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Tax Cap in Jeopardy: why should you care

Written by Heather Penn

In 1901 the city of Fairbanks was founded. In 1964, it was decided that a borough should be instituted. The FNSB is considered a 2nd class borough thereby (unlike the city) they abide by no charter. Instead they operate via a code book. Once the decision for a borough was made, the city decided to allocate certain areas to them such as the Parks and Rec, Education responsibilities and Taxation Assessment. Since its induction, the borough also picked up the responsibility of” flood control, animal control, libraries, and public transportation,” whereas “the city provides municipal functions within their boundaries to city residents,” including police and fire departments. (FNSB website).

“The Borough Tax Cap is actually a cap on the total revenue the borough can take into its coffers in any one year. The total is based on the amount of revenue received in the previous year, plus a cost of living increase. However, the “cap” is not a total cap! To be legal, certain exception had to be provided for – things that are allowed to raise the cap:”

  • New buildings and land coming onto the tax rolls
  • New payments on bonds approved by the voters
  • Payments for services approved by the voters
  • New legal judgements entered against the borough
  • Expenses for emergencies

Source; Interior Tax Payers Association (ITA)

The tax cap ensures that elected officials be responsible with tax dollars as they are forced to live within a budget.  The last 30 years of having a tax cap hasn’t seemingly stifled the borough in any way as they continue to have $200,000+ salaries and over 400 employees on their payroll. The city has 200 employees that include the police and fire departments. As previously mentioned the borough does not have a charter which would protect the cap. Instead it is left to the voter. Once voted on it cannot be changed by the borough until the next voting period. Voter approved initiatives cannot be changed at the Borough for a period of two years.  After that, they can be changed or eliminated if they are not renewed by another initiative.  That is why the ITA renews the cap every two years.

In the past voters have voted for an increase in taxes, called voter approved bonds, and these items were granted. This included new schools and libraries. There is an ordinance in the works right now that if passed will allow the city to collect $1,713,652 in property taxes, on top of what they are already collecting. Citing a loss of state funds, Mayor Kassel wants to eliminate the tax cap, rather than use the tax provisions offered by the tax cap to raise taxes without voter approval. Mayor Kassel stated that he would like to get rid of the tax cap rather than utilize the provisions provided by the cap that will allow taxes to increase with voter approval.  This ensures the voters won’t get a chance to say no.  The city has raised taxes several times utilizing this provision.  Voters can be generous if they feel the raise is justified.  Some simply believe that the elected body should always make these decisions and not the voters.

Mayor Matherly cites lack of revenue as a means to imposing a tax increase. From past experience, Fairbanks has learned to never use non-recurring revenue to fund recurring costs as that exact avenue left the city hurting in 2001, when all revenue sharing was lost. Some suggested putting the money in capital instead, that way you can’t overspend and buy things you can’t afford.

Both Mayor Kassel and Mayor Matherly claim that revenue sharing is going down and isn’t likely to improve but what about the revenue we are already collecting from places like Explore Fairbanks. Explore Fairbanks is given 70% of the Hotel Motel tax collected in the city of Fairbanks.

“Explore Fairbanks is a non-profit destination marketing and management organization whose mission is to be an economic driver in the Fairbanks region by marketing to potential visitors and optimizing visitor experience,” (Explore Fairbanks website).

In 2016, the total tax collected from the city was $3.1 million dollars. Of that $3.1 million, Explore Fairbanks, a non-profit, received $1,767,625. The city, where all that revenue was made got a mere 22.5% of the total $3.1 million The rest was split up amongst other local groups such as Fairbanks Economic Development Corporation (FEDC) who received $75,000, Discretionary Grants that totaled $200,000 (local non-profits that apply) and a Golden Heart Plaza maintenance fee of $25,000.. These figures do not include the Hotel Motel tax collected by North Pole and the FNSB, though it is broken down much the same way leaving Explore Fairbanks with another 70% percent of the profits.

Delta and Nenana have fought to not have a borough. This stance means the State then takes responsibility for funding schools. That is not so for FNSB residents as we pay an education tax due to the Borough claiming the task of education.

The Borough is essentially a government unit under themselves. Once the government starts to serve itself the outcome has proven to be, not good.



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Heather Penn

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