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2010-06-24 Work SessionKodiak Island Borough Assembly Work Session Thursday, June 24, 2010, 7:30 p.m., Borough Conference Room Work Sessions are informal meetings of the Assembly where Assembly members review the upcoming regular meeting agenda packet and seek or receive information from staff. Although additional items not listed on the work session agenda are discussed when introduced by the Mayor, Assembly, or staff, no formal action is taken at work sessions and items that require formal Assembly action are placed on regular Assembly meeting agenda. Citizen's comments at work sessions are NOT considered part of the official record. Citizen's comments intended for the "official record" should be made at a regular Assembly meeting. CITIZENS' COMMENTS (Limited to Three Minutes per Speaker) ITEMS FOR DISCUSSION 1. Fisheries Update from Trevor Brown 2. Sales Tax 3. State Assessor's Report 4. Crossing Guard PACKET REVIEW PUBLIC HEARING UNFINISHED BUSINESS NEW BUSINESS CONTRACTS Contract No. FY2007 -22A Amending Contract No. FY2007 -22 Kodiak Landfill Lateral Expansion Design and Construction Services. RESOLUTIONS ORDINANCES FOR INTRODUCTION OTHER ITEMS BOARD OF ADJUSTMENT - Adoption of Findings of Fact Affirming the Planning and Zoning Commission's Decision on Case No. 10 -013 of March 10, 2010, Overturning an Administrative Order Resulting in the Issuance of a Notice of Violation Regarding the Use of Lot 10, Block 1, Pasagshak Subdivision for a "Full- Service Lodge, Including Room Accommodations, Meals, Guiding, and Transport Services." The Appellants are Seeking Specific Relief. Appellants: Richard and Nancy Diemer. EXECUTIVE SESSION Borough Clerk's Performance Evaluation. Borough Manager's Performance Evaluation. MANAGER'S COMMENTS CLERK'S COMMENTS MAYOR'S COMMENTS ASSEMBLY MEMBERS COMMENTS GOA Rockfish Catch Share Program At its June meeting, the Council took final action defining a catch share program for the Central Gulf of Alaska directed rockfish fisheries. The program is intended to replace the pilot program under which the fisheries are currently managed, as that pilot program expires after the 2011 season. In addition to target rockfish species (Pacific ocean perch, northern rockfish, and pelagic shelf rockfish), the program allocates Pacific cod, sablefish, shortraker rockfish, rougheye rockfish, thornyhead rockfish,and halibut prohibited species catch to program participants. The Council's action would establish cooperative programs for both catcher processors and catcher vessels. Licenses qualifying for the program would annually form cooperatives that would receive allocations based on the catch histories of members. Catcher vessel cooperatives would be required to associate with a shore -based processor in Kodiak, but members may change cooperatives and cooperatives may change processor associations annually without penalty. All deliveries of catcher vessel catch are required to be made in Kodiak. Licenses used to participate in the trawl entry level fishery under the pilot program would receive an allocation of 2.5 percent of the total allocation to the program, which would be divided among participants in that fishery in proportion to the number of years they participated. Program allocations are otherwise based on catch histories from 2000 to 2006, with each license dropping the two years of its lowest catches. To conserve the species, halibut prohibited species catch allocations are reduced by 12.5 percent of historic levels. In addition, halibut savings may also be realized through a reduction of the rollover of unused halibut from the program to the fifth season trawl apportionment to 55 percent of that unused halibut. Caps limit the percentage of the various allocations that may be held by any person or harvested by a vessel and that may be received or processed by any processor. A program review is provided for after the third year of the program, in addition to any other reviews that may be required by the Magnuson Stevens Act. Sideboards limit the activities of program participants in other fisheries. The new program expires 10 years after implementation. The action also includes a set aside to establish an entry level fishery for fixed gear vessels. The initial allocation to the entry level fishery would be 5 metric tons of Pacific ocean perch, 5 metric tons of northern rockfish, and 30 tons of pelagic shelf rockfish, and would be increased for a species, each time the sector harvested in excess of 90 percent of that species allocation. Growth of the entry level fishery is limited to 1 percent of the Pacific ocean perch total allowable catch, 2 percent of the northern rockfish total allowable catch, and 5 percent of the pelagic shelf rockfish total allowable catch. The Council will receive a report outlining progress on the draft regulations at its October meeting, at which time it will assess whether to undertake a full review of those regulations. Staff contact is Mark Fina. Observer Program At the June meeting, the Council reviewed the initial review draft of the observer restructuring analysis (BSAI FMP Amendment 86 /GOA FMP Amendment 76) and a report from the Observer Advisory Committee (OAC). In general, the program is proposed to be restructured such that NMFS would contract directly with observer providers to deploy observers, and the industry sectors included under the program would pay either a daily fee or a fee based on a percentage of ex- vessel revenues (maximum of 2 %), as authorized under the Magnuson Stevens Act. The suite of alternatives varies by the scope of the fishing sectors included and the type of fee; however, sectors that are not currently subject to any observer coverage requirements (i.e., the commercial halibut sector and <60' groundfish sector) are included under every action alternative. The restructured program is intended to provide NMFS with the flexibility to deploy observers according to a scientifically valid sampling plan and to reduce the bias inherent in the existing program, to the benefit of the resulting data. Upon review, the Council released the analysis for public review, with two new options and several revisions. Both new options will be evaluated under each of the primary alternatives. The first option would assess an ex- vessel value fee on halibut landings and groundfish landings from vessels either <40', <50', or <60' length overall that is equal to half of the fee assessed on all other sectors subject to the fee under the preferred alternative. For example, if the Council approved a 2% exvessel value fee at final action, selection of the option would result in a 1% ex- vessel value fee for halibut and groundfish landings from small vessels. The second option requires that, if a restructuring alternative is approved, NMFS would release a draft observer program sampling design and deployment plan annually by September 1, available for review and comment by the Groundfish Plan Teams at their September meeting. The SSC and Council would review and approve the plan on an annual basis. Upon hearing public testimony about the limited ability for some smaller vessels to carry an observer, and recognizing that the proposed action provides a funding mechanism for electronic monitoring, the Council approved a motion to task the OAC and staff to develop electronic monitoring as an additional tool for fulfilling observer coverage requirements. The intent is for electronic monitoring to be available for specified sectors at the time a restructured observer program is implemented. Note that the current schedule proposes Council final action on a restructured program in October 2010, with the first year of a new program in 2013. Given that the North Pacific is the only region in which industry pays all of the direct costs of deploying observers, the Council also approved writing a letter to NOAA HQ to request Federal funds for start-up funding to implement a restructured observer program in the North Pacific, as well as an annual appropriation. The Council approved convening the OAC prior to the Council's scheduled final action in October. The primary purpose would be to review the public review draft analysis and provide comments on the analysis to the Council. The OAC may also have preliminary discussions regarding the development of electronic monitoring as an alternative tool for fulfilling observer coverage requirements. The initial review draft restructuring analysis, the May OAC report, and the June Council motion are posted on the Council website. The public review draft analysis is expected for release in mid - September. Staff contact is Nicole Kimball. Steller Sea Lion Update In June, the Council received an update from NMFS on the schedule for preparation and release of the draft status quo Biological Opinion on Steller sea lions. NMFS indicated that it is the agency's intent to release the draft BiOp by late July 2010. In order to provide the Council the opportunity to review the BiOp, and potentially provide input to the agency on management measures (if necessary) for the 2011 fishing year, the Council will hold a special meeting in August. There will be no time for independent review by the Center for Independent Experts (CIE) as originally envisioned, but the Council has requested SSC review of the BiOp, and could use the August meeting to comment on the BiOp as well as provide input to NMFS on any necessary management measures. The August meeting has been scheduled for the week of August 16 -19 at the Captain Cook Hotel in Anchorage, with the SSC meeting August 16 -17, the AP meeting August 17 -18, and the Council meeting August 18 -19. Following the August meeting, NMFS would complete an analysis of alternative management measures, and those would be available for potential Council final action at the October meeting. This is a very compressed schedule but would allow for measures, if needed, to be in place for the 2011 fishing year. Given the extremely compressed schedule, it became apparent that there is little merit in attempting to engage the Council's SSL Mitigation Committee in this process. That question was discussed by the Council in June, and at this time, the SSLMC is not scheduled to meet prior to the August Council meeting. After the draft BiOp is released, the role of the SSLMC will continue to be explored. The SSLMC or a more focused advisory group could potentially meet after the Council reviews the draft BiOp in August and provide input on any necessary management measures to the Council at the October meeting. Staff Contact is Jeannie Heltzel. CHANGES IN THE AREA ECONOMY SEAFOOD 400.0 350.0 300.0 250.0 200.0 150.0 100.0 50.0 Commercial Seafood Harvest Value & Volume Port of Kodiak 1990 - 2009 Total lbs. (mil.) - $ (mil.) Source: Alaska Dept. of Fish & Game Kodiak is consistently one of the top three fishing ports in the United States. The 2009 ex- vessel value of all fish coming into Kodiak was $115.5 million, down from $145.3 million in 2008, and volume in 2009 was 293.9 million pounds, up from 275.5 million pounds the year before. The worldwide financial crisis and the strengthening of the US dollar led to the low prices seen in 2009. Some species such as cod and rockfish seem to have been hit hardest by this down -tum. Some species such as sabelfish (Black cod) actually went up in price due to niche markets with less volatility. Salmon prices were below the previous year, but increased volumes led to an additional $7 million in exvessel prices over 2008. 2010 Prices seem to be slightly up with the promise of very good prices for salmon this year. October 4, 2010 Anchorage, AK Captain Cook December 6, 2010 Anchorage, AK Hilton Hotel January 31, 2011 Seattle, WA Joint Protocol Committee (T) SSL BiOp/ Measures: Review; Action as necessary Research Priorities: Finalize GOA Rockfish Program Regulations: Report;action as nec. GOA Rockfish Program Regulations: Review (T) BSAI P.cod Split: Discuss planlaction as necessary (T) Halibut Catch Sharing Plan: Review Regulations P.cod Jig Fishery Management: Discussion Paper (T) GOA Halibut PSC Discussion Paper: Review disc. Paper (T) IFQ Discussion Papers: Review (T) CQE area 3A D class purchase: Initial Review CQE area 3A D class purchase: Final Action CQE in Area 4B: Review Discussion paper Area 4B D shares on C vessels: Initial Review/Final Action Four new CQE eligible communities: InitialiFinal Action(T) Am 80 GRS Program Changes: Initial Review (T) Am 80 GRS Program Changes: Final Action (T) Am 80 Replacement Vessel Sideboards: Discussion Paper (T) Observer Program Restructuring: Final Action BSAI Crab ROFR: Initial Review BSAI Crab ROFR: Final Action BSAI Crab Rationalization 5 -year review: Receive report BSAI Crab Emergency Relief: Initial Review BSAI Crab Emergency Relief: Final Action Economic Data Collection: Review disc papers; action as nec. Al P.cod Processing Sideboards: Initial Review (T) Al P.cod Processing Sideboards: Final Action BSAI Chinook salmon bycatch EDR: Review regulationsl forms BSAI Chum Salmon Bycatch: Preliminary Review Arrowtooth Flounder MRA: Final Action GOA Chinook Salmon Bycatch: Discussion paper (T) GOA Tanner Crab Bycatch: Final Action BBRKC Spawning Area /fishing effects: Discussion paper (T.) BSAI Crab SAFE /OFLs: Review and Approve Salmon FMP NS1 Amendments: Discussion paper (T) BSAI Crab ACLs /snow crab rebuiliding: Final Action Pribilof BKC Rebuilding Plan: Initial Review Pribilof BKC Rebuilding Plan: Final Action Sablefish Recruitment Factors: Discussion Paper (T) MPA Nomination Discussion Paper Review Hagemeister Island: Initial Review Hagemeister Island: Final Action Scallop ACLs: Final Action Groundfish Specifications: Receive Plan Team Reports Groundfish Specifications: PT reports; Approve SAFE; Adopt Proposed Catch Limits Adopt Final Catch Limits HAPC: Review Proposals for Analysis HAPC: Action as necessary Groundfish Workplan: Annual review EFH Amendment: Initial Review (T) EFH Amendment: Final Action (T) DRAFT NPFMC THREE - MEETING OUTLOOK - updated 6/22/10 ACL - Annual Catch Limit Al - Aleutian Islands GOA - Gulf of Alaska SSL - Steller Sea Lion BKC - Bue King Crab BOF - Board of Fisheries FEP - Fishery Ecosystem Plan CDQ - Community Development Quota VMS - Vessel Monitoring System EFP - Exempted Fishing Permit BiOp - Biological Opinion MRA - Maximum Retainable Allowance PSC - Prohibited Species Catch TAG - Total Allowable Catch BSAI - Bering Sea and Aleutian Islands IFQ - Individual Fishing Quota ROFR - Right of First Refusal GHL - Guideline Harvest Level EIS - Environmental Impact Statement LLP - License Limitation Program SAFE - Stock Assessment and Fishery Evaluation MPA - Marine Protected Area EFH - Essential Fish Habitat HAPC - Habitat Areas of Particular Concern Future Meeting Dates and Locations Oct 4 -, 2010 in Anchorage (Captain Cook) Dec 6- 2010 in Anchorage Hilton January 31- February 8, 2011- Seattle March 28 -April 5, 2011- Anchorage June 2011 - Nome September 26 -, 2011 in Unalaska (T) Tentatively scheduled TO: FROM: Rick Gifford, Borough Manager tat DATE: June 22, 2010 SUBJECT: Additional Information Requested on a Sales Tax The following additional information was requested concerning a possible KIB sales tax: 1. Estimated sales tax at different rates Attachment. KODIAKISLAND BOROUGH OFFICE of the MANAGER The Honorable Mayor and Assembly of the Kodiak Island Borough • 1% $1,800,000 • 1.5% $2,700,000 • 2% $3,600,000 2. Estimated administrative costs: 3. Sales tax rates from other communities MEMORANDUM If the Borough collects the sales tax for the Borough and the City of Kodiak, we estimate one staff person at an estimated cost of $111,000. The City of Kodiak uses a Microsoft Access database for their sales tax recordkeeping. We could probably use their database, develop our own, or purchase off the shelf software. We do not know how much an off the shelf software program would cost. It might be possible for the Borough to contract with the City to collect the sales tax, since they already have a system in place. They currently have one staff person who is responsible for collecting and reporting the sales tax. Mary Munk, Finance Director of the City of Kodiak, feels that an additional person would have to be added if the Borough adopts a sales tax and there might need to be some software upgrades. Attached is a copy of the sales tax information portion of the 2009 Alaska Taxable that is compiled by the State of Alaska. It shows that rates range from 1°/0 to 7% for municipalities that levy a sales tax. However, it doesn't show a combined rate for cities within a Borough. It appears that the highest (in 2009) was Homer with a city rate of 4.5% and a Kenai Peninsula Borough rate of 3% for a total rate of 7.5 %. Adak Akhiok Akiak Akutan Alakanuk Aleknagik TABLE 1 2009 Municipalities: Class, Populations and Tax Types 'Municipality (Type of Municipality I Population I Pro xrty I Tax ' ITax 1 Second Class City Second Class City Second Class City Second Class City Second Class City Second Class City 178 48 341 796 670 242 No No* No No No No 3% NR NR No NR NR No NR NR No NR NR Aleutians East Borough Second Class Borough 2,699 No No 2% Raw Fish Tax Allakaket Second Class City 96 No NR NR Ambler Second Class City 259 No NR NR Anaktuvuk Pass Second Class City 284 No* NR NR Municipality of Anchorage Unified Home Rule 284,994 Yes No 12% Bed Tx/ 8 %Car Rental/72.6 mill Tobacco Anderson Second Class City 295 No No 8% Utility Tax Angoon Second Class City 430 No NR NR Aniak Second Class City 494 No 2% No Anvik Second Class City 84 No NR NR Atka Second Class City 73 No No 2% Raw Fish Tax/ 10% Bed Tax Atqasuk Second Class City 219 No* NR NR Barrow First Class City 4,054 No* No 5% Room /3 %Alcohol/$1Tobacco /12 %Smokeless Bethel Second Class City 5,665 No NR NR Betties Second Class City 22 No NR NR Brevig Mission Second Class City 350 No NR NR Bristol Bay Borough Second Class Borough 1,029 Yes No 3% Raw Fish Tax/8% Bed Tax Buckland Second Class City 458 No 6% No Chefornak Second Class City 470 No 2% No Chevak Second Class City 922 No NR NR Chignik Second Class City 59 No NR NR Chuathbaluk Second Class City 88 No No No Clarks Point Second Class City 54 No NR NR Coffman Cove Second Class City 141 No No No Cold Bay Second Class City 90 No No 10% Bed Tax / $.04 /gal. Fuel Tax Cordova Home Rule City 2,161 Yes 6% 6% Bed Tax/6% Vehicle Rental Tax Craig First Class City 1,117 Yes 5% 6% Liquor Tax Deering Second Class City 133 No NR NR Delta Junction Second Class City 1,058 No No No Denali Borough Home Rule Borough 1,848 No No Sev.Tax $.05 /yd grvl - $.05 ton - coal; Bed Tax 7% Dillingham First Class City 2,347 Yes 6% 10% Bed & Liquor Tax / 6% Gaming Tax Diomede Second Class City 128 No NR NR Eagle Second Class City 129 Yes No No Eek Second Class City 272 No 2% No Egegik Second Class City 62 No No 3% Raw Fish Tax Ekwok Second Class City 121 No NR NR Elim Second Class City 280 No 3% No Emmonak Second Class City 794 No 3% No Fairbanks Home Rule City 30,367 Yes No 8% Bed Tax/ 5% Alcohol Tax/ 8% Tobacco Tax Fairbanks North Star Borough Second Class Borough 89,896 Yes No 8% Bed Tax/ 5% Alcohol Tax/ 8% Tobacco Tax False Pass Second Class City 39 No NR NR Fort Yukon Second Class City 587 No NR NR Galena First Class City 580 No 3% No Gambell Second Class City 673 No NR NR Golovin Second Class City 160 No No No Goodnews Bay Second Class City 225 No NR NR Grayling Second Class City 152 No No No Gustavus Second Class City 473 No NR NR Haines Borough** Home Rule Borough 2,310 Yes 5.5% 4% Bed Tax Holy Cross Second Class City 194 No NR NR Homer First Class City 5,390 Yes 4.50% No Note: Municipal populations are from the State Department of Labor *Indicates that City does not levy property tax, but Borough in which City is located does The City of Haines and the Haines Borough consolidated in 2002, into a single Home Rule Government 15 Hoonah Hooper Bay Houston Hughes Huslia Ketchikan Ketchikan Gateway Borough Kiana King Cove Kivalina Lake & Peninsula Borough Home Rule Borough Larsen Bay Second Class City Lower Kalskag Second Class City Manokotak Second Class City Marshall Second Class City Matanuska - Susitna Borough McGrath Mekoryuk Metlakatla Mountain Village Napakiak Napaskiak Nenana New Stuyahok Newhalen Nightmute Nikolai Nome Nondalton Noorvik North Pole North Slope Borough Northwest Arctic Borough Nuiqsut First Class City Second Class City Second Class City Second Class City Second Class City Home Rule City Second Class Borough Second Class City First Class City Second Class City Second Class Borough Second Class City Second Class City Federal Law Second Class City Second Class City Second Class City Home Rule City Second Class City Second Class City Second Class City Second Class City First Class City Second Class City Second Class City Home Rule City Home Rule Borough Home Rule Borough Second Class City TABLE 1 2009 Municipalities: Class, Populations and Tax Types - continued (Municipality IType of Municipality (Population I Tax Property IS ales 'Special 823 1,160 1,755 81 277 No No Yes No No 6% No 4% No 2% Liquor License Tax No No No No Hydaburg First Class City 341 No NR NR Juneau, City & Borough of Unified Home Rule 30,427 Yes 5% 7% Bed Tx/ 3% Liquor Tx/ 12% Tobacco Tax Kachemak Second Class City 453 Yes No No Kake First Class City 519 No 5% No Kaktovik Second Class City 272 No* NR NR Kaltag Second Class City 188 No No No Kasaan Second Class City 54 No No No Kenai Home Rule City 7,134 Yes 3% No Kenai Peninsula Borough Second Class Borough 52,990 Yes 3% No 7,508 Yes 3.50% 7% Bed Tax 12,993 Yes 2.5% 4% Bed Tax 383 No NR NR 750 No 4% Fisheries Impact Tax (Flat Amt) 406 No NR NR Klawock First Class City 785 No NR NR Kobuk Second Class City 109 No NR NR Kodiak Home Rule City 5,974 Yes 6% 5% Bed Tax Kodiak Island Borough Second Class Borough 13,373 Yes No 1.05% Severance /5% Bed Kotlik Second Class City 610 No NR NR Kotzebue Second Class City 3,126 No 6% 6% Bed Tax / 6% Alcohol Tax / 6% Gaming Tax Koyuk Second Class City 333 No 2% No Koyukuk Second Class City 88 No NR NR Kupreanof Second Class City 27 No No No Kwethluk Second Class City 741 No 5% No 1,552 No No 2% Raw Fish Tax / 6% Bed Tax 67 No* 3% $5 per day / per person bed tax 256 No NR NR 430 No NR NR 417 No 4% No 82,515 Yes No 5% Bed Tax, Tobacco Excise Tax 5.29% 317 No NR NR 195 No NR NR 1,318 No No No 765 No NR NR 348 No NR NR 435 No No No 347 Yes 4% No 491 No NR NR 162 No No No Note: Municipal populations are from the State Department of Labor • Indicates that City does not levy property tax, but Borough in which City is located does 249 No NR NR 90 No No No 3,570 Yes 5% 6% Bed Tax 202 No NR NR 642 No 4% 4% Utility Tax / 4% Landfill Tax 2,099 Yes 4% No 6,706 Yes No No 7,407 No No No 383 No NR NR 16 Nulato Nunam (qua (Sheldon Point) Nunapitchuk Old Harbor Ouzinkie Palmer TABLE 1 2009 Municipalities: Class, Populations and Tax Types - continued (Municipality I Type of Municipality I Population I Property I Sales 'Special Tax Tax Tax Second Class City Second Class City Second Class City Second Class City Second Class City Home Rule City 274 156 540 184 167 5,559 No No No No* No* Yes No 4% NR 3% 3% 3% No No NR No No No Pelican First Class City 113 Yes 4% 10% Bed Tax Petersburg Home Rule City 3,009 Yes 6% 4% Bed Tax Pilot Point Second Class City 72 No No 3% Raw Fish Pilot Station Second Class City 587 No 4% No Platinum Second Class City 47 No NR NR Point Hope Second Class City 689 No* NR NR Port Alexander Second Class City 51 No 4% 6% Bed Tax Port Heiden Second Class City 90 No No No Port Lions Second Class City 190 No NR NR Quinhagak Second Class City 661 No 3% No Ruby Second Class City 160 No No No Russian Mission Second Class City 362 No NR NR St. George Second Class City 112 No NR NR St. Mary's First Class City 541 No 3% Alcohol Use Tax 3% St. Michael Second Class City 434 No NR NR Saint Paul Second Class City 450 No 3% Fish Tax 3% Sand Point First Class City 958 No NR NR Savoonga Second Class City 722 No 3% No Saxman Second Class City 420 No* 3.5% No Scammon Bay Second Class City 533 No NR NR Selawik Second Class City 846 No NR NR Seldovia First Class City 257 Yes 2 %14.5% No Seward Home Rule City 2,619 Yes 4% 4% Bed Tax Shageluk Second Class City 102 No NR NR Shaktoolik Second Class City 223 No NR NR Shishmaref Second Class City 587 No NR NR Shungnak Second Class City 272 No NR NR Sitka, City & Borough of Unified Home Rule 8,615 Yes 5 %/6% 6% Bed Tax/50 mill tobacco Municipality of Skagway First Class Borough 846 Yes 3 %/5% 8% Bed Tax Soldotna First Class City 4,061 Yes 3% No Stebbins Second Class City 577 No 3% No Tanana First Class City 252 No 2% No Teller Second Class City 260 No NR NR Tenakee Springs Second Class City 99 No 2% Bed Tax 6% Thome Bay Second Class City 440 No 5% Bed Tax 4% Togiak Second Class City 802 No 2% 2% Raw Fish Tax Toksook Bay Second Class City 605 No NR NR Unalakleet Second Class City 723 No NR NR Unalaska First Class City 3,551 Yes 2% 2% Raw Fish Tax/ 5% Bed Tx Upper Kalskag Second Class City 235 No NR NR Valdez Home Rule City 4,498 Yes No 6% Bed Tax Wainwright Second Class City 534 No NR NR Wales Second Class City 138 No NR NR Wasilla First Class City 7,176 Yes 2.5% No White Mountain Second Class City 191 No NR NR Whittier Second Class City 161 Yes 5% Sales tax summer only / $2.50 Pass. Trans. Tax Wrangell, City & Borough of Home Rule Borough 2,112 Yes 7% 6% Bed Tax Yakutat, City & Borough of Home Rule Borough 592 Yes 4% 1% Fish Tax/8% Bed & Car Rent/4% Sevr. Tax Note: Municipal populations are from the State Department of Labor 'Indicates that City does not levy property tax, but Borough in which City is located does 62 Municipalities (reporting) levy a General Sales Tax — Rates range from 1% to 7% 78 Municipalities (reporting) levy either a General Sales Tax , Special Tax (bed tax, fish tax, etc.) or a combination of the two 38 Municipalities (cities & boroughs) levy a property tax 64 Municipalities did not provide a report this year 14 Boroughs & 13 cities within boroughs, levy a property tax 11 Cities in the Unorganized Borough levy a property tax 17 Kodiak Island Borough TO: Borough Mayor and Assembly THROUGH: Rick Gifford, Borough Manager It FROM: Karleton Short, Finance Director SUBJECT: FundingFes DATE: June 8, 2010 MEMORAND UM At the last work session three different funding options were discussed. These included: 1. A sales tax. A one percent sales tax would result in revenues of approximately $1,800,000. 2. Alcohol and tobacco tax. Based on the revenues generated in the Fairbanks North Star Borough adjusted for our population size an 8% tax would result in about $180,000 in tobacco taxes and $130,000 in alcohol taxes for total revenues of $310,000. 3. We can increase the property taxes on real and personal property. This also results in an increase in the severance tax rate. Each mill generates taxes of about $1,115,000. At the current time the Borough pays approximately 1.88 mills for debt service. As the 2011, 2012, and 2013 bonds for the High School Renovation and Addition Project are sold it will increase to a high of 4.18 mills in FY2014. After that we will be paying approximately 3.21 mills in debt service. The Facilities Fund should reduce all of these mill rates by % %. The Borough's annual debt service for the High School Renovation and Addition Bond is estimated as follows: FY2012 $ 789,319 FY2013 $1,578,637 FY2014 $2,409,317 The FY2011 budget approved a loan of $2,000,000 for Renewal and Replacement projects from the Facilities fund. For every $2,000,000 we "borrow" from the Facilities fund for 10 years at 5% we will have annual payments of $259,000. We need to do $11,982,342 in Renewal and Replacement projects over the next four years. We hope that the State will reimburse us $5,740,137 leaving us $6,242,205 to pay. If we are reimbursed by the state at the full amount our loan payments to the Facilities fund will be $808,000 per year over ten years. These payments will stair step up and then down with the first years payments only being $259,000. Kodiak Island Borough Assessment Office Performance Audit May 3 -7, 2010 The Kodiak Island Borough is a Second Class Borough with a population of approximately 13,373 and contains about 12,150 square miles. Kodiak Island Borough Performance Audit May 3 -7, 2010 The Office of the State Assessor (OSA) conducted an on -site Assessment Performance Audit of the Kodiak Island Borough (MB) Assessors Office during the week of May 3, 2010. The audit was performed by Steve Van Sant, State Assessor and Ron Brown, Assistant State Assessor. The OSA team met with Mr. Bill Roberts, Assessor, Ms. Debra Rippey, Borough Appraiser, Rick Cortez, and Donna Hurley, both temporary Appraiser Technicians. These two individuals are on staff for a 6 month period. The OSA also met with the Borough Manager, Rick Gifford, Borough Finance Director, Karl Short, Borough Clerk Nova Javier and Assistant Borough Clerk Marylynn McFarland. During this audit we also made a presentation to the Kodiak Board of Equalization (BOE) offering them guidelines which are imperative while meeting in the upcoming week for BOE hearings that are scheduled to take place. General Assessment Office Information The total number of real property parcels in 2009 was approximately 7,800 and a personal property count of 1,733 accounts of which 533 were boats and vessels. The Assessor's Office is located on the second floor within the Borough Administrative building in downtown Kodiak. At the current time the Assessor's staff occupies two rooms across the hall from one another which appears to serve the office well at the present time. The current Assessor is new in the position, but a long time resident of Kodiak and has been involved in the fee appraisal business for over twenty years. He is extremely knowledgeable with market activities in the Kodiak area, having completed most of the fee appraisals in the area during his tenure in the appraisal industry. Mr. Roberts was also employed by the Borough Assessor's office in the early 1980's and performed many of the inspections for the borough during his tenure as a borough employee in that office. Mr. Roberts brings with him a tremendous amount of market knowledge that will be an asset to the borough and his reputation as the local fee appraiser should also be an asset. The former Assessor is responsible for the purchase of the new CAMA system which is called "PACS" (Property Assessment and Collection System) developed by True Automation out of Texas. This CAMA system appears to be adequate for the use by the Assessor's office. The following represents the features which should be sought when looking to purchase a CAMA system: There are four essential features of a CAMA system: data management, valuation, performance analysis, and administration. A good CAMA system will perform these Office of the State Assessor 1 �3 Kodiak Island Borough Performance Audit May 3 -7, 2010 functions in an effective, easy -to -use manner. The following information shares the information a good CAMA system should have: Data Management The success of any CAMA system is dependent on reliable data. Required data elements include property ownership, tax map reference, current use and highest and best use (zoning), physical property characteristics for both land and buildings, site data (access and utilities), sales data, income and expense data, and other pertinent market data. The system must provide for the efficient collection, storage, maintenance, and security of the data. Important features of a modem data management system include: (1) The ability of users to define which variables (data items) to collect and maintain. Important variables can vary among communities. (2) Edit capabilities. The system should include range and consistency edits to help ensure the integrity of the data. (3) Multi -year processing. Users should be able to update records for at least the current and forthcoming assessment years simultaneously. Otherwise, all changes for the current year would have to be completed before new buildings and data changes can be processed for the upcoming year. (4) Data security. There should be various provisions for password protection and data backup, so that data is not lost and can only be changed by authorized users. (5) Audit trail. The system should keep track of the last several changes to a property, including what was changed and by whom. Values from at least the previous year should be available for comparison with the current value. (6) Sketching capabilities. Modem systems have the ability to enter and print building perimeter sketches, so that these do not have to be hand drawn on field cards. The system should also be able to calculate building areas from the sketches. (7) Sales codes. There should be a series of codes for indicating whether real estate sales are valid indicators of market value and, if not, why. (8) Separate sales file. The system should logically separate production and sales data, so that a "snapshot' can be maintained of properties at time of sale. (9) Tracking system for building permits, abatements, changes in use, lot splits, lot assemblage, etc. tied into the audit trail and a reporting function. (10) Income and expense data. The system should provide for the maintenance of income and expense data, so that the income approach to value can be automated. (11) Inquiry and reporting. Users should have the ability to make ad hoc queries to the system, for example; • parcels contributing to tax base growth • selected property reports • list all properties with more than 3 dwelling units The user should be able to build reports for the selected parcels or to export the data to a file for external analysis, for example, with a spreadsheet program. Office of the State Assessor 2 Kodiak Island Borough Performance Audit May 3 -7, 2010 Valuation In mass appraisal, valuation involves automated applications of the sales comparison, cost, and income approaches to value. A good system should support all three approaches. Some specific desirable features include the following: (1) A replacement cost module tied to commercially available cost manuals, so that costs can be routinely updated. (2) Flexibility in depreciation schedules, so that users can develop and modify the schedules by property type, building quality and neighborhood as appropriate. (3) Cost trend capabilities that allow users to adjust cost values to the market by at least property type and neighborhood. (4) A land valuation module that allows the user to determine units of comparison (acre, square feet, front feet, depth, site), standard unit values, and site, topographic or neighborhood adjustments. (5) Standard statistical procedures, including measures of dispersion and graphics, that can be used to compute typical sales price per unit and help develop benchmark values, depreciation schedules, and market adjustments. (6) A sales comparison module that will retrieve a desired number of the most comparable properties to a given subject property based on a mathematical algorithm. Optionally, the system may adjust the comparables to the subject. (7) A multiple regression feature for use by jurisdictions with adequate sales. Adaptive estimation procedure (AEP or "feedback ") can also be used. (8) A spreadsheet module for use in income and expense analysis. Performance Analysis Performance analysis is the process of analyzing values to ensure that they meet required standards and are supportable. There are two broad aspects of assessment performance: (1) level, which relates to the overall ratio of appraised values to market values, and (2) equity, which relates to the consistency and uniformity of values. Assessment performance is largely evaluated through sales ratio studies, which compare appraised (assessed) values with recent sales prices. Because of the crucial importance of appraisal performance, a good CAMA system must have a good performance analysis system. Some specific aspects include: (1) Ability of the user to specify sale date range and other parameters (e.g., sale codes) for parcels to use in analyses. (2) Standard measure of assessment performance, including median, mean, weighted mean, coefficient of dispersion (COD), and price - related differential (PRD). (3) Ability to stratify data by neighborhood, size ranges, age groups, and so forth. (4) Graphics capabilities, including bar charts and scatter diagrams, for displaying results. (5) Ability to analyze values by "value source," so that one can, for example, compare the performance of values based on the comparable sales approach versus the cost approach. Assessment Administration Assessment administration includes a variety of functions related to preparation of the assessment roll (commitment) and general administrative activities. They include processing exemptions, generating form letters and assessment notices, computing use - value assessments, processing abatements, and preparing miscellaneous reports. In Office of the State Assessor 3 Kodiak Island Borough Performance Audit May 3 -7, 2010 addition, some systems perform tax billing and collection functions. Recent developments include computerized tax mapping, interface with geographic information systems (GIS), and video imaging, in which pictures of properties can be retrieved on- line for use in, say, value review and the evaluation of abatements. The PACS - CAMA system appears to contain all the necessary components listed above which makes it a solid usable system that will assist the Assessor in completing the required functions of his office. PACS is a fairly new program for the Kodiak Assessor's office and all assessed values contained on the assessment roll have not been derived from the system. For example, commercial values have all been derived from the Marshall Swift cost manual which has been used throughout the state for many years. The PACS program does have a commercial module but as of this date, it has not been updated so it is usable. The residential module appears to be in good shape and will be discussed later in this report. The fact that the MB has a usable CAMA system that appears to be functioning well, adds a new dimension to the Assessor's office alleviating the need for individual changes in assessments and allowing changes to be made in mass, especially after a new residential calibration. This will save many, many days of manual changes in the system. Under state law, a borough is required to have a systematic reevaluation cycle for the borough set out in a resolution (AS 29.45.150). During our visit, we were unable to locate a resolution nor did anyone we talked with know if one existed. Therefore, it is strongly recommended that in order to adhere to state law, the borough assembly adopt a resolution directing the Assessor to accomplish a reevaluation of all property within the borough "... over the shortest period of time practicable .." and that time frame should be no more than three (3) years. This simply means that at least once every three years all property within the borough is physically reviewed for accuracy and revalued utilizing the most current market data while other areas of the borough, while not physically reinspected, are valued each year using statistical methods such as value trending. This is in keeping with the statutory requirements of AS 29.45.110. The total number of real property parcels in the borough is approximately 7,800. The Kodiak Island Borough is a smaller borough in size representing number eight when compared with the other 17 boroughs in the state, at 12,150 square miles. The most populated areas of the borough are in the City of Kodiak and along the road system; however, there are a substantial number of real property parcels that are not available along the road system that must be reviewed throughout the reinspection cycles. The only method of transportation that can be used to get to these areas is by boat or airplane. This does not preclude this area from the review requirement of AS 29.45.150, therefore, special consideration must be given to travel arrangements and in those years when the remote areas are to be reinspected, the budget should show the increased travel budget for that year. Office of the State Assessor 4 Kodiak Island Borough Performance Audit May 3 -7, 2010 At this point in time, the Assessor, Bill Roberts, has been in the Assessor's position about four months, coming into the office in January 2010. Mr. Roberts was able to hire temporary help and have them in the field doing residential inspections for two months prior to the assessment notices being mailed. A review of assessment records indicates that assessments in the Kodiak Island Borough have been inspected sporadically at best, and no adherence to a reassessment cycle as required by AS 29.45.150 could be ascertained. It appears that new construction to real property accounts may have been picked up and added to the assessment roll. It also appears that properties which sold in the past several years were reassessed and resulted in a higher assessment to sales ratio than other unsold property. The fact that perhaps only the sold properties were reassessed leads us to believe that "sales chasing" may have occurred. "Sales Chasing" represents incidences where the assessment office reassesses sold property but not other property on the assessment roll. This practice accomplishes only one thing and that is to lead someone to believe that the assessment to sales ratio is higher than it actually is. Our office also received a complaint last year from an individual who complained of improper assessments whereby she believed that she was being treated unfairly since she had recently purchased her home and was reassessed while other homes in her neighborhood had not been reassessed. When confronted with this and asked about its truthfulness, the former assessor admitted it was true. His answer was that he did not have the staffing to reassess all property. That is why we scheduled the audit for this year. While we are lead to believe this sales chasing may have occurred, our office did not review every record to confirm this is a fact. We did review spot checks of property and noted that overall; values had changed very little over the past 15 -20 years. There were areas that appeared to have been reviewed, but these areas appeared to be minor when compared to the total 7,800 parcels. We are very pleased with the actions of the new assessor and based upon his accomplishments this year, believe the reassessments will occur as required by law. The OSA strongly suggests that the MB manager and assembly assure the public of equality in the assessment process by supplying the necessary resources for the assessor to complete his job in accordance with law. This should include both budgetary items for appropriate travel to the rural areas of the borough and the personnel resources to make the appropriate inspections and analyze data, build appropriate valuation models and calibrate the models to reflect market value. Without the property resources, the assessor will be in a position of not completing the reinspections and valuations as required. This has the potential of committing a major error (AS 29.45.103 -105) and could cost the borough more time and money in the future. A letter of "major error" from the Office of the State Assessor could require the MB to complete a total reassessment in one year rather than the three we have suggested. By assuring the Assessor has the resources needed to complete the assessment function, it not only removes any threat of a major error, it assures the public of equitable treatment in regards to property tax. Office of the State Assessor 5 Kodiak Island Borough Performance Audit May 3 -7, 2010 PERSONAL PROPERTY In accordance with AS 29.45.010, the MB has chosen to assess a property tax on both real and personal property. Personal property includes all tangible property other than real property, such as merchandise, stock in trade, machinery, equipment, furniture, fixtures, vehicles, boats and aircraft, AS 29.71.800(16). The KIB has also chosen to exempt certain personal property, most notably individual personal property while still retaining the right to assess business personal property. Currently, the KIB Assessor's office has about 1,200 business personal property accounts on the assessment roll and the KIB levies a flat tax on approximately 533 boats. The method of assessing personal property within the MB is done similar to other municipalities that assess personal property, that is, the acquisition cost of the asset less depreciation. Mr. Roberts indicated that he would like to change the method of assessment but after discussions, it appears that his intent is to assure that acquisition cost reported is similar to actual market value. This can be done with the use of personal property valuation guide books that are available for use by assessors. In reviewing the MB code for personal property, a couple issues arose which needs the clarification of the assembly. First, MB Code 3.40.050 states that boats and vessels are classified as a special category and boats or vessels of over 5 tons shall be assessed on a flat rate basis, which is to be determined annually. It was not clear to us if in fact, the flat rate is determined annually. We were told that boats are taxed on a basis of $1 per linear foot with a minimum of $30 fee. The code does not make mention of what is to happen to boats that are less than 5 tons. Based upon the reading of the code, it would appear that these boats and vessels should be taxed on an ad valorem basis. Whether or not this is the intent of the assembly is unknown, but the code is not clear. Also MB Code 3.40.070 states that household furniture and effects of the head of a family or household is exempt. It goes on to state "This exemption also includes all personal property in a rental unit when the building owner is owner - occupied and the total square footage of the rental unit does not exceed 35 percent of the gross living area of the structure." This section is very confusing to staff and the opinion of the OSA as to the meaning of this section was quite different than that of the previous assessor. The OSA suggests that the MB Assembly amend the MB Code 3.40.050 to address the taxability issue of boats and vessels of less than 5 tons to make it clear as to whether or not these boats and vessels are taxable on an ad valorem basis, a flat tax basis or exempt. The OSA also suggests that the Assembly address the issue of owner - occupied rental units and what the intent is as to taxability of the furniture contained in those units and how the determination should be made by the assessors office. The 35% square footage issue is apparently very confusing. There are two final issues that should be raised in conjunction with both real and personal property. First, it was discovered that the City of Kodiak leases several parcels of its real property and does not always record the leases. The only method the Assessor has to Office of the State Assessor 6 Kodiak Island Borough Performance Audit May 3 -7, 2010 discover the location and initial taxability of this property is through the State Recorders Office. If property is not recorded, it is impossible for the Assessor to locate the property for property tax purposes. Just because the property is owned by the City does not mean it is not subject to property taxes. If a City (or borough, or state, or federal) property is leased, it is most likely taxable under a Possessory Interest scenario, AS 29.45.030(a)(1)(A). Second, we had a discussion with Bill Roberts regarding the mailing of notices of assessment. Currently, the notices are mailed around the first of April and the BOE hearings are held in May. The Assessor is required to certify the assessed values to the assembly by June 1, which at times, can put a strain on the assessment staff in order to get all the valuations and appeals completed on time. There is no reason why the MB Assessor cannot mail assessment notices out in February which would allow the BOE to be held in early April which would then allow the assessment staff to be back out in the field in late April, allowing more time to complete the assessment process. Therefore the OSA strongly suggests the MB manager /mayor to send a letter to the City of Kodiak asking that a copy of any lease between the City and any party be sent immediately to the attention of the MB Assessor so a determination of taxability can be made along with an assessment for the use of both the City and the Borough. The OSA also suggests that the MB Assembly make an appropriate change to MB Code 3.35.040 to reflect the fact that the mailing of assessment notices will be prior to February 15 of each year rather than April 1 of each year. EXEMPTIONS Property which is exempt from property taxation must meet certain criteria set out in state statute and local code before an exemption is granted. Typically, that means that the party making the exemption request will need to file an application for the exemption and the assessor will review this data and make a decision as to whether or not the exemption should be granted. This information should be kept on hand so anyone questioning the determination can review the file and see how the determination was made. Unfortunately, the Kodiak Island Borough records do not reflect this format. There are files for these properties, but minimal information is contained in the files. There are no exemption determination records in the property record cards nor in any file we could locate. It would be impossible for anyone to try to determine how, why or why not an exemption was granted or denied without the proper paperwork. The only exemptions of which one is able to determine the status is the "community purpose" exemptions that are set in code and consequently are readily available. It is strongly recommended that the Borough Assessor set up files for each exempt property and include all relative materials needed to make an exemption determination. This will most likely involve sending new applications to the existing property owners requesting copies of their IRS 501(c)(3) documentation, articles of incorporation, and other pertinent data necessary for an decisional determination. Office of the State Assessor 7 Office of the State Assessor Kodiak Island Borough Performance Audit May 3 -7, 2010 ASSESSING WEBPAGE As part of the audit, the website for Kodiak Island Borough was examined. The webpage for the Assessing Department contains selections for Real Property, Exemptions, Personal Property, current Mill Rate data and the Board of Equalization. The page also contains a small section for Frequently Asked Questions and links to several related state and federal websites. The site contains a link to download a form to change a mailing address and the "Informal Property Review Form ". Some notable forms that might be considered as additions to this page are the Real Property Tax Appeal form, the Senior Citizen and Disabled Veterans exemption application and the Personal Property Reporting Form. It is recommended that these forms be added to the Assessing Department webpa2e. The Assessing webpage does not provide the ability to research properties by name or by parcel number. This is primarily due to the on -going implementation and development of the PACS software program. Until the PACS system is fully developed and updated, establishing the ability to search the tax roll by owner or parcel number would require substantial work that would provide only a short-term benefit. Per conversations with MB staff, the new PACS 9.0 version software will provide that capability. This software upgrade should be available by the end of this year. It was noted that a copy of the 2009 tax roll was available via the "GIS /Real Property Information" page, but it was not available on the "Assessing" page. Until the PACS system is fully developed, a link to this data should be provided on the "Assessing" page to provide easier public access to this data. A link to the main GIS webpage should also be provided here. It is recommended that links be provided on the Assessing Department webpa2e to provide access to the GIS webpage and the latest tax roll data. GIS WEBPAGE From the GIS/Real Property Information link provided on the Kodiak Island Borough home page, the public can examine assessed values and basic real property information via the internet. Currently, the parcels must be located by zooming in on the map provided on this page and selecting a parcel off of the map. The system lacks the ability to find a parcel by parcel number, by site address or by owner name. It is anticipated by MB staff that installation of the new PACS 9.0 version software and the hiring of a GIS specialist will resolve many of these issues. The GIS webpage was initiated in December of 2009, consequently the system is still under development. Given these limitations it is commendable that a functioning system was developed. Maneuvering the map to find a specific parcel was difficult and the system itself was not user friendly. However, with some practice and persistence a user who knows the specific geographic location of the parcel they are researching can find a significant amount of data. However, it would be impossible for a non - resident of the Borough to use this system to research property. For example, a mainland Alaska insurer or lender to a specific property with limited knowledge of Kodiak Island Borough. 8 The property information available from the website includes the following: • Parcel ID # • PACS # • Tax Area • Owner Name • Physical or Street Address • Land Value • BuildingValue • Zoning Designation • Land Area (Square Feet and Acres) • Legal Description • Aerial Photos • Taxing District • Current Land Use Kodiak Island Borough Performance Audit May 3 -7, 2010 Overall the website provides a significant amount of data and information in a compact space. Given the on -going software development and further effort by an individual experienced with GIS applications, the deficiencies in the current system should be resolved. Immediate suggestions for the GIS application would include the ability to search for properties using the parcel number, owner name and site address. The addition of these elements would enable use of the system by users who reside outside of Kodiak Island Borough. The use of PACS identification number should be promoted throughout borough government, the public and the private sector. These numbers are strictly numeric, unlike the older parcel numbering system which is alphanumeric and has a non - uniform number of characters. Many computer systems are not receptive to text characters and a uniform number of characters is a requisite for most data processing applications. The PACS number is strictly numeric and actually much shorter than the older parcel numbering system. The use of PACS number should also simplify expansion of the GIS and Assessing website applications as a digital, unique, "common thread" would then apply to all parcels on a borough -wide basis. It is recommended that the PACS number become the primary reference used by MB to identify real property. MB MAPPING SYSTEM The mapping system at KIB is maintained by the MIS (Management Information Services) Department. MIS provides all of the actual mapping, however the parcel and PACS numbers are assigned by the Assessing Department. Currently a hard -bound mapping system does not exist. When the need arises for a map of a specific area, a Office of the State Assessor 9 Kodiak Island Borough Performance Audit May 3 -7, 2010 request for the map is made to MIS and they will then generate the map. This appears to work, however it is inefficient and time consuming. While a fixed system of paper maps is the standard in most communities, such a system has its own problems. They are typically bulky and they require constant updating. A conversation with Paul Van Dyke, IT Supervisor, indicated that a copy of limited sections of the GIS map system could be installed on the laptops used by the appraisers in the field. This would provide the appraisers immediate access to a map of all parcels within the borough as well as the ability to expand or contract the view and access layers of information such as aerial photos. Such a system could be updated at will and would not require the printing and maintenance of hard copy maps. Such a system is in use in the Fairbanks North Star Borough and appears to be working well. Given the purported abilities of the PACS system and the potential labor savings inherent in such a mapping system, it is recommended that the electronic mapping system be installed on the appraisers laptops. THE MB TAX BASE The tax base of the Kodiak Island Borough has grown since the year 2000. During this time frame the total value of real property has increased by 28.4% and the total tax roll has grown by 21.2 %. However, Personal Property decreased by16% over this same time frame. The decrease in Personal Property valuation appears to be consistent throughout the decade with the exception of 2006 which sustained a 10% decrease in value. This was due to a policy change of deleting older personal property accounts. When annualized, the rates are as follows; Real Property 2.82% per year, Personal Property -1.93% per year and the Total Tax Base 2.16% per year. See the graphic provided below. 51,060,000,000 S050,000,000 6060,000,000 5760,000,000 s050,000,000 6660,000,000 5450,000,000 6260,000,000 6260,000,000 2160,000,000 660,000,000 2010 2001 2002 —REAL PROPERTY Office of the State Assessor KODIAK ISLAND BOROUGH VALUATION HISTORY 2112 2014 2011 2000 2007 2000 2000 - U-PER$0NALPROPERTY --ALL PROPERTY 2010 10 Kodiak Island Borough Performance Audit May 3 -7, 2010 On a value basis, residentially improved property constitutes over 54.7% of the tax base in MB, while vacant land represents almost 7.3 percent. Commercial and industrial property accounts for another 22% and Personal Property represents just over 11 %. The remaining 3.7% of the tax base is composed of mobile homes, farms and other miscellaneous property types. 517,555,173 $21,552,300 Office of the State Assessor $3,140,1100 =.,.05,107 $12,515,300 $ 3 . 073 . 560 131,530 • IPAIOBITIAL S4.7% • COrN6eC1AL 12.1% • rimester mix • VACANT 7.3% • wDOSTISAL 7.2% • APAI14NBlq 2.4% • MINIS 2.0% • OTNei 1.4% • CONOOIIIW * • NNNU PANICS OA% • FAIN 0.3% • AIIC5AFT 02% KODIAK ISLAND BOROUGH 2009 TAX ROLL The total tax base for MB was $907,513,350 for 2009. Of the total valuation, $850,190,144 or 88.7% of this amount was real property and $102,323,206 or 11.3% was personal property. For the fiscal tax year 2009, MB collected $10,559,405 in property taxes which equates to an overall tax rate of 11.64 mills or $11.64 per thousand dollars of assessed value. The millage rate within the City of Kodiak has remained constant at 12.5 mills since 2007. For the 2009 annual report, MB reported 15 service areas with a minimum millage rate of 10.5 mills and a maximum rate of 14.5 mills. 11 14 13.6 13 MILL RATE 12.6 12 11.5 11 KODIAK ISLAND BOROUGH MILLAGE RATE HISTORY • • • 2000 2001 Office of the State Assessor 2002 2003 CITY OF KODIAK 2004 2006 2000 Kodiak Island Borough Performance Audit May 3 -7, 2010 2007 2008 THE MB VALUATION SYSTEM The Assessing Department of the Kodiak Island Borough is in transition from a "paper - based" system to a true CAMA system. CAMA is a generic acronym for "Computer Assisted Mass Appraisal ". KIB has opted for a CAMA software program called PACS, which is manufactured by True Automation Incorporated in Plano, Texas. PACS provides modules that assist the Assessor in digitally storing documents, photographs, sketches, basic property data (zoning, living area, land size etc.) and modules that allow for the development and actual valuation of property. The PACS system package also includes "laptop" computers that the appraiser can take with them for field inspections. The computers provide the appraiser the ability to sketch, profile and photograph structures while they are physically on -site at the property. On returning to the office, the computers can be networked with the main application at the office and the data up- loaded to the PACS database. There are several problems with the interface at this time which True Automation should address this summer. The new PACS system should provide a significant improvement in assessment practices for MB. A developed CAMA system provides the ability to equitably appraise properties on a mass basis, rather than adjusting values one at a time. Such systems also allow for the electronic integration of the Assessor's database with GIS, Treasury, Planning and Zoning and many other functions of borough government. 12 Kodiak Island Borough Performance Audit May 3 -7, 2010 Another valuable asset to a fully developed CAMA system is the ability to query the Assessor's database for specific data on demand. For example, a simple query of the CAMA database can reveal how many homes have been built in the last ten years or how many senior citizens exemptions have been granted and the value of each exemption. The PACS system was installed in 2009, when it was loaded with the existing data from the paper records and the existing KB systems software program. The PACS system is "sketch- driven ", meaning that as a property is sketched in the program and the resulting area of each component is automatically identified and entered into the software. Entering the sketches from the paper records was not successful for many parcels during the initial installation, especially since some of the records had not been inspected in several years and the quality of this data was suspect. Consequently, during the initial installation, basic data on each property was entered and many 2010 values are generated off of that data. As properties are inspected by staff, the property is sketched, digital photographs are entered and the basic property profile is reviewed and updated as needed. Since the PACS system is not fully developed at this time, an exact count of the fully installed parcels is not possible. However, an estimate from the Assessor is that approximately half of the records are fully functional as of the date of the audit. It is estimated that the remainder of the parcels in the roaded areas of KIB should be fully functional by the end of 2010. The areas located off of the road system will require updating over the next three years as each area is reappraised by staff. To fully develop PACS, the Assessing Department will require continued staffing, the upgrade to PACS 9.0 version and training and support from True Automation. The progress made by staff in the implementation of the PACS software is impressive, however there are several valuable functions of the system that staff is not aware of at this time or may be aware of but lack the training to utilize. For example, the ability to export data from PACS into Excel, manipulate the data and then import it back into PACS. Another example would be the ability to fully utilize the query functions of PACS. It would appear that much of this training is available on -line from True Automation, however some applications may require formal training. It is highly recommended that MB insure that the Assessing Department completes the full installation of PACS and the upgrade to PACS 9.0 as soon as possible. It is highly recommended that MB provide adequate training to MB staff to fully utilize the capabilities of the PACS software. LAND VALUATION As stated earlier, the available information collected during the audit was limited as the PACS system is not fully developed. However, copies of the 2009 tax roll data and the preliminary data for 2010 was obtained. According to the preliminary 2010 tax roll, there are 7,404 parcels in KIB that are taxable and carry a land value. The remaining 400 parcels are either fully exempted or building only accounts. Office of the State Assessor 13 DESC COUNT IMPROVED 4,236 LAND ONLY 3,120 BLDG ONLY 291 EXEMPT 109 TOTAL 7,306 Kodiak Island Borough Performance Audit May 3 -7, 2010 While preparing this data it was noted that condominiums are currently assessed with a land value and a land area. For example, Lilly Lake Condominiums was examined and the units in this development are assessed with a land value of $6,600 per unit and a land area of 2,083 square feet. This is not the typical method of appraising condominiums, since a condominium does not hold "title" to a specific parcel of land. While a condominium may hold an "Undivided Interest' in the land where the development is sited, it does not possess title to a specific, defined portion of the site. In fact, if the "Individual Condominium Unit Appraisal Report Form" (Fannie Mac Form 465 or Fannie Mae Form 1073) is examined, the form does not even provide space for the entry of a land value. Looking at the available data and listings, the value generated by the Assessing Department appears appropriate and no valuations issues are apparent. However, it is highly recommended that MB remove the land value and land area for condominiums and assess the total value of the property as building. This would conform to the appraisal practices of other assessing departments in Alaska and private appraisal techniques. Previous to the PACS system, land valuation was conducted by what was essentially a manual approach. The assessor would identify the area to be reappraised and collect what sales information was available. Staff would then process the available data in Excel to construct a basic land valuation model which the assessor would then apply to the parcels being reappraised. Such a system does not allow for the efficient application of individual adjustments to specific parcels for notable amenities or deficiencies such as views and extreme topography. As well, once a new land value was developed, the value had to be "posted" to the record manually which is inefficient and time - consuming The new process of land valuation conducted by the MB Assessing Department is primarily performed within PACS. Land within MB is first segmented into various classes such as residential with sewer, residential without sewer, commercial and remote, and a land model is developed for each class. Currently there are four land valuation models that are in use, three for residential and one for commercial. Staff anticipates another two residential models and another commercial model to be developed before all land in MB will be valued within the PACS system. Staff asserted that all land on the road system will be appraised within the PACS system for 2011, while land off of the road system will be developed as these areas are inspected in the on -going re- assessment cycle. It was the opinion of the Office of the State Assessor that MB staff has thus far made excellent progress in developing the land modeling capabilities of the PACS system. Office of the State Assessor 14 Kodiak Island Borough Performance Audit May 3 -7, 2010 The basic land valuation within the PACS uses a land modeling system that relates land size and a base valuation for a parcel of land at a specific size. During the audit inspection a copy of the 2010 residential waterfront land model was obtained. This land model applies to residential waterfront land within the City of Kodiak. A graphic of this model is provided below. S35A0 S30.00 S25.00 *20.00 S/S.FL S15.00 510.00 2010 KIB RESIDENTIAL WATERFRONT LAND MODEL S5.00 t e164 e k":"/": 1 : 13 : 4 e l: 13 ://0 114 /0/44 111 LAND SIZE As shown in the graphic, a parcel of residential waterfront land would be valued based upon its physical size using the above model. For example, in the waterfront model noted above, a 17,500 square foot lot be valued at $10.00 per square foot or a total value of $175,000. The assessor also has the ability to modify that value for individual amenities or deficiencies they may observe during an inspection of an individual lot. For example a specific lot may lack sewer and water, or it may have an exceptional view, topography or substantial encroachments. The individual adjustments are developed by the assessor and applied individually to each parcel as needed. Once applied, these adjustments "remain" with the record until it is removed by staff. The land valuation system provided by PACS is similar to systems found in most CAMA software. Once the system is fully developed, KIB. will have the capability to re- appraise both residential and commercial land on an equitable basis in a highly efficient manner. Since the modeling system addresses both the overall market and the individual issues of a specific property, and then stores that information, periodic mass updates to land values will be far more efficient and equitable. Of course, this efficiency and Office of the State Assessor 15 Kodiak Island Borough Performance Audit May 3 -7, 2010 equitability will not be fully achieved until all parcels within KIB are integrated into the PACS system. It should also be noted that adequate land values are an essential component of any appraisal system, especially a cost -based system such as KIB is using. "The cost approach is based on the principle that the value of an existing property is the value of the land plus the replacement cost of the improvements less depreciation..." Property Appraisal and Assessment Administration, IAAO, 1990 Note that that estimate of land value is the first step of the valuation process when using the cost approach. As well, without adequate and timely land values, the ability of KIB to develop adequate building valuations and depreciation schedules via residual techniques will be significantly diminished. The land sales data obtained during the audit showed an average assessment ratio of 77% of market value and a weighted mean ratio of 82 %. However, there were only five land sales available to analyze and two of these sales were in 2006 and 2008. With this limited amount of data it would not appear appropriate to place too much reliance on these results. It is highly recommended that Kodiak Island Borough continue to develop the land modeling system in PACS. BUILDING VALUATION The process of appraising a structure in KIB begins with the field inspection when the property is examined, measured and photographed. After the inspection the property is "sketched" using the field notes and the sketching program found in the PACS software. Digital photographs of a property are also taken during an inspection and these photographs are then loaded into PACS where they can be recalled and used as needed. That completed, the appraiser can then profile the property as to grade, location, condition and other qualitative elements of value. Once the assessor has finished the sketch, input the photos and profiled the structure, PACS will generate the valuation based upon the values and schedules developed by the Assessor. PACS is a sketch -driven software program, meaning that the area computed by the sketch is automatically updated to the program and the resulting values are then posted to the program. The system has the ability to identify different types of living area (first floor, second floor etc.) as well as non - living area spaces such as garages and unfinished basements. This presented a problem during the initial installation of the program, since some parcels did not have existing sketches or the existing sketch did not translate correctly to the PACS software. Consequently many of the residential properties are not fully integrated into PACS. Staff has stated that the residential parcels on the road system should be fully integrated to PACS by 2011. Office of the State Assessor 16 Kodiak Island Borough Performance Audit May 3 -7, 2010 For properties not fully integrated to PACS, the values are generated based upon the previous physical data that had been manually input to PACS. Staff is currently inspecting these properties and generating a working sketch within PACS. Thus the complete integration of all parcels into the PACS system will not be complete until the first re- assessment cycle is completed Commercial properties are not valued by the PACS system at this time. For 2010, commercial properties were valued using the existing values which were generated using the Marshall & Swift software that preceded PACS. Staff stated that the commercial properties located on the road system will be reappraised in 2010 and fully integrated to the PACS system by next year. It was noted during the audit that staff was not updating the PACS system with the date of inspection when they examined a parcel. This information will be critical for documenting inspections and to insure that the department has not "missed" a parcel or area. It should be mandatory that all MB staff update the "date of inspection" field after all inspections of real property. BUILDING VALUATION WITH PACS PACS has the ability to appraise all real estate on a mass basis. It is adaptable to the local community as the local assessor can develop value and depreciation schedules based upon their own analysis and input the results of that analysis to the PACS system. As stated earlier, the PACS system is not developed for commercial properties at this time. However, the valuation system is developed for residential properties located within the roaded areas of the borough. Currently, there are four residential improvement schedules in use in the PACS system. The four schedules are applied to structures based upon the quality of construction, for example fair, average, average -plus etc. At this time, there is no differentiation within the system for neighborhood or location, though the system is capable of doing so. Just as seen in the land valuation module, the building valuation system in PACS requires that staff assign individual properties to a specific schedule. As stated earlier, this is currently done only by grade. However it is anticipated that schedules for location will be required as areas located off of the road system become fully integrated to PACS. During the audit a copy of an improvement schedule was obtained. The particular schedule was developed to profile the RCN (replacement cost new) of an "Average -Plus" home located within the City of Kodiak. The schedule was developed by the local assessor after an analysis of sales data and consultation with local builders. A graphic of this schedule is presented below. Office of the State Assessor 17 5150.00 $145.00 5140.00 $135.00 S130.00 VALUE 5125.00 $120.00 $115.00 Office of the State Assessor 2010 KIB SFLA MODEL Kodiak Island Borough Performance Audit May 3 -7, 2010 $105.00 5100.00 1,100 1,300 1,400 1,700 2,000 3,000 5,000 LIVING AREA PACS also contains schedules for components such as garages, decks, porches and other components of value that the assessor may need to identify and value. Issues specific to a particular home can also be addressed via adjustments to depreciation or other tools in the software. Again, by utilizing locally developed values and applying them uniformly to similarly situated properties, the system promotes equity and the ability for KIB to efficiently address changes in the local market. For example, the above schedule currently uses an RCN of $150 per square foot of living area for a 1,500 square foot home. Thus the RCN for the living area of the structure would be $225,000 (1,500 * $150 per s.f.). Note that the actual cost to build the structure could be different, but that the assessor has determined that current "market value" of the living area is $225,000. If in the future market values were to decrease to $140 per square foot, the assessor can adjust the schedule to reflect that value. And in doing so, the assessor will adjust not only the one property in question, but every similarly situated home within the borough at same time. Upon completion of the valuation, PACS provides a condensed one -page printout of a parcel that contains the sketch, picture and basic information on the parcel. A sample is provided below. 18 MOM u.lm selrw,1,,1111b 11110Nlw&.'p. re01a.17a11rIM .... *H. PROPERTY MHO A/01NT lT 1' 111 1 01 ? a P P' M PATRICK M AAHL X 4P110AAA MARKET 0 : 00 q KOMP. AR 10114 US + .A.10 MARKET T • 11 1 W' 9'+111 WOE 1MM1lT YK .• .l +'RODIICIINIY II! AOO. L086 0 1112111111110 NON& .tan xwuwlo miff !11111.■1111111 41 CAP 113611 - 0 SOUS 1334 AIaUg7A111 V1av OR , APMVK.0111001 Cost a VALUE - 411117 0111111.E SIOITC11 61Iepw.eertM(1g310.MMt) ClellllOrs wimp." LAST APAR. TOPOGRAPHY LAST APOQ. YR 2007 ROAD ACCESS LAST MP. OATS I Alela NEXT 1011 NOR 01SP.OATS 1 r . Jl � L al 0•1• 4 ‘ u REMARKS MOM PRONGS 7WYa003 11818 T1P! PMWT D AA1 SAL' DT MGM GRAIITW DCMOPS° GAO UM ( 9111 " Ave t of 1 Office of the State Assessor • 1 a 141.111% WHY GOMA 11.01110111 230.1* MrD0e1e imirosuliam r 1ms G3_C1aJn11 WW1 1111111111111. 1.0 s3asstala A l 1 i1sri iaran<Ja MUM CM eao COM 101 GUAM 1 , 1.114 R Kodiak Island Borough Performance Audit May 3 -7, 2010 %ow elO 1 13 VALUATION PERFORMANCE As part of the audit, a spreadsheet of recent sales data was obtained. There were 273 sales of improved residential properties in the database. These sales were analyzed using the preliminary 2010 valuations and the resulting assessment ratios. The assessment ratio is a standard calculation made by dividing the current assessment by the sales price of the property. The sales showed a median assessment ratio of 91.8% of market value and an average assessment ratio of 91% of market value. This exhibits a marked improvement over the 81.8% rate reported in the 2009 Annual Report to the State of Alaska. The COD or Coefficient of Dispersion, a measure of uniformity, was also calculated. The COD was calculated at 9.5345, which is within the standards set by the International Association of Assessing Officers (IAAO) for single family residences. The IAAO recommends levels of 15.0 or less for non - homogenous residential properties. 19 4 100.0011 2/8110111 100101 p� 1 D I.MM IWCIMRI.S1 8R1M11.0 CKMr•0 PRAwtO 0101.1¢0 aft leas It Ism 3iSe0✓� 3°1L'a mow rum r1 aka ex ..Colt alai 'else: , d0' • A.1 , .... NO A hoary 1 11.6 ROW: MINN* ¢02711 01A9CtM -v.Ai»efe..r.. ■. • e _ 4. • 11]Al ••• 4 11 , 10E • 4 • ri t A . .• 1 • AO' • • . - .1:11t �• • . • • . �► • r 4 -** • :• • .. • � • • • • •' • • • - •• • • AVERAGE ( s 2 73 TOTAL SALES RATIO -9L0% MEDIAN RATIO -91.3% ■ A graphic presentation of this analysis is provided below. 1.40 1.20 1.00 0.30 0.'0 0.40 0.20 0.00 A " � Office of the State Assessor ALL KODIAK INIPROVED SALES RATIOS yr • SALES RATIOS — Linear (SALES RATIOS) Kodiak Island Borough Performance Audit May 3 -7, 2010 Based upon this analysis it would also appear that the MB residential real estate market has been increasing. A basic analysis of the trend in the declining ratios would indicate that the market is increasing at a rate of approximately 3.5% over the period graphed (November 2007 to August 2010). A similar analysis was also prepared by analyzing the sales study and comparing it to the sales study contained in the 2009 Annual Report from Kodiak Island Borough. The results appear to indicate that not only has the accuracy of the valuations improved notably, but the values appear to have a higher degree of concentration at the desired level of valuation (100 %). At the current time the Standard Deviations of the ratios indicate that there is no perceptible difference, however the 2010 ratios are based upon twice the sample size and it must be remembered that the PACS database is still a work in progress. See graphic provided below. 20 80 Kodiak Island Bamugh Performance Audit May 3-7, 2010 KODIAK ISLAND BOROUGH 2009 & 2010 RATIOS • 2009 • 2010 0.60 0.65 0.70 0.75 0.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.30 1.35 Until the PACS system is fully developed, the final result will in many respects remain a question mark. Bowcver, at the present time best indications are that there has been substantial imnroroement in the values for real property in KIB. VALUATION SUMMARY The Assessing Department for the Kodiak Island Borough is producing what appear to be notably enhanced valuations for improved residential property. Due to a lack of available sales data, it is not possible to make a conclusion on the valuations of vacant land or commercial real estate at this time. Still, it would appear logical that the timing of the improvement in valuation and the implementation of the PACS system is more than just coincidence. Unfortunately, until such time as the system is in full operation and staff is Billy conversant in its capabilities, a final conclusion would be premature. Again. it is the recommendation of than Office of the State Assessor that continued deevdonment of She PACS system be continued. Steve • an State Assessor Ronald Brown Assistant State Assessor Office of the state Assamor ? 1 KODIAK ISLAND BOROUGH ASSEMBLY WORK SESSION Work Session of: fiA/M.12, 0 c'2 0( 0 Please PRINT your name Please PRINT your name