EDITORIAL: Mayors make a good case for a seat in property tax talks
Property taxes are the underpinning of the operation of the Fairbanks North Star Borough and other local governments. Therefore, anything that could have a detrimental impact on that revenue will most likely catch the attention of elected officials.
And that’s precisely what has happened with regard to the natural gas pipeline agreement reached among the state, the major oil companies operating on the North Slope, and pipeline builder TransCanada.
Mayor Luke Hopkins of the Fairbanks North Star Borough and the mayors of the Kenai Peninsula Borough, the North Slope Borough and the city of Valdez sent a letter to Gov. Sean Parnell earlier this month expressing deep concern about the potential impact the agreement could have on local property taxes.
The oil companies that hold the leases to the North Slope gas leases say they want fiscal certainty on oil and gas fiscal terms in order to go forward on the gas pipeline. And fiscal certainty with regard to the gas pipeline would surely mean a stable, flat tax payment, a system called “payment in lieu of taxes.” That differs from the tax fluctuations that the rest of us see as a result of annual increases and decreases in property values.
But it’s the local governments that have taxing authority over property located within their borders. And they should be involved.
Large projects and buildings bring in a large portion of a government’s total tax revenue. The trans-Alaska oil pipeline is the biggest example in the Fairbanks area and has been the subject of repeated taxation disputes, one of which, for the year 2006, was won this week by the Fairbanks borough when the case went to the Alaska Supreme Court. That victory means $9 million in taxes for the borough.
With such large amounts of tax revenue at stake, it is right that leaders of the local governments strenuously express concerns at the earliest opportunity.
The mayors’ concern, as stated in their letter to the governor, is that they will be excluded from the negotiations about local taxes on existing oil production and pipeline property and future gas production and pipeline property.
Will, for example, the state somehow change the tax structure on existing oil-related property to a flat annual rate from the current value-based system? Will a flat, or payment in lieu of taxes, system be imposed for a gas pipeline? And how would that affect Fairbanks and the other pipeline communities?
Mayor Hopkins says he’s heard virtually nothing from state officials on this. He and the other mayors expressed that frustration in their letter to the governor: “We have become concerned about the lack of information provided to municipalities regarding the impacts of the ongoing negotiations.”
The mayors don’t just want to be advisers in the process. They — and, through them, the communities they represent — want to be active participants who can have the ability to shape the eventual outcome of decisions. The mayors and Alaskans in general want to see a natural gas pipeline built.
But the mayors are acting responsibly by looking out for their respective communities and are deserving of meaningful inclusion by state officials and the oil companies.