In December of 2014, the Unalaska City Council held a work session on the pressing housing issues on the island. City officials and the public brainstormed ways to lessen the financial and administrative burden on people who wanted to create new residential rental businesses, and the burden on those who already own and operate such units.
As a result, City Hall staff looked at creating a business personal property tax exemption.
Last week, the council voted unanimously to pass that exemption, which city manager David Martinson says will help local small businesses. Although it means the city receives less tax revenue, Martinson says the exemption is worth it.
"The city saves time, and the business saves time," Martinson said. "So at the end of the day, the minimal dollar value of what we would lose from revenue, we'll be able to get other important things done in the city - in the clerk's office - and our small business owners get to not spend as much time filling out the forms and they don't have pay the minimal amount of money that they pay, but every dime for a small business owner adds up."
Unalaska property owners will continue to pay property taxes on the value of their real estate and its structures. But from now on, the first $30,000 of business personal property won't be taxed.
"The personal property inside the house....so the washers, the dryers, the draperies...everything that you have in the house isn't part of what you pay in property tax. We only [tax] the value of the existing structure and the land, so they still pay the property tax on that," Martinson explained Monday. "But everything that you leave in the house...so let's say that you had a furnished apartment that you were going to rent. All of the furnishings are part of your personal value in that "business." So all of that, if it doesn't add up to $30,000, you pay no taxes on that business."
The new exemption doesn't just help residential rental businesses, it applies to all types of businesses. Business personal property includes items such as office furniture, computers, tools, inventories and aircraft.
By adopting the new tax exemption, city officials decided it was better to lose out on an estimated $35,500 year in tax revenue but save in administrative costs.
According to the city clerk's office, there are 368 businesses on the city's tax rolls for fiscal year 2016.
In fiscal year 2015, business personal property taxes brought in nearly $2 million dollar to city coffers. But a staff analysis revealed that the top thirty percent of local businesses pay almost all of those taxes.
By exempting the first $30,000 of assessed value, 275 local businesses now won't have to pay the business property tax.
City officials say they consulted with the State Assessor's Office to ensure the exemption was legal, and learned it would be an allowable exemption.
