Guest Opinion: A Careful Look at Ballot Measure 1

In the primary election 2012, Alaska voters will consider Ballot Measure 1. Dave Donley says the measure isn't what it appears to be and that Alaskans should vote it down.

By Dave Donley

Ballot Measure One could put the state on the path to losing over $110 million dollars in annual revenue.  The real but hidden issue at dispute in Ballot Measure One is how the North Slope Borough, the Fairbanks North Star Borough, and the City of Valdez tax the billions of dollars of oil and gas property within their boundaries.

The State has failed to enforce laws that were intended to restrain how much property tax money local governments can collect on oil and gas property.  State law allows local governments to collect up to 30 mils of property taxes.  State law also establishes an oil and gas property tax of 20 mils.  Currently the 20 mil oil and gas property tax state wide totals about $480 million a year.  The state gets about $110 million of this total from a combination of the difference between local mil rates and 20 mils; and the full 20 mils assessed in unorganized areas of the state.  Local governments get about $370 million a year.

So how does this involve Ballot Measure One?  The more a local government can shift the property tax burden away from residential property and onto oil and gas property the higher mil rate they can get their residents to accept.  The higher the local mil rate the less oil and gas property tax the state will receive.  This tax revenue was originally intended to be shared and used statewide but instead is more and more being kept by the few local governments along the pipeline route.

Back in 1973, the Legislature in anticipation of the immense value of future oil and gas property, placed limits on what local governments could collect from such property.  Legislators gave local governments a choice of two limits; however the North Slope Borough and Valdez through politics later persuaded the state bureaucracy to not enforce the clear meaning of the law.  This allowed these local governments to take hundreds of millions of dollars of oil and gas property taxes that should have been shared statewide.  At the 1973 committee hearings then Commissioner of Community and Regional Affairs and current Alaska Native leader Byron Mallott, testified in favor of limiting the amount of oil and gas property tax local governments could capture because “the impact of the oil industry is statewide.”

By the time the issue was litigated the misuse was so entrenched the courts refused to enforce the original meaning of the law and left it for the legislature to fix.  Chief Justice Mathews strongly dissented from that 2001 opinion saying: the result was contrary to the original intent of the law and “a prohibited shifting of the tax burden . . . to the state as a whole.”

And it’s potentially even worse; according to the State Assessor the state may be liable for up to $110 million in tax revenue including revenue from areas outside these local governments if they raise their mil rates over 20 mils.  That is one reason why the Legislature would not pass this proposal and why the support for it mostly comes from the North Slope Borough, Fairbanks, and Valdez.

There are other good reasons not to support Ballot Measure One.   As articulated by the Anchorage Assessor in the Voters’ Guide, owners of homes valued under $237,000 could actually pay higher taxes along with rental and business property owners.

If the supporters of Measure One wanted to honestly address residential property tax relief they could have included a 20 mil cap on local property taxes to prevent the potential taking of the state’s oil and gas property tax revenues.  That would have been simple to do but very tellingly they did not.

Dave Donley represented Anchorage in the State Legislature for sixteen years – six years in the House and ten years in the Senate.  He served as Vice Chair and Co-Chair of the Senate Finance Committee.  He also served as House Judiciary Chair, House Labor and Commerce Chair twice, and Anchorage Caucus Co-Chair three times. The opinions in this article are the author’s and do not necessarily reflect the views of the Alaska Policy Forum.