Owners of commercial property in the City and Borough of Juneau recently received an unwelcome surprise — news from the assessor that their property’s assessed valuation has increased for tax purposes.
But, rising tax bills for commercial properties could reduce the property tax burden on residents.
As CBJ City Assembly members mull the city’s tax rate for fiscal year 2022, news of increasing commercial valuations and the associated increased tax revenue could reduce the property tax mill rate for homeowners.
Jeff Rogers, CBJ finance director, joined the Greater Juneau Chamber of Commerce Alaska Business Roundtable meeting Thursday to explain why the reassessment happened now and what it means for business and property owners in the borough.
“Commercial assessments have been flat for about 10 years. We’ve long suspected we were under assessing value,” Rogers said. “Up until now, we haven’t had the tools and expertise to change it.”
Rogers explained that historically, property values were generally assessed at 72.86% of the amount that the property might sell for given typical selling conditions. Based on the 2021 assessment, valuations have moved closer to 88.53% of expected value, closing in on the city’s goal of assessing property at 98% of its fair market value.
He said this is the first adjustment that will take place over the next few years to get local property assessments closer to the 98% goal.
Commercial property assessments increased by about 7% across the borough, though there’s significant variability in individual properties.
“Each parcel is assessed independently. It’s not a 7% across-the-board increase,” he said. Rogers added that assessed values between similar properties could vary for several reasons, including views, size and condition.
Rogers said that the assessor is not seeing declining property values, which might lower projected selling prices.
“We see no evidence of softening sales data for property, and replacement costs continue to rise,” he said. “Sellers are unlikely to sell for less, and buyers are looking to the rebound.”
Rogers encouraged any commercial property owner who questions the assessment of a parcel to appeal the decision by the May 3 deadline. He said that about 98% of appeals are resolved locally based on additional information provided by owners.
Link to residential property taxes
Rogers explained that when commercial properties are under-assessed, the tax burden to pay for city services falls more heavily on residential property owners.
In early April, City Manager Rorie Watt proposed a .02 mill increase to the city’s 10.66 mill rate to help fund child care. However, based on the larger-than-expected commercial base, city assembly members learned Wednesday that a reduced mill rate could still raise the money needed to cover the budget.
“We calculated that to receive the same amount of tax with new property valuation, we could go with a mill rate as low as 10.4. It has not been that low in more than 10 years,” Rogers said. “Only the assembly can choose where to set the mill rate.”
Rogers pointed out that the city is ending fiscal year 2021 with about an $8 million deficit. The city manager has proposed using federal money to fill the budget hole.
“When we have this debt, do we reduce the mill rate? I think the assembly will wrestle with this,” Rogers said.
About the budget process
The proposed citywide budget of $396 million is down $22.1 million from the 2021 amended budget. The citywide budget aggregates the spending for all city government operations, including those that operate as enterprise operations. Enterprise operations include Bartlett Regional Hospital, the airport, water utilities and docks and harbors. It also has money earmarked for capital improvements and debt service.
Every Wednesday until the end of May, assembly members will review proposed budgets from all component pieces to pass the final budget and associated tax rate.
• Contact reporter Dana Zigmund at email@example.com or 907-308-4891.