Areawide sales tax, new property tax exemption headed to Mat-Su ballots

What you need to know:

• The Mat-Su Borough Assembly voted 5-2 to place a measure on the November ballot asking voters whether to approve the borough's first area-wide 1% sales tax on most goods and services.
• The measure also would create a property tax exemption of up to $75,000 for owner-occupied primary residences, potentially reducing annual property tax bills by about $700 for roughly 26,000 homeowners who do not already receive senior or disabled veteran exemptions.
• Borough officials estimate the sales tax could generate up to $20 million a year, while the new exemption could reduce property tax revenue by about $16 million. Supporters say the proposal would help fund borough services while reducing reliance on property taxes. Opponents said it could lead to higher taxes.
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PALMER — Mat-Su voters will decide this fall whether to add a new 1% sales tax on most goods and services purchased in the borough while also granting a new property tax exemption for owner-occupied homes.

If approved, it would be Mat-Su's first area-wide sales tax. It is intended to give the borough a way to raise revenue to cover the cost of services like schools and major road construction while reducing its reliance on property taxes, supporters said.

The Matanuska-Susitna Borough Assembly voted 5-2 during a regular meeting Tuesday to place the question on the November ballot, with Assembly members Michael Bowles and Dee McKee voting no. It was proposed by Assembly member Stephanie Nowers.

If approved by voters, the proposed sales tax would be in addition to sales taxes charged within the city limits of Houston, Palmer and Wasilla and within the Talkeetna Special Use Area. Combined with the 1% borough tax, the total sales tax would be 5% in Palmer, 3.5% in Wasilla, 2% in Houston and 4% in Talkeetna.

The sales tax ballot measure is tied to a new property tax exemption of up to $75,000 for owner-occupied primary residences.

The proposed tax would generate as much as $20 million each year, while the exemption could reduce borough property tax revenue by about $16 million, borough finance officials said. 

If approved, people who own and live in their homes in Mat-Su would receive an exemption of up to $75,000 of their property's assessed value each year. The new exemption could not be combined with the current $279,720 exemption available to seniors and disabled veterans, according to the measure.

If approved, the exemption could reduce average property tax bills by about $700 per year for the approximately 26,000 residents who do not already receive one of those tax breaks, Nowers said last month.

How the proposal ultimately affects taxpayers each year would depend on the borough's total annual budget and the corresponding property tax rate set by the Assembly, borough Manager Mike Brown said during Tuesday's meeting.

The ballot question joins a second tax measure asking voters whether to adopt a 5% sales tax on alcohol.

The 1% sales tax ballot question was first introduced last month and postponed indefinitely in a 4-3 vote, with Assembly members Dmitri Fonov, Bill Gamble and Ron Bernier voting no. Such a step effectively kills a proposal while preventing a lawmaker from introducing it again under a new filing number.

Borough procedure allows Assembly members to revive a postponed or rejected measure if they voted on the prevailing side when it was considered.

Assembly member Dee McKee, who voted to postpone the measure, asked to bring it up again because she believed it was worth discussing, she said.

McKee ultimately voted against placing the measure on the ballot because she said a sales tax would raise the cost of living for disabled veterans.

Bowles said he opposes the measure because it could increase taxes for residents by adding a new tax without eliminating any existing ones.

The Assembly began discussing ways to add a sales tax after an initial proposal by Bowles early this year that would have imposed a 6.5% sales tax while eliminating about 60% of property taxes paid by the average homeowner.

The measure was ultimately rejected by the Assembly last month because of concerns it could trigger a large budget shortfall.

More tax-related ballot questions are scheduled for consideration by the Assembly next month. If approved, they will appear on the November ballot alongside the 1% general sales tax and 5% alcohol sales tax questions.

A measure proposed by Bernier would add a 3% property tax and cap the annual mill rate at 3 mills, or $300 per $100,000 of assessed value.

A measure proposed by Bowles would reduce the voter-approved marijuana tax from 5% to 3%.

-- Contact Amy Bushatz at contact@matsusentinel.com

This story was edited July 22 to clarify that an initial sales tax proposal by Assembly member Michael Bowles included the repeal of about 60% of the property tax paid by the average Mat-Su homeowner.