Kodiak Island Borough staff recommended raising the borough mill rate from 10.75 to 12.78 for the 2021 fiscal year, representing an increase of 18%. If approved by the assembly, it would be the first mill rate increase since 2012.

Borough Manager Michael Powers attributed the proposed increase to a 50% cut in school bond debt reimbursement from the state, leaving the borough with an additional annual payment of $2.6 million not covered by the state. While the mill rate is still a proposal and would have to be approved by the borough assembly, Powers indicated the increase is virtually guaranteed unless assembly members elect to make significant cuts to the borough budget. 

“We have to expect the state is not going to be very helpful to local jurisdictions,” Powers said during a special meeting of the borough assembly on Saturday. “It’s a common tactic of states to put the burden on local governments because of the ability of local governments to raise taxes to compensate for shortfalls.”

The borough mill rate has remained steady at 10.75 since fiscal 2012. Prior to that, it was set at 10.50 between 2006 and 2012. While the mill rate has remained steady, Assembly Member Scott Arndt said that home values have grown significantly in this time, increasing collected borough property tax.

Increasing the mill rate, which determines property tax within the borough, would raise annual property tax paid to the borough on a home worth $300,000 from $3,225 to $3,834.

Total mill rates vary throughout the borough, with additional levies within city limits, road service areas and fire service areas. Total mill rates in the borough for fiscal 2020 varied between 10.75 and 14.50. If passed, the mill rate would increase by 2.03 across the board.

Arndt said he is opposed to the mill rate increase, adding that it might be possible to balance the budget without transferring the cost to taxpayers. 

“It’s like a puzzle,” he said.

While the proposed mill rate increase is steep, borough mayor Bill Roberts said he was “stunned” by how low the increase was, given the financial difficulties facing the borough, which include a decline in state fisheries tax. 

“The reason it’s so low is because we really aren’t addressing R&R,” Roberts said. “We’re not going to get away with that anymore. This assembly has to step up to the plate.”

Roberts said the duty of the government is to set the mill rate to ensure that the government can continue to perform its task.

“Our job is to keep the government vibrant, healthy and responsive, and to do that, we have to look at what it’s going to cost and what it’s going to cost the taxpayer,” he said. “Somebody has to pay the bill, and it’s not going to be the state.”

R&R, or renewal and replacement, refers to budgeting for maintenance and repairs of borough-owned buildings. Powers advised that the assembly should take into consideration maintenance and repairs of borough-owned buildings, which include the borough offices, schools and other facilities. Deferred maintenance and repair costs are now estimated at over $5 million, according to borough documents. 

Powers said the borough has “kicked the can” on renewal and repair, noting that the borough office building, which also houses the Kodiak City government offices, is “falling apart.”

Assembly Member Rebecca Skinner said that while R&R needs are high, she is not comfortable approving a mill rate higher than 13.

“That’s a big increase to put on an already stressed community,” she said, proposing to access the Facilities Fund to address building maintenance, rather than pass the cost to taxpayers.

The proposed borough budget also includes a $246,000 increase request for general fund spending, which would go toward staff salaries, benefits and training, among other expenses. 

The increase would cover hiring additional city planners, a maintenance specialist for the engineering and facilities department, an additional full-time maintenance worker, and an assessor’s position, according to Powers. 

The assembly is scheduled to further discuss mill rates during an upcoming work session scheduled for Feb. 27. The borough is required to adopt a budget by June 10.

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