Win Gruening: We pay, they spend, as Juneau Assembly rejects property tax relief

By WIN GRUENING

In a recent City and Borough of Juneau Finance Committee meeting, a majority of Assembly members rebuffed an attempt to provide tax relief to local property owners.  

The proposal by Michelle Hale, supported by Greg Smith and Wade Bryson, would have lowered the mill rate from its current 10.66 mills to 10.56 mills. After some discussion, it was defeated on a 6-3 vote. The decision to maintain the current mill rate (a reduction from the previously proposed .20 mill increase) was forwarded for final approval at the next regular Assembly meeting on June 14.

While the proposal would not have provided a substantial reduction in taxes at the individual level, it would have sent an important message to residents and businesses that their elected Assembly was cognizant of the past and future economic hardship caused by the pandemic.

If anything, the proposed reduction was woefully short considering the significant property valuation increases experienced by Juneau commercial property owners.  Consider that many Juneau businesses are struggling after experiencing their second year of minimal to zero revenue and, even with the prospect of some cruise arrivals by August, may not fully open this year.  According to City Manager Rorie Watt, the city was “way behind” on updating commercial assessments as required by state law.

The severe jump in assessed land values caught commercial property owners off guard and will result in major property tax increases. Predictably, this has provoked a sharp reaction from many downtown business owners.  Some owners that have purchased property in the last several years have reported assessments that have been double their original purchase price.  

Over 300 tax appeals have been filed this year contesting the city’s latest round of tax assessments – triple the number in a normal year.  According to the city, while the new assessments have primarily affected land values, businesses can expect similar increases in building values next year.

While recognizing that property valuation is a complex process with many factors, a cursory review of tax assessments on the CBJ website reflect some odd and outsized disparities.  The unimproved waterfront lot purchased last year by Norwegian Cruise Lines for $20 million is still assessed at $7.5 million which values the land at about $60 per square foot.  

Even if it were assessed at the higher sale value, it would be $161 per square foot. Yet, the Archipelago lot downtown on South Franklin Street is assessed at $300 per square foot.  Some nearby improved properties reflect updated land values of $450 per square foot – all resulting in double-digit increases in their property taxes.

Some Juneau Assembly members believe that continuing the current mill rate is tantamount to “holding the line” on taxes and that’s where their responsibility ends.  But everyone knows that property tax formulation is a combination of the mill rate and property valuation – and both should be considered when budgeting our tax dollars.  

Even amid the pandemic, the Assembly blithely approved some large discretionary expenditures – all while the private sector suffered massive layoffs. City staff never considered serious operating spending reductions.  Last year $1.5 million in scheduled pay raises for city employees were approved along with new hires, longevity pay and merit increases. Additional increases in employee benefits and compensation is expected this year. 

Also funded was a brand-new childcare program that adds millions to future expenses along with a $1.5 million grant to Sealaska Heritage Institute subsidizing their $14 million arts plaza under construction in downtown Juneau.

Why is it that municipal operating expenditures are never reduced but consideration of temporary property tax relief for residents and small businesses is considered a tax break for the wealthy?

The city currently has around $40 million in reserves and unrestricted fund balances.  This is considerably higher than past years and more than enough to absorb a substantial temporary reduction in property taxes. Our economy has begun to recover, and, with declining debt and increased sales tax collections, our municipal revenues will recover as well.

The economic health of Juneau’s families, businesses and their employees should be as important as non-essential CBJ spending. One of the most important ways the Assembly can continue to help existing small businesses and attract new startup businesses is to keep property taxes and overall cost of living low.

The Assembly can still reconsider property tax relief.  The time to act is now when Juneau’s businesses and citizens need it most.

After retiring as the senior vice president in charge of business banking for Key Bank in Alaska, Win Gruening began writing op-eds for local and statewide media. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970. He is involved in various local and statewide organizations and currently serves on the board of the Alaska Policy Forum.