Seward homeowners who live in town would get two property tax breaks under final budget

Seward homeowners who live in their own homes would get two tax breaks under City Manager Kat Sorensen's final two-year budget, which cuts the property tax rate and counts on a new exemption for primary homes.

The final budget, posted Nov. 6, would drop the city's rate from 3.64 to 2.64 mills in 2028. A mill is $1 of tax for every $1,000 of a property's assessed value.

On top of that, a separate ordinance, not yet introduced, would take $75,000 off the assessed value of primary homes in the city. At the new rate, that's worth about $198 a year.

For a home assessed at $300,000, for example, the city's share of the tax bill would fall from about $1,092 to about $594 if the owner lives there and qualifies. If it's a second home or a rental, the owner would get only the rate cut, bringing the bill to about $792. Renters wouldn't get anything directly.

Some council members had pushed for that kind of targeting. At an October work session, Council member Lori Draper pointed out that the Kenai Peninsula Borough offers a homeowner exemption and Seward doesn't. Another council member warned that a straight rate cut "would really only affect people that own property, not year-round renters, not people on lower income."

Council member Casie Warner wrote on Oct. 28 asking the city to explore "maintaining our current mill rate and instead using targeted tax exemptions." Sorensen had said the rest of the city's property tax pays its debt, so any exemption would have to come in place of the rate cut, and she floated dropping the rate cut in favor of lower electric rates.

The final budget does both: the rate cut and the exemption.

The cuts rest on summer sales. Starting in 2028, the city's sales tax would go from 4% year-round to 6% from April through September and nothing the rest of the year. The borough's 3% sales tax wouldn't change. Sales tax revenue would rise to about $10.9 million that year.

Even so, the city's general fund would spend about $2.66 million more than it takes in during 2028, with transfers from other city funds covering the gap.

The council opened the first of three budget hearings Monday. The exemption ordinance is set to be introduced Nov. 23, the same night as the second hearing, and final approval of the budget is scheduled for Dec. 14.

Two questions about the exemption are still open. A state law that took effect Sept. 20 lets local governments exempt all or part of a home owned and lived in by a local resident. But the city hasn't settled who would qualify: the budget's agenda statement cites 185 days of borough residency, while Sorensen has described primary homes in the city. Sorensen also said in October she would check with the city attorney on whether voters must approve it.

The final budget shows 2028 property tax revenue $100,000 lower than the October draft. No city record says whether that's the exemption's cost or how it was figured. In October, Sorensen said the exemption "would only be about $50,000 a year."