Part Two: The story of how Alaska’s property tax assessment process has failed the Haines community
By BRENDA JOSEPHSON
The first part of this story was published in Haines, we have a problem. Details were provided on the implementation of the first phase of a new mass appraisal methodology for Haines Borough’s 2023 property tax assessments.
In the name of “uniformity and equity,” an exotic hybrid valuation model of replacement costs with some market data that ignores actual market sales conditions, resulting in inflated assessment values in excess of full and true value.
What happened in Haines was a perfect storm of process failures combined with unjust actions from government officials. While these issues have come to light at a local level, the catalyst was due to a failure of Alaska’s municipal taxation statutes to protect individuals’ rights and the public interest from bad actors on a local level.
Haines municipal elections last month brought forth considerable change in leadership. Haines now has a new mayor and half of the assembly seats are now held by newcomers who were sworn in on Oct. 24.
The new assembly’s first action was to schedule a property tax workshop to research what went wrong with the 2023 assessments. Their second action was to introduce an ordinance in a special meeting to delay penalty and interest on property tax payments for two months.
The public was encouraged by the responsiveness of the new assembly. Mayor Tom Morphet even listed the assessment issues as top priorities in his Mayor’s Corner blog.
However, hope of any real change appeared fleeting during the property tax workshop. Assembly Member Debra Schnabel called for delaying corrective action and instead hiring an outside company to “audit” the fiasco that has caused so much public distrust of their government.
If the insult of spending taxpayer funds to delay action was not enough Haines Borough fiscal officer, Jila Stuart stated at the end of the meeting that the new methodology in 2023 created winners and losers and those that are upset and speaking out are just the losers. Her words are memorialized 2 hours and 46 minutes (2:46) into the audio recording of the assessment tax workshop.
The issues that plagued the 2023 property assessments started with the implementation of a systematic reevaluation not authorized by a public act of the assembly. The exotic cost-based hybrid valuation model was implemented under the guidance of contract assessor Michael Dahle. But the true injustices came to light during the appeal process. Instead of receiving serious inquiries and site visits in response to their appeals many appellants received intimidating emails that indicated that if they pursued their appeal their assessment would be increased even further.
Alaska’s property tax assessment process has been set up to protect the municipality’s interest not the residents. Even the State Assessor’s mission statement identifies his mandate is “to advise and assist municipalities on assessment and tax issues”. There is no advocate to protect the rights of citizens from the heavy hand of their local government.
Alaska’s property tax assessment process fails to protect individual rights due to the following:
- Board of Equalization – When the elected officials are siting as the Board of Equalization, ex parte communication restrictions prevent the citizens from contacting their assembly members while they are an appellant in advance of the BOE hearings. If process errors or unjust actions from bad actors are occurring an appellant is thereby denied their first amendment right to redress their grievances with their representatives. Statute does not protect citizens by establishing a pool of unelected members to serve as BOE members.
- BOE Hearing – Statue establishes that appellants bear the burden of proof but fails to protect due process to guarantee appellants their right to a fair hearing. Alaska Statutes have no provisions to require:
- Sufficient notice of appellants’ hearing date for continuation hearings.
- Assessor’s office staff reports to be provided with sufficient time for an appellant to prepare for the hearing.
- The ability to reject a BOE panel member which is a normal part of the selection of jurors.
- Assessment to be based on recognized uniform standards of appraisals.
- Protection for public from punitive actions of an assessor with threats to increase assessments if appeals are not withdrawn.
- Licensing – Alaska does not protect the public’s interest by requiring licensing for assessors. Licensing would provide a pathway to assure the public that the assessor has met eligibility requirements, maintains proficiency through required continuing education, and provide a process for reporting violations of standards to the licensing board.
- Full and True Value – By statute property assessments are required to be at full and true value. However, statute fails to specify that an appeal must be treated as a single-property appraisal. Clarification of the intent of this statue must make it clear that the mass appraisal method shall fade into the background when valuation is contested by a property owner.
- Assessment Notice – Statute stating “sufficient notice is given if mailed by first class mail 30 days before the equalization hearings” fails to consider that receipt of notices mailed from out of state can be significantly delayed for Alaska’s rural communities.
Each one of the failings listed above played a part in the failure of the 2023 property tax assessment process in Haines. This failure has created a loss of trust, respect, and goodwill of the people toward their government.
The assessment fiasco started with the implementation of a new mass appraisal cost-based hybrid valuation model implemented under the guidance of contract assessor Michael Dahle. Dahle was hired by Haines Borough Manager Kreitzer without holding a certification as an assessor or an appraisal license. Keitzer defended hiring this contract assessor without professional assessment credentials in a memo dated October 28, 2023.
Kreitzer’s justification was because “In the State of Alaska, there is no licensing for assessor’s, other than a business license (same for Haines Borough). Although some municipalities require certain levels of certification with the Alaska Association of Assessing Officers, the Haines Borough does not.”
The statement that the State of Alaska does not require licenses for a contract assessor is correct. This is shocking given the fact that in a BOE hearing the assessor’s opinion is valued so highly that appellants bear the burden of proof to overturn an assessed value. In Alaska the real estate profession is highly regulated. You cannot sell, appraise, or even inspect real estate without a licensed issued by the State of Alaska.
Licenses are so commonplace in our society even the person cutting your hair or giving you a massage must be licensed. But the State of Alaska fails to require the person that is presumed to be correct in a quasi-judicial BOE hearing to maintain credentials.
During the appeal process a disturbing trend of misdescriptions of property resulting in excessive assessments and threats of increases in assessments came to light. One homeowner went on the record about the threats he received from the Assessor’s Office that all four of his assessments would be increased if he refused to withdraw his appeals.
You can hear the appellant’s BOE testimony yourself from the Haines BOE hearing on October 11, 2023, starting at 26 minutes and 10 seconds (26:10) at this Haines BOE Oct. 11, 2023 link.
In response to appellants expressing a feeling of extortion Haines Borough attorney provided a legal opinion. The municipal attorney confirmed that statute does indeed allow for the contract assessor to adopt a tactic of threatening to increase assessments if relief is pursued to the BOE.
Dahle was able to do this not because it was just and fair, but rather just because. It is allowable because there is no check on an assessor’s power in the Kangaroo Court, that the BOE hearing process allows under State of Alaska statutes.
The public’s frustration was compounded with borough administration’s refusal to address appellants’ concerns about process errors. Instead of addressing issues, the borough administration acted in bad faith by unilaterally changing the BOE rules for the hearing procedure which required the assessor’s staff report to be made “available to the appellant at least five working days prior to the hearing”.
An appellant pointed out that he was denied due process at his BOE hearing for a variety of reasons including failure to be provided with the staff report on a timely basis. The response from the administration was to simply change the hearing procedure to eliminate the five day requirement. The new BOE hearing procedure only requires the staff report to be made “available to the appellant prior to the hearing”.
This creates an unreasonable standard of delaying the information to the appellate in a quasi-judicial proceeding right up to the moment before the hearing begins.
My journey through this year’s assessment process began in April when I received a corrected assessment notice with a building value for a single-family residence on a vacant lot. It was my expectation that this obvious error would be easily resolved. Instead of receiving resolution I received an email on April 29, 2023 stating that the assessor closed the appeal and issued additional corrected assessment notices.
The corrected assessment notices included a 45% increase on the vacant lot and the transfer of the value of a single-family residence to the adjacent parcel that already was assessed with a residence. The assessor’s office ignored the information submitted with the appeals in June and did not perform a site visit to the properties.
When my appeals were heard by the BOE on October 18, 2023 we were able to successfully articulate the following:
- Intentional misdescription for the purpose of excessively increasing the tax assessment in appeal 2023-226 by valuing an outbuilding as a single-family residence.
- Improper increase of 45% on vacant land in appeal 2023-227.
- The regressive nature of the hybrid cost-approach with inappropriate manipulation of costing and depreciation factors.
- The failure of the new insurance-based replacement cost computer program for homebuilt and rural buildings common in remote areas. This was stated directly by Dahle during the hearing and can be heard on the hearing recording at approximately 1 hour and 36 minutes (1:36) BOE October 18, 2023 audio.
- The lack of professionalism and use of intimidating techniques. There was no effort by the assessor’s office to approach the appeals with honest inquiry, a desire to find truth, or to properly correct the tax assessment record.
Although truth and justice prevailed in these cases they exposed a systemic problem with process failures, retaliatory increases in assessments, and intentional misdescriptions. It showed by example the inherent flaws that can be exploited in Alaska’s property tax assessment process.
Most appellants did not receive justice in their cases. Many were intimidated into dropping their appeals and others were less successful during their BOE hearings.
It is well known that ‘you can’t fight city hall’. Statewide policies and statutes must be written to guide the process and protect the public from the heavy hand of local government that can occur due to unintended consequences and bad actors.
Often it takes failings of this magnitude to raise enough awareness to make our public officials understand that action must be taken. We need to prevent this from happening again throughout the State of Alaska.
The appeal process for property tax assessments should not be adversarial. If public officials demonstrate that they are unable or unwilling to conduct themselves responsibility, then there ought to be a law.
We can and must do better.
Brenda Josephson has held elective office on the Haines Borough Assembly and Haines Borough School Board. She also served her community as a Haines Borough Planning Commissioner and as a member of the Haines Chamber of Commerce Board of Directors. She is licensed by the State of Alaska for real estate sales and is a federally licensed tax professional authorized by the US Department of Treasury to practice as an Enrolled Agent before the Internal Revenue Service.
Brenda Josephson is a resident of Haines. The information provided in this article is what she believes to be true and accurate after months of research and personal experience. Hyperlinks to source documents are provided throughout for independent verification of information. People have been called out by name and dates have been provided to tell the full story. The intent is to raise awareness of the systemic flaws in Alaska’s property tax assessment process.