Kenai voters could soon decide whether to give themselves a new option for reducing their yearly property tax bill. Kenai City Council members are considering a ballot question that would put a $75,000 residential property tax exemption before voters in November.
Council members convened Wednesday to talk through the logistics of the proposal. The work session came two weeks after a former Kenai vice mayor asked the council for property tax relief. James Baisden told council members earlier this month his property taxes have increased 18.5% over the last five years.
“I’m asking the council if they would address the residential property tax and what we can do specifically to put some exemptions in place to help the escalating and compounding effect that’s taken place over the last four or five years,” he said.
The change is one the Kenai Peninsula Borough enacted this year after getting voter approval. The initiative passed with almost 80% of votes in favor.
To receive the exemption, a property owner would need to apply through the borough for a single piece of property occupied as a permanent home by a Kenai resident.
City officials say 1,435 property owners would be eligible for Kenai’s residential exemption if it passes. Of those, more than a third are also eligible for other property tax exemptions specific to seniors and disabled veterans.
City Manager Terry Eubank says the new exemption could cost Kenai around $442,202 per year that would otherwise go to the city’s general fund.
“I think the big question here is can the city afford the exemption?” he said. “I would say the city has sufficient financial capacity to absorb the estimated impact. However, the exemption definitely may affect future budget decisions.”
Eubank says the city could reduce the amount of money it spends on big projects or draw from savings to make up the difference. The city has a policy about how much it must keep in savings, but he says there’s about $2 million more that the city could draw from and still be in compliance.
Some council members questioned whether a fixed exemption amount is the best way to boost affordability given inflation. Council member Bridget Grieme asked whether lowering the city’s property tax rate, or mill rate, could achieve the same goal while impacting more people.
“Is there a comparable mill rate that you would suggest to that of the $75,000 exemption for primary residence homeowners that could apply to commercial property owners, as well, so that it could be applied across the board as a mill rate reduction instead of a property tax exemption or value exemption?” she said.
Unlike a mill rate reduction, Eubank says property tax exemptions are intended to achieve a specific policy objective. In 2023, the city council passed a personal property tax exemption that also aimed to address affordability.
The council is scheduled to decide next month whether to put the residential exemption before voters this fall. If passed by voters, the exemption would take effect in 2027.
