The Alaska Senate voted 13-6 on Tuesday to pass a bill that would apply both a carrot and a stick for local governments to encourage the construction and maintenance of developments.
One provision of Senate Bill 77 would allow municipalities to exempt the owners of newly developed or redeveloped commercial properties from paying property taxes. Another provision would allow municipalities to increase the property taxes of owners whose properties have become blighted by as much as 50%.
Bill sponsor Anchorage Democrat Forrest Dunbar said the bill is aiming at spurring housing development, adding that the high cost of construction in Alaska doesn’t justify new building. The exemption would lower the cost to property owners.
“Housing in all of Alaska has become incredibly difficult to pencil out,” Dunbar said.
Under current state law, municipalities can only exempt a portion of new commercial developments, including apartments. The bill would change that to allow the entire value to be exempt for a designated period of time.
The blight tax would not apply to any primary residence, so people with low incomes would not be taxed out of their homes. It would leave it up to municipalities that implement a blight tax to determine what their definition of “blighted” is. These municipalities would be required to establish an appeals process. The tax penalty would end when owners fix up their properties.
Dunbar said he believes municipalities are more likely to take advantage of the exemption provisions of the bill than they are to apply a blight tax. But he said the blight tax would address cases where property owners choose not to take care of their properties.
“If it is falling into such disrepair that it’s become a danger to the neighborhood, then frankly that person who owns it, whether they’re in state or out of state, should either fix up the property or sell it to someone who can,” he said.
There is a House version, House Bill 84, sponsored by Wasilla Republican Rep. Jesse Sumner. Sumner said properties that are allowed to deteriorate bring down the values of neighboring properties.
“Blighted properties often become a magnet for criminal activity, which impose additional costs upon local government,” Sumner said at a March 24 House Community and Regional Affairs Committee meeting where the House bill had its first hearing.
Bill supporters point to success Anchorage has had with property tax exemptions to spur some construction.
Big Lake Republican Rep. Kevin McCabe expressed concern that the Anchorage Assembly would use a blight tax to “willy nilly” take property.
“I just want to make sure that a … ‘rogue’ is the wrong word, but that an Assembly that is sort of taking their own direction doesn’t create a problem,” for property owners who are experiencing hard times but have hopes for the future, McCabe said. “So I think we have to protect the individual rights as well as the city rights.”
The bill is supported by homebuilders and people working in economic development. Some spoke at the March 24 hearing.
Anchorage Economic Development Corp. CEO Bill Popp noted that the bill requires a public process for a municipality to adopt a blight tax, and that business organizations would participate in the process in Anchorage.
Mike Robbins, executive director of the Anchorage Community Development Corp., predicted the bill would stimulate economic and housing development around the state.
“We’re suffering from shortages at all levels. Multiple factors have contributed to this environment, which we have no control over,” Robbins said. “But there are some that we can and should work to solve.”
Robbins said the exemption provision would help close the gap for builders between costs and the returns needed to make the investment.
A prominent national opponent of taxes has weighed in against the bill. Grover Norquist, the president of the Washington, D.C. nonprofit Americans for Tax Reform, wrote a letter saying the blight tax in the bill would be the broadest in the country.
Norquist raised particular concern over how the bill leaves it to municipalities to define blighted, which he suggested would open it up to abuse.
“Since SB 77 allows for any and all standards, no matter how broad or unnecessary, ordinary Alaskans could face strict supervision and a 50% property tax hike for something as simple as a broken window or front door,” Norquist wrote.
Palmer Republican Sen. Shelley Hughes opposed the bill due to the blight tax, saying that she would have supported it if it only included the carrot of the exemption. Hughes said private property is central to the United States.
“We work to cherish it and protect it, unlike the ability in communist countries or under dictatorships,” she said. “We have the right to have property. And I believe that our measures should be to help protect, and not to put a property owner in risk of, eventually, that property possibly being taken from them if the taxes are such that they cannot pay them.”
Hughes attempted to amend the bill on the Senate floor to require that any definition of blighted include that the property endangers public health or safety. The amendment failed, with five votes in favor and 14 opposed.
Democratic Sen. Matt Claman, a former Anchorage Assembly member and acting mayor, predicted that the tax exemption would prove to receive more rapid attention from local governments than the blight tax, which he described as “very complicated.”
“It’s another step we can take in making Alaska ready and open for business,” Claman said of the bill.
On the final vote on the bill, all eight Democrats present voted in favor, while Sen. Donny Olson, D-Golovin, was absent. Five Republicans also voted in favor: Sens. Click Bishop of Fairbanks; Cathy Giessel and James Kaufman of Anchorage; Kelly Merrick of Eagle River; and Gary Stevens of Kodiak. The no votes were Republican Sens. Jesse Bjorkman of Nikiski; Robb Myers of North Pole; Mike Shower and David Wilson of Wasilla; Bert Stedman of Sitka; and Hughes.
The Senate version of the bill is already scheduled for a hearing with the House Community and Regional Affairs Committee on Thursday. If both chambers agree to pass the same version of the bill, it would go to Republican Gov. Mike Dunleavy, who could allow it to become law or veto it.
James Brooks contributed to this article.
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