FAIRBANKS, Alaska — An Alaska mayor is having second thoughts about a voter-imposed ceiling on how much money the borough government can collect from year to year.
Fairbanks North Star Borough Mayor Karl Kassel said budgeting for the future based on a mathematical formula is flawed. No formula can take into account all of the unforeseen circumstances that impact local government, he said.
Kassel’s comments come as the tax cap marks 30 years in effect, the Fairbanks Daily News reported (http://bit.ly/2wGpGqS ).
Signatures are being collected to put the tax-cap question on the 2018 borough ballot. He likely will vote no if that happens, Kassel said.
“I am not so enamored with the tax cap anymore,” Kassel said. “It’s very challenging to put the future in a formula.”
The idea of the tax cap, which is better described as a revenue cap, came from a group of business owners who petitioned to get it on the ballot in 1986.
Donna Gilbert was a local businesswoman at the time. She said few people understood it, and she even voted no.
She would later become one of the tax cap’s staunchest advocates. “Nobody had a clue, including me,” Gilbert said.
Opposition to the tax cap, led by labor unions, was extremely effective, and people feared libraries, schools and fire stations would close, she said.
The tax cap failed with 5,785 people voting yes and 8,316 people voting no, according to borough records.
Not long after the failed vote, the Fairbanks City Council approved a sales tax. Gilbert helped organize a meeting of sales tax opponents, and the Interior Taxpayers Association was formed with Gilbert as president.
In 1987, the voters approved the tax cap overwhelmingly with 11,177 people voting yes and 6,716 voting no, according to borough records
“It puts a cap on the amount of revenue that the borough can take in,” said Gilbert, who went on to serve on the Fairbanks City Council and Borough Assembly. “They can only take in as much this year as what they did last year with the exception of the rate of growth. It has given us stability, particularly the homeowners.”
Kassel said he isn’t so sure the borough can afford to keep services at status quo under the tax cap.
The formula takes into account inflation, new construction, new bond payments, legal judgments, emergencies and new services approved by the voters. It does not take diminishing state funding into account.
Because of the tax cap, the borough is unable to raise taxes to maintain services previously supported with state money, Kassel said.
The mayor said he plans to spark a community discussion about government services — what people want and what they are willing to pay for — this winter.
A special working group picked by Kassel will lead the discussion.