By LARRY NORENE
How many more property tax exemptions on “for profit” developments can our tax bills stand? I’m not talking about the familiar senior citizen, veteran, residential, or the nonprofits, (though there are thousands of nonprofit exemptions), but the newer Ethan Berkowitz-era exemptions for the wealthy and politically connected.
Some people assume that the property tax on an exempted property is lost to the tax collector. Not so. The same total amount (the budget) is collected from the remaining taxable properties. The rate for everyone goes up accordingly when someone else doesn’t pay. Just like dining out with a group of friends; if someone leaves the table and doesn’t pay their share, the remaining diners must pay their share of the bill.
It costs the Muni treasury nothing to grant exemptions, but it costs us.
Here are some egregious recent examples of the new Berkowitz era exemptions:
- The new multimillion dollar neon building at 5th and F. It’s the newest and nicest, great highly profitable lease to an oil company owned by very wealthy developer/owners. It is exempt for 10 years. Millions in tax dollars, plus anything else that developer builds on that whole block and his property on Northern Lights Blvd is slated for exemption.
- The hotel at 4th Avenue and C Street is exempt for 10 years. Wouldn’t the other hotels like a break like that, not to mention that they will pay more in property taxes because of the Mark Begich deal?
- SpanAlaska Trucking, a subsidiary of a $4.5 billion Manson Lines built a $26 million warehouse – exempt.
- In the MLS listings of new downtown $840,000 condos, the Realtor touts that the new buyer will be exempt for 12 years!
How did that get by legal scrutiny? Although the Muni carefully crafted ordinances to exempt developers, they must realize that creating a legal right for a property not to be taxed, regardless of ownership, creating additional value for the developer to sell, is beyond hard to swallow for the rest of us. All other exemptions of all types expire upon change of ownership or use.
The public hasn’t heard much about this, but how could they? The assessor contends that exemption information is confidential, even after freedom of information requests. Administration approval bypasses the Assessor and goes solely to the CFO (a political appointee). Meetings are private. Assembly approval is by resolution, rather than ordinance, thus no public hearing, and is buried in a consent agenda. The dollar amounts involved are never shown, and these exemption issues are handled with Assembly in private work sessions. The truth is that there is nothing in an advalorum tax system that is not subject public review. Tax rolls are supposed to be open, reviewable, and verifiable.
Although there are thousands of exemptions totaling $18-20 billion out of a $57 billion tax roll, the recent abuse of the system warrants a review of at least the new exemptions on FORPROFIT entities. Full disclosure and transparency including financial impact, legal review, and expiration upon sale are needed. I suspect that some of the Assembly has been “compromised”, but we will wait to see if anyone even wants to have a conversation about it.
Expect to hear only crickets.
Larry Norene is a real estate broker and retired real estate appraiser.
