In April, ballots in the Anchorage municipal election will likely ask whether residents want a bigger tax write-off for homeowners. An ordinance introduced at Tuesday’s assembly session has not yet won approval from elected officials but is unlikely to face opposition. In this case, it is presented to the voters.
Currently, homeowners can write off 20% of the value of their primary home, up to $50,000. The new proposal would raise that cap to $75,000 and slightly adjust the percentage in the case of less expensive homes.
The change was made possible by passage of a bill in the Alaska Legislature, which went into effect Monday and will go into effect in October.
“Homeowners in Anchorage are feeling the impact of record inflation rates, and residential property valuations rose an average of 8-10% in 2022 while commercial values remained flat or declined at a similar rate,” wrote the sponsors of the local ordinance, which includes The Assembly Vice-Chairman Christopher Constant, and Members Forrest Dunbar and Austin Quinn-Davidson. “Greater residential exemption could give homeowners some much-needed relief from 2023.”
Under the current tax system, the owner of a $350,000 home in Anchorage is taxed as if the home were worth $300,000. Should voters accept the nomination, the same house would be taxed $275,000.
Even in a polarized political environment, Anchorage’s electorate tends to be unanimous when it comes to property tax exemptions: A similar measure in 2018, which raised the tax rate from 10% to 20%, passed almost 3-to-1 .
“The 2022 Budget passed by the Assembly has kept property taxes constant for most homeowners this year,” said Quinn-Davidson, co-chair of the Budget and Finance Committee. “Yet, Anchorage taxpayers deserve a break. This new law offers a sensible solution that relieves taxpayers of home ownership and allows the municipality to continue funding essential public services.”
Since the pandemic, real estate values and the local revenues that derive from them have been turned upside down. Property values across the community have skyrocketed due to a hot real estate market. Meanwhile, many commercial properties, including hotels, fell in value and, in some cases, remained at reduced capacity due to travel restrictions and work-from-home policies to curb virus transmission. That, in turn, has hampered local government revenues across the country, including Anchorage. Fiscal holes were plugged with government bailouts, but these were temporary.
At the local level, the exemption measure would reduce homeowner taxes slightly but keep overall community revenues stable.
“It just shifts the tax burden from the residential taxpayers, who are the majority of the taxpayers, to the commercial taxpayers,” Dunbar said.
[A Spenard development is rapidly reshaping the neighborhood. It’s barely making a dent in Anchorage’s housing demand.]
Property taxes are always a political issue, but especially so this year after Mayor Dave Bronson wrote a letter carrying tax bills, accusing the assembly of doing what homeowners are hooked on. Assembly members pushed back, saying the numbers Bronson included were misleading. They have complained that in the weeks since the letters were sent out, they not only had to take a barrage of calls and emails from voters, but also spent a great deal of time simply clarifying or correcting misinformation about local taxes and budgets .
“The mayor’s great deception has taken painstaking work to undo,” Dunbar said. “That letter had kind of politicized the tax cap and the way the budget worked.”
If voters approve in next April’s election, the increased tax exemption would go into effect in 2023.