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HomeMy WebLinkAboutOrdinance No. 3382-2023l -- Sponsored by: Gabriel, Knackstedt, Baisden, Daniel, Askin, Sounart, Douthit KENAI CITY OF KENAI ORDINANCE NO. 3382-2023 AN ORDINANCE AMENDING KENAI MUNICIPAL CODE CHAPTER 7.05 TAXATION OF REAL AND PERSONAL PROPERTY TO PROVIDE AN EXEMPTION ON THE FIRST $100,000 OF ASSESSED VALUATION OTHER THAN MOTOR VEHICLES AND WATERCRAFT OWNED BY EACH TAXPAYER AND MAKING HOUSEKEEPING CHANGES. WHEREAS, Kenai Municipal Code (KMC) 7.05 defines the City's taxation, as well as any exemptions to the taxation of real and personal property; and, WHEREAS, Kenai Municipal Code currently requires all personal property, (except residential personal property) including aircraft, motor vehicles, and watercraft, be subject to taxation; and, WHEREAS, motor vehicles are taxed by the State of Alaska through the vehicle registration process, and funds are remitted to the Kenai Peninsula Borough, which distributes the City's proportional share; and, WHEREAS, a house keeping amendment to KMC Chapter 7.05 to clarify motor vehicle taxation is in the best interest of the City and its residents; and, WHEREAS, the current business personal property tax is burdensome to many business owners within the City and is not consistent with neighboring communities; and, WHEREAS, the Kenai Peninsula Borough and the City of Soldotna have a $100,000 exemption for business personal property, excluding aircraft and watercraft, for each taxpayer; and, WHEREAS, implementation of a $100,000 exemption consistent with that of the Kenai Peninsula Borough and City of Soldotna will remove the reporting burden to many Kenai business, and the tax savings represent an investment by the City and its residents in the City's businesses; and, WHEREAS, based on the current certified main role, it is estimated that exempting the first $100,000 of business personal property, other than motor vehicles and watercraft, from property taxes would result in a maximum tax reduction of $435 per business and an approximate $35,000 loss in annual tax revenue to the City; and, WHEREAS, the exemption of the first $100,000 of business personal property other than aircraft, motor vehicles, and watercraft is in the best interests of the City of Kenai and its residents. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, AS FOLLOWS: Section 1. Amendment of Section 7.05 of Kenai Municipal Code: That Kenai Municipal Code, Section 7.05-Taxation of Real and Personal Property, is hereby amended as follows: New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 2 of 8 Chapter 7.06 TAXATION OF REAL AND PERSONAL PROPERTY 7.06.010 Property subject to taxation. (a) All real and personal property not expressly exempt by law shall be subject to annual taxation at its full and true value based upon the actual value of the property assessed. This shall not apply to property subject to a flat tax and/or exempted from the ad valorem tax in this chapter. (b) The rate of levy of tax shall be fixed by resolution of the City Council, but the aggregate thereof shall not exceed three percent (3%) of the assessed value of the property assessed. [(C) IN ADDITION TO EXEMPTIONS PRESENTLY AUTHORIZED BY THE KENAI PENINSULA BOROUGH, THE INVENTORY OF A BUSINESS HELD FOR RESALE IN THE NORMAL COURSE OF THAT BUSINESS IS HEREBY CLASSIFIED AS PERSONAL PROPERTY EXEMPT FROM TAXATION FOR THE CITY OF KENAI.] 7.06.020 Assessment —Collection by Kenai Peninsula Borough. The Kenai Peninsula Borough shall assess and collect all property taxes levied for City purposes on property within the boundaries of the City of Kenai [AS PROVIDED IN AS 07.15.320. The procedures for assessment and collection shall be as provided by statutes of the State of Alaska. 7.05.030 Senior citizen's tax exemption. The provisions of [AS 29.45.030] Alaska Statutes that set out mandatory Senior Citizen tax exemptions are hereby incorporated herein by reference as though set forth verbatim herein. 7.06.035 Community purposes exemption. Property of an organization not organized for business or profit -making purposes and used exclusively for community purposes is exempt from taxation under this chapter. Property or a part of the property from which rentals or income are derived is not exempt from taxation unless the income derived from the rentals does not exceed the actual cost of the owner of the use by the renter. 7.05.036 Personal Property Tax Exemptions. a The inventory of a business held for resale in the normal course of that business is hereby classified as personal property exempt from taxation for the City. New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 3 of 8 (b) The first $100.000 of assessed valuation of personal property, other than aircraft motor vehicles, and watercraft owned by each taxpayer shall be exempt from the levy on personal property within the City. For taxpayers with more than one personal property tax account, the $100,000 exemption will be distributed pro rata amongst all of the tax a er's accounts to the total assessed value of the tax a er's Personal property. 7.05.040 Procedure for applying for exemption. The procedure for applying for the exemptions provided for herein in KMC 7.05.030 shall be accomplished as provided in applicable Alaska Statutes [AS 29.45.030]. 7.06.060 Direction to apply for State subsidy. [PURSUANT TO AS 29.45.030, A] A recovery of revenues lost through tax exemptions is provided for, and the administration is hereby directed to make such applications or take such actions as may be required in order to secure the reimbursement for revenues which may be lost.[BY AS 29.45.030]. 7.05.060 Exemption of State augmented. If a person qualifying for a[N] mandatory exemption from real property tax [PURSUANT TO AS 29.53.020(a)] does not receive an exemption of a value of two hundred fifty dollars ($250.00), then the City shall exempt such person for taxes up to the total sum of two hundred fifty dollars ($250.00). 7.05.070 Disabled persons' exemption. One (1) piece of residential property owned and occupied by a citizen disabled within the meaning of the provisions of the U.S. Social Security Act and found to be totally disabled by administrators thereof, who is a resident of the City of Kenai, Alaska, shall be exempt from so much of such property tax levy by the City up to and including the sum of two hundred fifty dollars ($250.00), providing such citizen is head of the household and providing that not more than one (1) exemption shall be allowed on any one (1) piece of real property. This exemption is not automatic, but must be applied for prior to the fifteenth day of January during the year that such citizen is qualified. The first year for qualification pursuant to this enactment shall be the calendar year 1973 and the deadline for applying shall be not later than the fifteenth day of January, 1973. Application shall be made in the same fashion as provided for senior citizens of sixty-five (65) years of age or more. New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 4 of 8 7.05.075 Property tax credit —Residential sprinklers. (a) Credit. The owner(s) of a newly constructed one- or two-family dwelling who installs, and/or has certified, a compliant sprinkler system by a qualified installer may receive a credit against the City of Kenai property taxes. (b) Amount of Credit. The credit allowed under this section for a residential sprinkler system is the lower of the eligible cost to the owner of the property for the installation of the system or two dollars ($2.00) per square foot of the dwelling (excluding attached garages). "Eligible cost" means the cost of the sprinkler system including labor and materials required to comply with the minimum standard established by code. (c) Carry Over. The amount of credit in any tax year must not exceed the amount of the City of Kenai property tax imposed on the property benefitted by the credit in that tax year. Any amount of a credit not taken in the tax year in which an application is approved may be carried over in subsequent years until the full credit is granted. (d) Application. (1) A property owner must submit an application for the tax credit to the Finance Department on or before the date that the Finance Department sets which date shall be no later than April 30 of each year. Applications filed after April 30, or applications that are incomplete as of the date set for filing by the Finance Department, will be retained and, once complete, evaluated for a tax credit for the next succeeding year. (2) An application must: (A) Be on the form that the City requires; (B) Demonstrate that the taxpayer is entitled to the credit; and, (C) Include a certificate of occupancy from the City of Kenai's building official indicating that the system for which the credit is sought meets the requirements of the 2009 International Residential Building Code (or subsequent edition adopted by the City). (e) Appeal. If the tax credit is denied, or if less costs for the installation of the system are allowed than the applicant believes appropriate, the applicant may appeal that decision to the City Manager on a form provided by the City. Appeals shall be filed with the City Manager within fifteen (15) days of the date of any decision under this section. In reviewing an appeal, the City Manager shall consider whether the sprinkler system meets the requirements of this section; the costs were necessarily incurred to install the system in accordance with this section and applicable codes; and the application for the tax credit was timely filed. (f) The credit authorized by this section applies to any tax year beginning January 1, 2012. New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 5 of 8 7.05.080 Personal property tax —Assessments —Aircraft. (a) Purposes of taxation, aircraft that have been issued an N number by the Federal Aviation Administration ("FAA") by January 1 st of the tax year shall be totally exempted from ad valorem taxes and shall be taxed in accordance with the schedule at the end of this section. (b) The owner of record of an aircraft that has been dismantled, destroyed or crashed and the FAA N number has been retained by the aircraft's owner of record may submit to the assessor on an approved form "Aircraft Statement of Condition" that would allow for ad valorem taxation of that aircraft if approved. Aircraft for which such registration or licensing has lapsed or that has not passed the annual inspection required by the FAA shall not qualify on this basis alone for ad valorem taxation unless it has been dismantled, destroyed or crashed. (c) Commercial aircraft operated under a regular schedule by a scheduled airline shall be exempt from the flat tax and shall be taxed on an ad valorem basis in accordance with the KPB landing schedule formula. The KPB landing schedule formula provides for the prorated calculation of scheduled aircraft by dividing the total hours per year into the total time aircraft operated by a scheduled carrier are in the KPB, and multiplying the result by the assessed value of each aircraft. (d) Definitions. (1) "Aircraft" means any engine powered contrivance invented, used, or designed to navigate, or fly in, the air and that is capable of being manned and is required by the FAA to be registered and certified in order to be manned. (2) "Aircraft engine" means an engine used, or intended to be used, to propel an aircraft, except the tail rotor of a helicopter. (3) "Commercial aircraft" means any aircraft transporting passengers and/or cargo for some payment or other consideration, including money or services rendered. (4) "Crashed" means aircraft for which only parts remain that, due to their condition, can no longer be assembled to create any contrivable aircraft. This shall be evidenced by a FAA accident report and/or copy of an insurance claim that determines the aircraft to be a total loss. (5) "Destroyed" means aircraft that have been damaged by age, weather, neglect and/or external influences outside the owner's control, and only unusable parts remain that, due to their condition can no longer be assembled to create any contrivable aircraft. This shall be evidenced by photographs and a physical inspection by the KPB Assessing staff appraiser if deemed necessary by the borough assessor. (6) "Dismantled" means aircraft that have been voluntarily disassembled and only parts remain that can no longer be assembled to create any contrivable aircraft. Evidence such as New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 6 of 8 photographs and a physical inspection by the KPB Assessing staff appraiser shall be provided or allowed if deemed necessary by the borough assessor. (7) "Scheduled airline." A "scheduled airline" means any individual, partnership, corporation or association: (a) Engaged in air transportation under regular schedules to, over, away from, or within the U.S.; and (b) Holding a Foreign Air Carrier Permit or a Certificate of Public Convenience and Necessity, issued by the Department of Transportation pursuant to 14 CFR Parts 201 and 213. (e) An aircraft owner may appeal the determination of the borough assessor under this section using the procedures set out in KPB 5.12.050-060. AIRCRAFT FLAT TAX SCHEDULE BASED ON (MGWIL) Manufacturer's Gross Weight with an Internal Load Fixed Wing Rotorcraft/Rotary Wing Class Weight Annual Tax Class Weight Annual Tax 1 Less than 2,000 Ibs $0 1 Less than 1,500 Ibs $0 2 2,000 to less than 4,000 Ibs $0 2 1,500 to less than 3,500 Ibs $0 3 4,000 to less than 6,000 Ibs $0 3 3,500 Ibs or more in weight $0 4 6,000 to less than 12,500 Ibs $0 5 12,500 Ibs or more in weight $0 New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 7 of 8 7.06.090 Personal property tax —Assessments —Watercraft. (a) For purposes of taxation, watercraft for which the United States Coast Guard certificate of number, or U.S. or foreign documentation, or State of Alaska Department of Motor Vehicles boat registration, or a State of Alaska Department of Fish and Game number has been issued, or other form of maritime licensing have been issued by January 1 st of the tax year shall be subject to ad valorem taxes of the City. This shall not apply to any class of watercraft exempted from the ad valorem tax in this chapter. (b) For purposes of taxation, the City adopts the following classification schedule for watercraft based upon the overall length of the watercraft: Class Overall Length 1 Less than 15 feet 2 15'to less than 20 feet 3 20 to less than 25 feet 4 25 to less than 36 feet 5 36 to less than 60 feet 6 60 to less than 100 feet 7 100 or more feet in length (c) For purposes of taxation Class 1 and 2 watercraft are hereby classified as personal property exempt from taxation for the City of Kenai. 7.06.100 Motor Vehicle Taxation. Motor vehicles subject to the motor vehicle tax under Kenai Peninsula Borough Code are not subiect to an ad valorem tax on personal property_. Section 2. Severability That if any part or provision of this ordinance or application thereof to any person or circumstances is adjudged invalid by any court of competent jurisdiction, such judgment shall be confined in its operation to the part, provision, or application directly involved in all controversy in which this judgment shall have been rendered, and shall not affect or impair the validity of the remainder New Text Underlined; [DELETED TEXT BRACKETED] Ordinance No. 3382-2023 Page 8 of 8 of this title or application thereof to other persons or circumstances. The City Council hereby declares that it would have enacted the remainder of this ordinance even without such part, provision, or application. Section 3. Effective Date: That pursuant to KMC 1.15.070(f), this ordinance shall take effect 30 days after enactment. - ENACTED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, THIS 20TH DAY OF DECEMBER, 2023. ATTEST: Michelle M. Saner, MMC, City Clerk r - _ C� Brian Gabriel Sr., Mayor Introduced: November 15, 2023 Enacted: December 20, 2023 Effective: January 19, 2024 New Text Underlined; [DELETED TEXT BRACKETED] City of Kenai 1 210 Ficlalgo Ave, Kenai, AK 99611-7794 1907.283.7535 1 www.kenaixity MEMORANDUM TO: Mayor Gabriel and Council Members FROM: Terry Eubank, City Manager DATE: November 7, 2023 SUBJECT: Ordinance 3382-2023 — Personal Property Tax Exemption This memo provides information in support of amendments to the Kenai Municipal Code to provide an exemption on the first $100,000 of assessed personal property other than motor vehicles and watercraft and make other housekeeping changes. In February, a Kenai business owner contacted the Administration with the suggestion that the City consider this exemption which is similar to exemptions provided by the Kenai Peninsula Borough, City of Soldotna, and City of Homer. Since then, the Administration and the City Attorney reviewed KMC 7.05, which defines the City's taxation policy, and determined that an amendment to the section related to motor vehicles taxation required an amendment to accurately reflect the practice used by the Kenai Peninsula Borough to distribute the City's proportional share of this tax. The Administration also reviewed the current certified tax role to determine the effect of a $100,000 personal property tax exemption. Based on the current certified main role, it is estimated that exempting the first $100,000 of personal property, other than motor vehicles and watercraft, from business property taxes would result in a maximum tax reduction of $435 for a City of Kenai business and an approximate $35,000 loss in annual tax revenue to the City. Although the exemption will result in a loss of revenue, it is important to note that the current personal property tax is burdensome to many business owners within the City and is not consistent with neighboring communities that offer the exemption. The City has recently made strides in promoting economic growth through its partnership with the Kenai Chamber in promoting the City as open for business, creating development incentives and favorable lease provisions on City -owned lands, and implementing a program to assist Kenai businesses in improving Kenai storefronts. Enacting a $100,000 exemption will remove the reporting burden on many Kenai businesses and is consistent with the City's mission to serve the citizens of Kenai through listening and leading; to promote growth, and continually improve services by balancing the wishes of the community with responsible management. Thank you for your consideration.