City and Borough of Juneau
Assembly Finance Committee Meeting
Friday, October 15, 2010
Immediately Following the Special Assembly Meeting
Assembly Chambers

I. Call to Order

II. Roll Call

III. Approval of Minutes
      September 22, 2010

IV. Information Item - Senior Citizen/Disabled Veterans Hardship Exemption
The City and Borough has opted to provide a Senior Citizen/Disabled Veterans Hardship Exemption allowed under State Statute, 29.45.030(3). This is an optional exemption that the CBJ has opted into by ordinance. Not all communities in the state have opted for this exemption (for example, Anchorage and Fairbanks have not). The current regulations require us (all governments opting for this exemption) to exempt the property taxes on qualifying residential property in excess of 2% of the taxpayer’s gross household income. For senior citizens and disabled veterans with more expensive homes, the 2% threshold results in gross household income levels being quite high. This has raised a question about the effectiveness of this exemption and how well it targets true hardship situations. The effectiveness of the exemption has become a larger issue over the past couple of years as the number of individuals taking advantage of the exemption has grown.

A summary of the exemption activity for the past seven years is presented below.

Year

# of Exemptions Given

Average Property Value

Highest Property Value

Average Household Income

Highest Household Income

Average Tax Exemption

2004

10

$355,780

$507,900

$27,908

$59,567

$1,911

2005

31

$336,248

$561,300

$34,156

$73,847

$1,361

2006

33

$406,242

$624,200

$44,092

$114,836

$1,732

2007

39

$411,895

$658,600

$49,630

$132,511

$1,721

2008

51

$423,053

$838,600

$60,743

$184,356

$1,598

2009

84

$440,414

$908,500

$70,823

$205,549

$1,661

2010

185

$463,892

$1,476,800

$78,403

$252,467

$1,746

Presented below is a chart showing the 2% gross earnings thresholds in relationship to property assessed values.

Hardship Exemption – Gross Household Earnings Threshold

The State Assessor, Steve Van Sant, has indicated that the current regulations would allow the CBJ to adopt limits to the application of 2% threshold but not modify the 2% rate. Our Law Department previously indicated that they felt we did not have the ability to set limits to the exemption application, but after further review, have reversed this position. They believe that the State’s regulations do allow the flexibility to adopt gross earnings limitations. A memo from Amy Mead, CBJ Assistant City Attorney, to John Hartle, City Attorney, stating her opinion and reasoning, is included in the packet.

After reviewing the options, staff is recommending that we consider setting the following limitations:
1. An upper gross income limit of 300% of the Federal Poverty Guidelines. The 300% of the Federal Poverty Guidelines (Alaska Rate) would set the 2010 maximum household earnings limits as follows-

Persons in Family

Poverty Guideline

300% Limit

1

$13,530

$40,590

2

$18,210

$54,630

3

$22,890

$68,670

4

$27,570

$82,710

2. The applicant may not own more than one parcel or residence on the date of the application.
3. The primary residence may not have an assessed value of $500,000 or more as of January 1st of the year in which the exemption is sought.
4. The residence for which an exemption is sought may not be an income producing property.
5. A hardship exemption shall not be granted to any applicant who has not owned and occupied the residence for which the exemption is sought for a minimum of 2 years prior to the date of the application.

We are not recommending the CBJ set a limit on gross assets. Quantifying applicant gross assets would be difficult and potentially subjective.

Included in the packet is a draft of ordinance Serial No. 2010-33, An Ordinance Amending the Real and Personal Property Tax Code Relating to Exempt Property, and Providing for the Establishment of Baseline Criteria for the Application of the Hardship Exemption Authorized by State Law

On September 22, 2010, the Finance Committee concurred with a recommendation that the CBJ request that the AML or the Conference of Mayors petition the State to review their Senior Citizen/Disabled Veterans exemption regulations. Staff is recommending the Finance Committee consider continuing to move forward with this recommendation. Without regulation changes, our options to progressively apply exemption limitations would be minimal and staff believes that there are more progressive ways to set hardship limitations.

V. Adjournment