Anchorage tax-exempt property audit won't finish until 2031 or 2032 under current staffing

Anchorage's Property Appraisal Division told the Assembly this week that completing a mandated review of roughly 570 flagged tax-exempt properties will not finish until late 2031 or early 2032 under current staffing.

The memo responds to Assembly Resolution 2026-073, adopted March 24, 2026, which directed the Division to produce an initial scope report, not a completed audit. Municipal Assessor Jack Gadamus prepared the memorandum in collaboration with Internal Audit. Internal Audit Director Alden Thern, CFO Lance R. Wilber, and Municipal Manager William D. Falsey reviewed it before Mayor Suzanne LaFrance submitted it. The Assembly is scheduled to take it up July 21.

The remaining work requires 120 full-time employee weeks of effort. The Division currently dedicates approximately 55 percent of one FTE to that work. The 2026 workload compounds the problem: the Division received nearly 2,000 appeals and more than 4,000 exemption applications this year, making substantial audit activity unlikely before the fourth quarter at the earliest. A broader audit covering all exemptions needing ongoing analysis would push the workload to roughly 200 FTE weeks.

The Division estimates approximately $52 million in currently exempt value may be potentially taxable, producing an estimated annual tax burden shift of about $811,000, roughly 0.12 percent of total property tax revenue levied for 2026. The largest share comes from nonprofit religious, charitable, cemetery, hospital, and educational exemptions, which account for about $30.8 million of that potentially taxable value and roughly $479,000 of the estimated tax shift. The Division found a 1.7 percent substantive non-qualification rate among high-priority accounts reviewed and an error rate of less than 0.5 percent for government-owned exempt property.

The report does not frame misuse as widespread. The current March 15 annual certification deadline creates administrative hardship for both staff and nonprofit property owners. The report notes that the municipality required annual certification starting in 2009, then relaxed the requirement in 2011. The accompanying memorandum to that ordinance explained that mandatory annual certification had created administrative burdens for the Property Appraisal Office and nonprofit organizations, particularly smaller ones with limited administrative capacity.

To improve capacity, the Division is pursuing upgrades to two positions by the end of the third quarter of 2026. It also proposes replacing the March 15 deadline with a rolling 90-day window tied to when the Division sends each request, spreading the workload across the year. For the longer term, the Division recommends a risk-based recurring review framework rather than the five-year uniform cycle the Assembly's resolution requested. Under that framework, ownership-based exemptions would receive annual systematic review with no defined periodic audit cycle unless a compliance issue is identified. Primary-purpose use-based exemptions would be placed on a six-year audit cycle. Secondary-purpose or higher-risk exemptions would be placed on a three-year audit cycle.