From Win Grüning
In a recent meeting of the Juneau City and County Finance Committee, a majority of the congregation rejected an attempt to provide tax breaks to Juneau owners. Michelle Hale’s proposal, supported by Greg Smith and Wade Bryson, would have lowered the CBJ mill rate from the current 10.66 mills to 10.56 mills. After some discussion it was rejected with 6: 3 votes. Their decision to keep the current milling rate (a reduction of the previously proposed increase by 0.20 mills) was presented to the next regular meeting on June 14th for final approval.
While the proposal would not have resulted in a significant tax cut on an individual level, it would have sent an important message to residents and businesses that their elected congregation was aware of the past and future economic hardship caused by the pandemic.
If anything, the proposed reduction was shockingly short given the significant property appreciation increases experienced by commercial property owners in Juneau. Keep in mind that many Juneau businesses are struggling after seeing their sophomore year with minimal to zero income, and even with the prospect of a few cruise arrivals, they may not fully open by August this year. According to Rorie Watt, CBJ city manager, the city was “way behind” in updating its commercial ratings according to the country’s regulations.
The sharp increase in the property values assessed has surprised commercial property owners and will lead to substantial increases in property taxes. Predictably, this has generated a sharp reaction from many downtown business owners. Some owners who have purchased a property in the past few years have reported reviews that have been double their original purchase price. This year, more than 300 tax lawsuits were filed to challenge the city’s most recent tax bill – three times the number in a normal year. While, according to the city, the revaluations mainly had an impact on land values, companies can expect similar increases in building values in the next year.
While real estate appraisal is a complex process, with many factors, a cursory review of the tax bills on the CBJ website reflects some strange and oversized differences. The unrepaired lot, purchased by Norwegian Cruise Lines last year for $ 20 million, is still valued at $ 7.5 million, which equates to about $ 60 per square foot to the land. Even if it were rated at the higher retail value, it would be $ 161 per square foot. Still, the archipelago’s land in downtown South Franklin is valued at $ 300 per square foot. Some upgraded lots nearby reflect updated land values of $ 450 per square foot – all of which result in double-digit increases in their property taxes.
Some members of the congregation believe that maintaining the current mill rate means “adhering to taxation policies” and that is where their responsibility ends. But everyone knows that the wording of the property tax 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 gathering lightly approved some large discretionary spending – while the private sector suffered massive layoffs. City workers have never considered serious business spending cuts. Last year, planned $ 1.5 million wage increases for city workers were approved along with new hires, longevity salaries, and benefit increases. It also funded a brand new childcare program that will add millions to future expenses, along with a $ 1.5 million grant to the Sealaska Heritage Institute, which will fund the $ 14 million art space under construction in downtown Juneau subsidized.
Why is the city’s business expenses never reduced, but considering a temporary property tax break for residents and small businesses is considered a tax break for the rich?
The city currently has around $ 40 million in reserves and unrestricted fund balances. This is significantly higher than in previous years and more than enough to absorb a significant temporary drop in property taxes. Our economy has started to recover, and as debt falls and VAT revenues increase, so will our municipal revenues.
The economic health of our families, businesses and their employees should be just as important as non-essential CBJ expenses.
The assembly can still think about the relief of the property tax. The time to act is now when our businesses and citizens need it most.
• After retiring as Senior Vice President responsible for commercial banking for Key Bank in Alaska, Win Gruening became a regular columnist on the Juneau Empire’s opinion page. Born and raised in Juneau, he graduated from the US Air Force Academy in 1970. He is involved in various local and national organizations and is currently on the board of directors of the Alaska Policy Forum. Columns, My Turns, and Letters to the Editor represent the author’s view, not the Juneau Empire’s view. Have something to say? How to Send a My Turn or Letter.