Anchorage's City Budget – Where's the Outrage?
By Elstun Lauesen
The Assembly Voted last night for the $435 M budget that cuts services and raises property taxes by half a mill.
Basically, this budget was predicated on a set of assumptions that misrepresented facts of a greater magnitude than those alleged by Assemblymen Chris Birch, Dan Coffey and Bill Starr against then Mayor Mark Begich. We all remember the hand-wringing over the ‘overly optimistic’ assumption that set Starr into meltdown mode in early 2009. Alleging ‘criminal’ activities by the Begich administration, Starr made unauthorized visits to the FBI and Bond Council, in essence, trying to undermine the fiduciary position of the Municipal corporation. Starr’s theatrics were later mooted by a forensic audit that found no criminal wrongdoing on the part of the Begich administration. Any other corporation would have fired Starr.
The $17 M shortfall identified by Acting Mayor Claman in January of 2009, and blamed on the former Mayor, was nearly eliminated by Union concessions and the performance of the City’s stock portfolio under the Obama recovery. In February of 2009, the stock market was languishing in the 6,000s and by the end of 3rd quarter of 2009, the market was over 10,000.
Comes now Mayor Dan Sullivan, who is doing the flip-side of what was alleged against Mayor Begich. Only the consequences of the Sullivan actions has created a $17 M structural deficit as opposed to a $17 M one-time-only shortfall: $8.5 M under the Cap in 2009; $8.5 M under the Cap in 2010 = $17 M reduced revenue capacity forever.
I wonder: where is the outrage? We can’t even hear outrage from the Center-Left much less the Center-Right as the Sullivan Budget, based on complete bollox, is passed unanimously. Transit and libraries cut, neighborhood councils, parks and recreation cut. 100 positions lost. All of it unnecessarily.
The budget by Mayor Sullivan was based on falsehoods:
1. Mayor Sullivan claims that the the Anchorage Economy is in crisis: This is simply not true. the Federal BEA (Bureau of Economic Analysis) says that it is quite robust—Alaska is the fourth strongest performing State in the nation;
2. Unemployment is extremely high, forcing down the value of labor and, hence, those Union contracts are eating up budgets with artificially high wages. The State Research and Analysis Division of the Department of Labor disagrees. Anchorage has lower unemployment than the nation as a whole. The September 2010 unemployment rate in Alaska was 7.7% while nationally the rate was 9.6%;
3. Anchorage residents are overtaxed. A Study by ISER in 2000 on tax rates and housing values concludes that in Anchorage the personal property taxation as a ratio to income is among the lowest in the nation!
“… According to the National Association of Home Builders, Anchorage had the most affordable housing among metropolitan areas on the west coast and was the 50th most affordable housing location among 184 metropolitan areas in the entire US in the second quarter of 2000. This would suggest that the ratio of assessed value to personal income would be much higher in these other metropolitan locations than in Anchorage.”
-ISER, Anchorage Budgets and Property Taxes p.14
4. Anchorage Government is growing too fast.
In comparison to the growth in income, this is not true. Since 1990, the cost of city services has almost doubled in real dollar terms, yet, according to the BEA, the aggregate household income increased over 260% from 6.6B in 1990 to $17 B in 2009;
5. Anchorage residents are, generally, overtaxed.
According to the 2010 issue of their State-by-State comparison, Tax Foundation places Alaska at 49th in terms of Per Capita Tax Burden of $2,871; the only state lower is Mississippi. For tax burden as a percentage of State Income, Alaska is 50th. The Foundation of comparison of State tax climate places Alaska at no. 1 for LEAST individual tax burden; Alaska has the highest State Revenue per capita and in their comparison of public expenditures as a ratio of individual contribution (taxation) or ‘Benefits vs Burdens’ analysis, the Foundation notes that Alaskans get about $6.8 dollars per capita for every per capita dollar of tax paid, the highest in the nation.
So…the reality is that our economy is steady, our employment is far better than the nation as a whole, our tax burden is low and there is absolutely no rational reason for this budget to be brought in under the allowable cap.
Finally, the Mayor’s own public process revealed a citizenry WILLING to be taxed for services. His unwillingness to do so makes a mockery of that process.
On balance, this budget has been sold under false pretenses, but the voters of Anchorage will have a chance to send Sullivan a message.
The salient message voters have to ask is this: Is the City Assembly supposed to be a rubber stamp for the Mayor or a checks and balance to the Mayor through oversight and review? The Charter says that it is that latter. Mayor Sullivan has fielded rubber stamp candidates against incumbents Elvi Gray-Jackson, Mike Gutierrez, and Harriet Drummond. He is supporting the re-election of Chris Birch.
April, 2011 you can send a message to Sullivan.
BTW – how much did that forensic audit end up costing the city? If I remember correctly, it was slated to be quite a hefty amount. beth.
Forensic Audit cost $50,000
First thing I read today was that Parnell gave himself a $50,000 raise. Sullivan giving a 5% raise awhile back. And then this. I’m beginning to think there is no fiscal problem. Wait , extending the tax cuts for the rich just confirms it.LOL
When is this Yahoo up for re-election??
YIKES..TYPO ALERT: “COUNCIL” SHOULD BE “COUNSEL” CRAP! GRRRRR. ‘BOND COUNSEL’ 7 LINES DOWN FROM THE TOP.
Sigh–from Washington D.C. to Anchorage to the slough. $$$ for special interests and corporate interests. Actual services and real jobs just aren’t a priority.
there’s already a hotel bed tax to address those disparities. a sales tax of any sort won’t pass if it comes up for a vote. left-leaning people don’t like sales tax because it is regressive…. independents and right-leaning see it as a slippery slope, where even if it’s small and limited, it can and will be incrementally expanded and increased. and property taxes won’t necessarily go down just because a sales tax is collected.
I agree with your statement, Clark…all of it. Sales tax has gone down 5 or 6 times before. Chris Birch thinks its fine because he lards his assets in property and since his family income is well over $250,000 a year his consumption is largely discretionary. He will purchase his goodies from outside and ship them up as he is going back and forth to Palm Beach on his golfing trips. The poor in this community, unlike Birch, have no choice. But the real point here is WHAT IS THE CRISIS???? IS THERE A CRISIS HERE???? I don’t think so. Who is over taxed? It isn’t residential property owners. I will tell you who is UNDERTAXED. Commercial property owners. People like Rick Mystrom, Companies like Jack White Real Estate Developers, Conoco-Philips, Walmart, ASRC, etc. ISERs study on the impact of the Tax Cap pointed out years ago that Commercial Propert accounts for about half the City’s valuation but only about 26% of the tax bse.
My best friend spent some time in Anchorage in September, meeting with some major commercial real estate owners/developers there. He’s a portfolio manager for pension fund investments. I asked him about property taxes on commercial real estate there, and he said it was a mess, with lots of “sweetheart” deals. That’s the way it is in Texas too: commercial real estate and expensive housing owners/sellers are not required to disclose the costs of construction or sale prices. It’s widely known that some pay about 1/3rd what they should in property taxes.
Not living in Anchorage, I might have misheard. But isn’t Chris Birch proposing a city sales tax that will directly offset, dollar for dollar, the property tax? Hey, make those tourists, transient workers (cannery, tourism) pay for some of the infrastructure they use. For the same reasons, I think we should have an income tax. Gov. Hammond (at the time he said it) said that up to 20% of the income paid in this state went out of state because the workers (oil patch, cannery, tourism) lived out of state. Again benefited from infrastructure that they didn’t help pay for.
While I have lived in Alaska continuously since 1975, I don’t understand the issue with wanting to tax workers who live out of state. Not sure what part of the infrastructure they use that they don’t pay for. Most live in employer housing while working ,and never leave an Alaskan airport on their way to and from work and home. They don’t pay any statewide taxes, but don’t use any of the services either.
The nature of those remote jobs encourages people to live outside. High wages, with all living needs paid for by the company while here, and long tours on and off work. Back in the pipeline construction days, a lot of those jobs hired people from outside because we didn’t have those skills here. Now, most people who have those jobs that live outside started out living here, but once they were secure in their job, they moved back closer to family or where ever they originally came from. I don’t fault them for having that option.
Out-of-State workers in the fisheries, tourism and oil field industries generate $2 B in income in Alaska per year. Many of those workers are provided housing and meals and their spending within the State is minimal. If they spend at Bars, those drinks are already taxed. Sales tax is an awful alternative. The lower the income, the less consumption is discretionary.
The income tax is the best way to capture non-resident income. It is estimated that the state has lost an average of $400 m p.a. over the last 30 years since we eliminated the income tax. That’s $12 B in income which, if it offset oil income that was otherwise used for operations, could have grown the PF. Alternatively, that is $12 B that could have flowed into local government as revenue sharing, cushioning the reduction in that program as State lawmakers warily eye oil revenue declines.
Why sales tax is more palatable than income tax I will never, EVER figure out. It is just a horrible way to raise money.
Something I have NEVER seen in a discussion about property taxes: They reduce your federal income tax liability.
So does a state income tax.
Only if you itemize, though, I believe, can you deduct/off-set with state property taxes. If you don’t have enough deductions to itemize (cost of property taxes, med expenses, donations, etc.), it’s to your advantage (‘cheaper’) to just use the standard deduction.
It’s a damned “Catch-22” — beth off-spring had out-of-pocket medical (something like $3,100-worth) that had to be sucked up because the standard deduction was $150 more; claiming the standard deduction, obviously, was the better ‘deal’. IOW, even though beth off-spring had over $3k in unreimbursed medical expenses, that was just too bad…no relief for those expenses because b o-s did not have a total [of deductions] that would’ve taken b o-s over the standard deduction amount. When compared to other standard deduction claimants, beth o-s might just as well have not gotten any deduction at all — the med expenses wiped any tax relief out. ’tis a pisser. beth.
Maybe we should have a modest income tax with a property tax deductible if we are to follow the logic and line of thinking that seems to be prevalent.
From what I understood last night, they passed a resolution to have a ballot initiative for a sales tax. Income from the sales tax would be used to offset property taxes. At least I think that is correct.
a sales tax to offset property tax? – okay, its agreed that a sales tax is regressive. The CEO might have 100 times the income of the janitor but they both pay the same percentage of the cost of necessities, so a greater proportion of the burden falls on those making the least income. Now that we’ve shifted more of the tax burden onto the lower and middle classes, let’s compound it by offsetting the money we just received to reduce the money paid by property owners. And who are the biggest landowners? – the mall owners, the big retailers, the oil companies. By all means, let’s shift the tax burden from BP and Walmart to the BP janitors and Walmart checkers. Those corporations are having a tough time squeezing out executive bonus payments in these tough times. This all must have Danny boy wriggling his toes in ecstasy. I mean, time for a party. Anyone know a good party planner?
Send some of the pro-sales tax folks to Juneau for a couple weeks.
I’ll take a couple of them on as job shadowers…
We tax ourselves 5% on goods AND services with enough exemptions for a variety of groups and items to mean that most of the first 6 weeks of training a new employee is teaching them how understand what and who is taxable… hidden cost to business, extra burden on small business…
Unwieldy rules for proof of tax exempt status, purchase of software to accomodate all the ins and outs,monthly tax reports… hidden cost to business, extra burden on small business…
I could go on for a week or two…Who knows what it costs the city/borough to administer their dumb dang setup… either, too, and also even…
Income tax makes more sense…
Can home rule cities do income tax?
Going to go find out… makes a lot more sense if we can/could!!!!
ps- They even tax bus passes …their own dang bus passes
Elstun:
You obviously care about those pesky, pesky things: facts.
Happy, Birthday, too.