had to dial 911. The amazing thing is… Somebody answered! Not only did somebody answer, but within 2 minutes we had an EMT at the house. Praise God it wasn’t life and death. I understand that our EMT’s are volunteer, but our tax dollars go to support them. I view myself as a conservative. Although I don’t like the waste I see in our local government, I still believe that everybody who may need to utilize our public services (Police, fire/rescue, and EMT) should help pay for them. I am not opposed to the elimination of property tax in Craig, to be realistic we need to have something to replace it with. Does that look like a higher sales tax? Probably not. To be honest it would be the same burden on those paying property tax, unless the sales tax was increased during peak fishing and tourism season. There is no simple answer.

The City of Craig has raised the price of services several times in the past few years to help shore up their budget deficit. I am not informed enough to know if they have it under control or not. I would say that the cost of living continues to go up and our jobs continue to leave. We will reach a point when we have to start cutting back services or find another source of income for the city. If we do not, the citizens who do pay tax will be burdened to the point that they won’t be able to sustain. In my opinion, the city continues to make the problem worse by supporting the construction of low income housing. This housing brings in very little property tax, and again the burden is laid upon the tax payer. The city should take a position to help families become independent tax payers, by promoting small business opportunities and home ownership. The city is sitting on way too much undeveloped land that could be made available to start ups, not the “good old boys”. Tax collection and personal wealth is never about a get rich quick scheme, rather a slow chess game.'



Right now Andy and Lisa are focused on reaching the required amount of signatures to put the petition on the ballot, which equals about 25% of the voters who cast ballots in the last city election which is approximately 76. They write that weather depending they will, 'try to be either in front of the Craig Post Office or the AC Thompson House most days between the hours of 4 and 6 pm.'



 If approved by the qualified voters at the next regular municipal election or special election, the repeal of Chapter 04, Title 3, Property Taxation, of the Craig Municipal Code shall take effect on July 1, 2025.    

If you would like to read the full petition/referendum [you may go here.]


Update:


Andy wrote in to add: 

 "Furthermore, the idea that because I don't own property in Craig and
pay property taxes somehow makes me less credible is absurd. Would
people find my ideas more credible if I was somehow lining my own
pockets if the referendum is successful?

I attend council meetings arguably more than any of Craig's general
public. I also obtain and study a copy of the city budgets and attend
budget meetings, not to mention meeting with city officials and heads
of departments, touring city facilities, and generally educating
myself on city business. This referendum is the result of that
experience in which I see the city municipal corporation as avaricious
towards its residents while continually expanding the corporation -
even though the city population has been flat, or declining, since the
year 2000. It is also the result of seeing profligate and sometimes
inappropriate spending such as close to a million dollars spent over the
years on council health insurance benefits - the likes of which are
virtually unheard of anywhere else in the state."

2. Property Tax Repeal Referendum in Craig [published originally on SitNews]


By Andy Deering

August 14, 2018
Tuesday PM


Here is my response to Arthur Martin's article No Property Taxes in the City of Craig? A Referendum May Make this a Reality.

At the very outset of the article it should have been made very clear this referendum calls for a gradual elimination of property tax over a six year period. The basic idea is that when we have a balanced budget, revenue windfalls, or reductions in spending be GIVEN BACK TO TAXPAYERS and not simply spent elsewhere as has been done in the past. If this protocol is followed, a six mill reduction over six years is neither excessive nor impractical and gives plenty of time for all necessary discussion and debate. It should be noted that the City of Craig currently has over $10 million dollars in a reserve fund as well as over $3 million dollars in a school reserve fund.

The article failed to mention that our budget proposals were just that - proposals - and would have to be decided ultimately by the people of Craig. Those proposals equaled over a million dollars much more than property tax brings in - and that people could not only pick and choose which they liked and didn't, but that they could come up with their own budgeting ideas as well. And they would have six years to do it. Some of the proposals are no brainers such as eliminating property tax eliminates the need for expensive property assessors as well as significantly reducing administrative costs relating to property tax.

As for police, the City of Craig has 10 full time equivalent positions, 5 of which are full-time patrol officers. My research suggests Craig has the highest per capita number of patrol officers in the State of Alaska, possibly the nation for all we were able to find out. If the ratio of patrol officers to square miles of jurisdiction is considered, the same conclusion is reached only magnified. I am often asked by visitors to Craig "Why on earth are there so many police here?" ! Residents have been asking the same thing for years. In addition to this high number of police, we have full time state troopers as well as forest service police here. Is it really outrageous to consider a reduction? Reducing two patrol officers and bringing Craig more in line with other Alaskan towns would save enough money to eliminate 1/3 of the property tax in Craig. As there is typically a high turnover with patrol officers, this could happen naturally over time through attrition. 911 and dispa
tch service would remain unchanged, as would jail staffing, DMV and DOT services.

All this talk about "saving one child from drowning is worth the cost of the pool" is absurd and demagoguery. The pool closure during summer months is one of many options meant to save taxpayers money, while still having children learn to swim, which they do during winter school months. Local people's use of the pool is also greatest during winter months, when the pool would be open. And remember, if you don't like the idea of closing the pool at all, fine, choose some other options - there are plenty to think about. However, it's worth considering that the pool is costing taxpayers approximately the same as the schools. Depending on what numbers are used for annual pool attendance, each time a patron uses the pool or fitness room he or she is subsidized by taxpayers from $100 to $150 per visit! Is this open for discussion? I would hope so.

The article suggests that we are proposing to cut city council health insurance benefits. This is wrong. City council health insurance benefits have already been cut, adding over $100K annually to the city budget. We are proposing that this windfall be applied to removing 1/6 of the property tax immediately.

Another consideration is that eliminating property taxes in Craig will ease the burden of future taxation from the state. The Alaska State Legislature is contemplating state income tax, sales tax, and permanent fund reduction or elimination.

On the revenue side, there are possibilities of windfalls in the future. A proposed 1% increase in sales tax could bring in approximately $300K annually to an already balanced budget. This money, intended for the aquatic center, would create enough surplus in the budget to eliminate 3 mills of property tax.

Another future possibility for a revenue windfall is internet sales tax. With a recent Supreme Court decision, it may be possible for municipal corporations to receive significant funding from this source.

I am not advocating either of these revenue sources, however if they come to pass I am advocating that the money generated to an already balanced budget be applied to tax relief directly to the people living in the city of Craig in the form of property tax reduction/elimination. This is what the referendum is all about.

Arthur's article was confusing with regard to property tax and mill rates. Here's some clarification:

Property tax in Craig is currently set at six mills. That means if you own a property worth $200K, your annual tax bill would be $1,200. Once again, Craig is the only place on POW with property tax.

The article implies that I am somehow dictating the way the Craig municipal corporation should be run. Exactly how is exercising an Alaska Constitutionally-guaranteed right to referendum - in this case to simply allow people to vote on how they are taxed - "dictating" anything?

Furthermore, the idea that because I don't own property in Craig and pay property taxes somehow makes me less credible is absurd. Would people find my ideas more credible if I was somehow lining my own pockets if the referendum is successful?

I attend council meetings arguably more than any of Craig's general public. I also obtain and study a copy of the city budgets and attend budget meetings, not to mention meeting with city officials and heads of departments, touring city facilities, and generally educating myself on city business. This referendum is the result of that experience in which I see the city municipal corporation as avaricious towards its residents while continually expanding the corporation - even though the city population has been flat, or declining, since the year 2000. It is also the result of seeing profligate and sometimes inappropriate spending such as close to a million dollars spent over the years on council health insurance benefits - the likes of which are virtually unheard of anywhere else in the state.

The signature gathering for the referendum has so far been met with amazing enthusiasm. There have been over 100 signatures gathered in a short amount of time. This is a strong signal that many in Craig are unhappy with the way they are taxed and governed, and that the status quo is no longer acceptable to them. They are willing to allow a vote to consider elimination of property taxes over a 6 year period. Most understand full well that without property tax, spending and revenue issues will have to change, but many believe those changes will be more of a benefit than a hardship. Let s not forget that every single property owner in Craig would benefit directly from elimination of property tax. That s not just a benefit for noisy special interest, like most non-essential city services provide.

If the people of Craig decide to eliminate property tax this October, I don't know for sure how different things will be in six years when it s fully enacted. But I would suggest you might be surprised at the positive effects for the vast majority of the people living here.

Thank You,

Andy Deering
Craig, Alaska

About: I am a resident of Craig, commercial fisherman, mechanic, welder, philosopher, author "The Best Life Money Can't Buy", and have a strong bias towards Liberty.

3. No On Craig Property Tax Ballot Measure [Published originally on SitNews]


By Bob Claus

August 18, 2018
Saturday PM


To the Editor:

There is a ballot measure to eliminate the property tax in Craig. No one likes paying taxes, but this is a bad idea.

As a taxpayer in Craig and former president of the school board, I value the services that my taxes help support. A full local contribution to the Craig Schools lend a stability to the school budget that other districts lack. This has allowed the Craig Schools to excel and provide the services our kids deserve.

As a former Alaska State Trooper and private citizen, I like the 24 hour police service that no other community on the island enjoys. I like the tax-funded support for the fire and EMS services we all will need at some point in our lives. It makes my investment in Craig more secure and gives me peace of mind for my family and property.

I use the services that are described as “non-essential” daily and believe that these are the amenities that attract people to live and invest in Craig. The recreation opportunities, the trails, the harbors, the pool, the historic district at the cannery, etc., are the things that make Craig a great place to live.

I urge you to vote “No” on this misguided measure.

Bob Claus
Craig, Alaska


Editors Note:


I write a lot of editorials on a variety of different subjects (some of which had a lot of negative emails sent my way), my original article on this issue was NOT an editorial. It was a genuine piece of journalism that I am very proud of and that explained the facts on this controversial issue.  My OPINION on this subject is very strong and for now I have refrained from stating it publicly, as i've really enjoyed the passionate discussion from both sides of the isle.

So, thank you for reading  and s
hare the stories on your social!

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