Municipal League urges local control in Alaska LNG tax negotiations

The Alaska Municipal League told state senators Friday that local governments need the power to negotiate their own tax agreements with the Alaska LNG project developer rather than accept a statewide formula.

Nils Andreassen, the league's executive director, testified that member communities want tools to address project impacts that vary widely from borough to borough. He proposed adding language to Senate Bill 280 that would let municipalities negotiate economic development exemptions individually, similar to authority they already have under general property tax law.

"Under statute AS 29.45.050(m), municipalities may adopt ordinances to provide partial or total property tax exemptions or deferrals for economic development property for up to five years," Andreassen said. "That is a tool that could be applied in the case of oil and gas property tax."

The legislation comes after Gov. Mike Dunleavy floated a proposal late last year to cut the property tax rate by 90 percent for the Alaska LNG project. Local governments criticized that proposal, which would have reduced their property tax revenue by 90 percent. Municipalities would have had to forego revenue that otherwise helps them deliver essential services, relieve tax burdens on residents and other businesses, meet deferred maintenance needs, and invest in infrastructure. The governor introduced SB 280 on March 20 in response to that criticism.

The Senate Resources Committee is working through a committee substitute that breaks the project into three components: the gas treatment plant, the pipeline, and the LNG export facility. Each would receive different tax treatment. The current version would split some revenue between the North Slope Borough and Kenai Peninsula Borough while directing other portions to a community impact fund.

Andreassen said that structure moves in the right direction by recognizing impacts beyond the two boroughs that contain most of the infrastructure. But he stopped short of endorsing the committee substitute. The league's December resolution called for not touching oil and gas property taxes at all.

"The original version of the bill is not consistent with the resolution that members passed," Andreassen said. "One, our resolution says do not touch oil and gas property taxes."

The original bill introduced by the governor would have capped local property tax revenue at roughly 10 percent of what boroughs could otherwise collect. The committee substitute increases that amount, though Andreassen said local officials still question whether it covers construction and operational impacts.

"Big projects, or any for that matter, have an impact within a community," Andreassen said. "A project of this scale has impacts at scale, affecting not just the socioeconomic fabric of a community, but creating real bottlenecks for services and burdens on infrastructure. We have heard that these impacts range from public safety and housing to local roads, land management, and so many others."