Ever since the Municipality of Anchorage was established, it has been issuing bond debt to finance essential public infrastructure: schools, roads, parks, police, public safety, libraries and fire protection. Every year there are bond propositions on the election ballot. Some pass and some do not. For the ones that do pass, the municipality sells the bonds, receives the financing, and pays them off over time, usually 20 years, through increases in property tax. And just like your home mortgage, after it is paid off there are no more payments.
This year, bonds that the municipality issued 20 years ago will be paid off, and there will be no more payments on them. This is referred to as debt being retired. The municipality estimates there will be about $70 million in debt retired this year.
The Municipal election coming up on April 1 will have nine bond propositions on the ballot (in addition to the Assembly and School Board races) totaling $124 million. The ballot language for each proposition states what it will cost property owners annually in terms of an amount per $100,000 in assessed valuation. Should all of them pass, it would cost most property tax owners annually about $26 per $100,000. On a $400,000 home, that would be about $9 per month. (There are also two single-year special tax levies on the ballot for snowplows and police cars, which would cost $6 per month on a $400,000 home for one year.)
However, that amount will be offset by the amount of debt being retired. The $124 million in new debt will be reduced by the $70 million: a 56% reduction. After the reduction in property taxes for retired debt, the increase in property taxes, should all the bond propositions pass, would really be about $11 per $100,000, or $4 per month on a $400,000 home.
There is another aspect to the bonds where some voters, particularly outside the Anchorage Bowl, could overestimate what bonds will cost them. Not all bonds are paid for by all taxpayers in the municipality. Some parts of the Municipality pay for their own police, fire, parks and recreation, or roads services separately from the rest of the municipality. Their bonds are “service area” specific. Only properties in those service areas pay. This is stated in the bond language, but some voters may not appreciate the details.
State law requires the full faith and credit of the whole Municipality to be pledged for the bonds. Thus, passage requires approval by voters residing in the entire municipality. However, only property owners in the specific service areas will be taxed for these bonds. There is no cost to property owners outside the service areas.
Thus, for the April ballot:
• Proposition 2: Roads and drainage: Chugiak, Eagle River, Girdwood and the Anchorage Hillside LRSAs do not pay.
• Proposition 3: Parks and recreation: Chugiak, Eagle River, Girdwood and some of the Hillside do not pay.
• Proposition 4: Police: Girdwood and other areas south of Anchorage do not pay.
• Proposition 7: Fire protection: Chugiak and Girdwood do not pay.
• Proposition 8: Girdwood roads: Only Girdwood pays.
• Proposition 9: Chugach State Park Access: Outside Anchorage Bowl does not pay.
For example, Proposition 8 is $3 million for road safety improvements in Girdwood: an increase in property taxes of $24 per $100,000, paid for only among the small population base there. It would be unfortunate for Girdwood to be denied the upgrades because outsiders thought they had to pay for it.
Voters should carefully assess each bond proposition before voting. In doing so, they may want to consider what each bond will actually cost them, given where they live, and the retirement of previously issued debt.
Roger Marks is an economist in private practice in Anchorage. From 1983-2008 he was a senior economist with the Alaska Department of Revenue Tax Division.
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