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HomeMy WebLinkAboutResolution No. 2019-17tltc&ityof: KENAI, ALASKA "V Sponsored by: Mayor Gabriel and City Council Members Suggested by: Council Member Peterkin and Mayor Gabriel CITY OF KENAI RESOLUTION NO. 2019 -17 A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, IN SUPPORT OF MODIFYING SB 57 AND HB 59 TO RESTORE LOCAL MUNICIPALITIES' AUTHORITY TO TAX OIL AND GAS PROPERTY TAXABLE UNDER AS 43.56 TO A MAXIMUM OF 15 MILLS. WHEREAS , Governor Michael Dunleavy has transmitted SB 57 and HB 59 to the legislature which creates a new mandatory municipal tax exemption on oil and gas exploration, production and pipeline transportation property; and , WHEREAS, as a result this bill removes local tax authority and shifts all revenue from property in the municipalities to the state on oil and gas, exploration, production and pipeline transportation property which would provide estimated additional tax revenues of $450,000,000 to the state next fiscal year; and , WHEREAS , removing revenue sources from municipalities and forcing them to increase the burden on residents to provide similar service does not equate to cutting the State budget; and, WHEREAS, Article X, Section 1, of the Alaska Constitution provides for maximum local self- government and a liberal construction applied to the powers of local government; and, WHEREAS, prohibiting municipalities from taxing or sharing in revenue from taxes on property within municipal jurisdictions that burden local resources is not only unreasonable, but flies in the face of Article X, Section 1, of the Alaska Constitution; and, WHEREAS, City of Kenai revenues from oil and gas properties are estimated at $27 4,455 for fiscal year 2020 and the Kenai Peninsula Borough 's revenues from the same are estimated at $14,784,733; and , WHEREAS , this reduction in revenues would burden the City of Kenai 's ability to fund , maintain, and improve roads, provide other services including 911, police, fire, and emergency medical, senior citizen, and recreational services to visitors and residents ; and , WHEREAS , this measure would cause the City of Kenai to seek other sources of revenue to fund basic services which would likely be in the form of significant increases in local taxes and fees; and , WHEREAS, this would also drastically affect other municipalities in the state with oil and gas properties, severely impairing their ability to provide education and other services to their residents; and, WHEREAS, allowing municipalities to collect taxes on oil and gas property in their boundaries is just, equitable, and appropriate as municipalities are impacted by their presence including incurring costs of providing education to their employees and their families, fire and emergency Resolution No. 2019-17 Page 2 of 2 medical services, law enforcement, solid waste services, road services , hospital services, recreational services, 911 services, and many other services ; and, WHEREAS, the general property tax rate levied by the City is currently 4 .35 mills on property located in the City which is a reasonable and responsible rate; and , WHEREAS, the highest property tax rate levied against any oil and gas property in the Kenai Peninsula Borough is currently 10.33 mills and the lowest such rate is 4. 70 mills ; and, WHEREAS, a more equitable approach would be to allow municipalities to levy a tax under AS 43.56 of up to 15 mills on oil and gas property thereby ensuring that the State of Alaska would receive tax revenue allowed under AS 43.56 from these properties and continuing to provide much needed funding for the affected municipalities. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA: Section 1. That Governor Dunleavy and the state legislature are strongly encouraged to modify SB 57 and HB 59 to allow municipalities to continue to levy local property taxes on AS 43 .56 oil and gas properties at a rate up to 15 mills. Section 2. That a copy of this resolution shall be sent to Governor Dunleavy, all members of the Alaska House of Representatives and all members of the Alaska State Senate. Section 3. That this resolution takes effect immediately upon adoption. ADOPTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this 201h day of March , 2019. BER CIL MEMBER 'Vtff"!e «1/tl!t a PaJ'~ Ct'tj «1/tl!t a f"a t«!"e " 2 10 Fidalgo Ave , Kenai , Alaska 99611 -77 94 Telep ho ne: (907 ) 2 83-7535 I Fax : (907) 2 83-3014 www.kenai.city MEMORANDU M TO: FROM: DATE: SUBJECT: Members, Kenai City Council Mayor Brian Gabriel and City Council Member Robert Pete rk in March 14, 2019 Resolution No. 2019-17 in Support of Modifying SB 57 and HB 59 Governor Michael Dunleavy has transmitted Senate Bill 57 and House Bill 59 to the legislature for their consideration. These bills specifically exempt oil and gas, exploration, production and pipeline transportation property from taxation by municipalities while preserving the States right to tax those properties . The Constitution of the State of Alaska was crafted to create a strong , fiscally sound system of local government. Specifically, the first section of the Local Government Art icle of the Alaska Constitution states : "The purpose of this article is to provide for maximum local self-government with a minimum of local government units, and to prevent duplication of tax-levying jurisdictions. A liberal construction shall be given to the powers of local government". By imposing exemptions and limiting the ability to generate revenues , the State is weakening a municipality's ability to provide for maximum local self-governance ; an important tenant of our Constitution. We recognize the difficulties the State is facing, with falling oil revenues and dwindling savings , however, replacing those revenues by undermining the ability of local municipalities to generate revenues to provide essential services does not reso lve the State 's fiscal issues, it simply shifts the burden to the local level. This Resolution recommends a more equitable approach to the ta xation of oil and gas properties , protecting a municipality's right to levy tax on these properties at a reasonable level up to 15 mills, while providing an opportunity for the State to receive tax revenues on the same property. Your consideration is appreciated .