Will the City of Craig Get Rid of Property Taxes? - P.O.W. Report

Monday, August 13, 2018

Will the City of Craig Get Rid of Property Taxes?

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.
Est. Cost Savings / Revenue
Status / Notes
Apply the city council health benefits elimination to the first year. 
Eliminate / limit health benefits for mayor.
($12,000 - $30,000) plan dependent
Eliminate DC lobbyist.

Possible tax windfall from proposed 1% increase in city sales tax
Craig city council is considering a 1% increase in city sales tax.
Possible windfall from internet sales tax collected by City of Craig
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
Through attrition, decrease City of Craig patrol officers from 5 to 3. 
$100,000 - $200,000 as officers resign from position
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 - $200,000

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

No need to pay for property tax assessors.

Sunset the recreation position.

Estimated Budget Reduction Savings Total:

FY2019 Property Tax 6 Mills Revenue Budget Est.:

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.]


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."

(1.) https://flaglerlive.com/8527/definition-origin-millage-mill/

(2.) 10 Good Reasons to Repeal Property Tax in the City of Craig

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