The Haines Borough Assembly’s Commerce Committee brainstormed ideas for imposing a tax on extracted resources.  The tax would be modeled after taxes already in place in other Alaskan boroughs.  It would be limited to natural resources such as timber, gravel and ore that are exported.  KHNS’s Jenn Shelton reports.

 

Severance taxes are applied to nonrenewable resources that are exported from a community. Take timber for an example. If trees are cut in Haines and shipped out on a barge, then they could meet the requirements to be charged a severance tax.  But if the same trees are cut and then processed locally to make, say, hot tubs, then those same trees would not be subject to a severance tax.

Tuesday evening was not the first time Haines Borough Assembly members have discussed severance taxes. Commerce Committee Chair Debra Schnabel can remember at least two previous times when the topic was raised and later shelved.  Although no one spoke in opposition to severance taxes at Tuesday’s meeting, Schnabel said she wants to make sure that the taxes are not seen as punitive, but fair.

Schnabel: “The reason that you have a severance tax is because you are taking out. You are devaluing your borough. Right now the borough has a value.  It has a value of its resources. And when those resources go away, you have depreciated the value of the borough.”

Other municipalities like Denali, Kenai, Yakutak and Kodiak already have severance taxes in place.  Schnabel said she would look to those boroughs when drafting a proposed ordinance to be discussed at the next Commerce Committee meeting in four weeks.

Kodiak taxes land resources, like gravel and minerals, and also marine remsources, like fish and shellfish.  The borough reports bringing in $1.5 million annually. And the Denali Borough is funded almost entirely by severance taxes, because they do not have property taxes.

But severance taxes have yet to gain much traction in the Haines Borough, where some are apprehensive of taxing businesses.  Schnabel anticipates opposition, and she spoke carefully during the meeting.

Schnabel: “But having grown up in a very conservative, business family, certainly the lore of how much businesses do to contribute to the economy and to make life better is sometimes a pretty strong argument too.  So I want to make sure that we aren’t just taking a negative view of development.”

Committee members spent a lot of time discussing what types of resources should be defined as non-renewable.  Some resources like timber and fish, took more consideration.  Trees take a long time to grow, but they do grow back.  The committee asked – Does that make them a renewable resource, or nonrenewable? And fish, while they reproduce abundantly, are seeing population declines.  Committee member Ben Aultman-Moore said he saw arguments for both sides, and he asked for clear definitions for each industry in the first draft of the proposed code.  

Aultman-Moore: “I do think that, in this case, in the case of the taxation that we are talking about, timber and fish are debatable. In terms of whether or not non-renewable resources are being severed, whereas minerals and gravel, it’s, to me, not super debatable.  I mean they are non-renewable resources being removed from the community.”

Going into the meeting, the committee had decided that fish would not be considered for a severance tax.  But after discussions, members decided to remain open to a severance tax on fish processed on tenders.

The committee also discussed whether a severance tax should be voted on by the assembly or left up to voters. But all three committee members, including Craig Loomis, appeared in agreement that this is an opportunity to broaden the tax base and generate revenue.  

Schnabel said she foresees severance tax revenues going towards public land projects that would improve residents’ quality of life.  She mentioned putting the money towards conserving public lands or waters, or developing recreational areas or facilities, such as a ski lift.  She added that revenue would initially be allocated towards pressing capital projects, such as improving roads and sewer processing. 

The next Commerce Committee meeting is scheduled for February 20th at 6:30 p.m. when the committee expects to present a draft ordinance.