Three-Way Conversation about Anchorage Property Taxes
26 March 2007Late February of this year I sent the following letter to the Anchorage Daily News editor:
I am baffled by the Daily News’ righteous indignation expressed in the Feb. 14 editorial, “Tax shift no answer.” The Fairbanks City Council approved a resolution asking legislators to shift more property tax responsibility to commercial properties and away from residential properties. The Daily News response was “shifting the tax burden from residential property owners to commercial property owners … is not fair and is not the answer.”
I would respond, “How would you know? You offer no analysis.”
I am also mystified why the Daily News editorially dabbles in the property tax affairs of Fairbanks when we have property tax issues here in Anchorage that demand real analysis. A study by UAA’s Institute for Social and Economic Research, “Anchorage Budgets and Property Taxes,” found:
“By any measure the growth in commercial assessed value has not kept up with residential. The total assessed value of commercial property is less today than it was in 1980, after adjusting for inflation.” And, “In the early 1970s the shares were 33 percent commercial and 50 percent residential (with personal property the balance). By 1999 the shares were 24 percent commercial and 65 percent residential.”
It appears that here in Anchorage businesses have been transferring their share of property taxes to homeowners for decades. How about a nice editorial on the “fairness” of that?
Bottom line: Facts, rather than blather.
A few weeks later, mid-March, the following response appeared in the Anchorage Daily News:
Lawrence Weiss’ implication that Anchorage commercial property owners have shifted property tax burdens to homeowners is not only inaccurate but disingenuous (”Anchorage businesses have shifted tax burden onto residents for years,” Feb. 23). Property owners don’t shift taxes; governments do. Property values are determined by economic and market conditions. Local governments establish property tax mill rates. Where in this process does a business or commercial property owner “shift” the tax burden to homeowners?
The October 2000 UAA Institute for Social and Economic Research report quoted by Mr. Weiss identified several factors contributing to the decline in the growth of commercial property values relative to residential values. Almost all were market and economic conditions, and there was certainly no reference to commercial property owners “shifting” the tax burden.
If Mr. Weiss is proposing taxing commercial property at higher rates than residential property, he should simply say so. While this would be poor economic policy, he could at least be forthright. To imply commercial property owners pay less property tax or receive a tax break at the expense of homeowners is deceptive at best. He also fails to mention one local property tax burden borne solely by Anchorage businesses — business personal property taxes. And why shouldn’t the Daily News editorialize on tax positions taken by the Fairbanks City Council? The more people involved in debating public policy issues in Alaska, the better.
– Kevin Kerr, Anchorage
Shortly after the letter by Mr. Kerr appeared in the Daily News, an email appeared in my inbox from a trusted colleague with expertise in this area, and with a “sensitive” position so that he wishes to remain anonymous. I know who he is, so I will just repeat his comments…
I read the letter to the editor today responding to your article
about the shift from commercial to residential property tax. The sixth reason that Scott Goldsmith and Lexi Hill listed on page
17 in their report (Anchorage Revenues and Budgets) is the most
plausible explanation for why commercial property contributes a smaller
share of total property value: “There could be underassessment of
commercial property compared to market value.”Commercial properties are often undervalued because there is not
sufficient information available to do accurate appraisals. New large
commericial properties are not easily compared to other properties for
appraisals, and neither the city nor the State currently require full
disclosure of the market value of sales of commercial properties. With
limited information about market prices and few comparable properties,
the appraisals of large commercial properties fall short of market
value. As a result, they are under assessed.In contrast to commercial properties, the appraisal of residential
properties is relatively straightforward. Most of the residential
properties in Anchorage fall into a narrow range of standard sizes,
types, and lots. There is more turnover in the residential market and
so there are more observations of actual market value. Because there
are more observations of market value of residential properties and
because residential properties fall into standard categories, it is
much easier to appraise the full market value of residential property
than commercial property.So residential property remains fully assessed while commercial
property is under assessed. This has caused the gradual decline of the
share of commercial property relative to residential property. The
problem is caused by a lack of access to information about the market
sales price of commercial properties in the city. The solution is to
require full disclosure of the market value of property sales in the
city. Other states have created a state level database with a full
listing of all sales prices of properties sold in the state. With this
type of database, the Municipal government would have access to
information about the market price of commercial property and be able
to make better full market value appraisals of commercial property, as
required by state law.
So there it is. A three-way conversation about property taxes ending with the suggestion for a public policy based in precedent and informed by facts.
ldw
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