Sitka has 2,800 personal property accounts — mostly consisting of boats. Combined, they generate only 8-percent of Sitka’s property tax revenue. The assembly would rather that the assessor focus her efforts on the other 92-percent of real property: mainly land and buildings.

Sitka’s boat owners got a holiday gift: The Sitka assembly last night (Tuesday 12-27-16) exempted their vessels from property tax.

Though in a budget crunch, City Hall believes the move will ultimately earn more than it costs, as the assessor can devote her full attention to real estate.

Downloadable audio.

Most of the heavy lifting for this ordinance happened at the assembly’s last meeting. Wendy Lawrence, Sitka’s assessor, explained the problem with taxing boats as personal property using simple math.

“And what we discovered was that we were using 60-percent of our resources on eight percent of the revenue.”

That 8-percent amounts to about a half-million dollars of personal property tax revenue in Sitka. (About 2,800 accounts. The effect of the ordinance would reduce that number to 600, and produce a revenue loss of $137,400, which Lawrence believes could be offset by gains in real property.) In a memo to the assembly, Lawrence explained that over three-quarters of municipalities have exempted some form of personal property from taxation.

Both times Sitka’s boat exemption ordinance was heard it has generated opposition — last time from assembly member Steven Eisenbeisz; this time from a member of the public, Clyde Bright — a vacation-rental landlord who was thinking about the large loophole people might want to sail through:

“I could get a million-dollar yacht out here and rent out rooms in it, and not have to pay any property tax.”

The assessor has argued that eliminating the personal property tax on boats would make Sitka’s harbors a more attractive place to moor. Bright thought it would make the harbors more attractive to live.

“I imagine that people would be selling their homes — or renting them out — and moving on boats.”

Carter Hughes, a fisherman, told the assembly he was okay with paying property tax on his boat, which he sometimes lived on. He didn’t know what the assessor found so challenging about collecting the tax.

“I’m not sure about what’s so hard about looking at the harbormaster’s list of boats of boats that are there, then seeing who you send the bills to.”

Sitkans currently pay a personal property tax on boats based on length. $20 a year for skiffs under 15 feet. $30 for boats to 20 feet. $50 for boats to $30 feet, $100 for boats to 50 feet, and topping out at $200 for boats over 50 feet.

Municipal administrator Mark Gorman said it would be easy enough to add these taxes to moorage, but that wasn’t the challenge.

“The fleet is not moored entirely in our harbor system. There’s a lot of private moorage in the channel, and there’s a private harbor outside of town. And there’s a lot of boats that are trailered. So we could easily capture the boats in our system — that’s not labor intensive — it’s getting the rest of the fleet.”

Mayor Matt Hunter was sympathetic to the idea that eliminating the property tax was just too big a break for the owners of large vessels, but he thought that the assessor had made a reasonable case for the trade off in improved revenues.

“I have no problem with looking at some of our most valuable boats. I don’t know how we would go about assessing a tax on big vessels, but if we’re exempting all aircraft over [under] 12,500 pounds maybe we could exempt all boats under some length or tonnage. But as it is I think this is a good step in the right direction compared to what we currently do.”

Kevin Knox also supported the ordinance, but expressed concern that it not translate into a loss in revenue for the harbors. The vote was 4-0 in favor, with members Bob Potrzuski, Tristan Guevin, and Steven Eisenbeisz absent.

In addition to boats, the ordinance exempts aircraft under 12,500 pounds from personal property tax. Other exemptions already existing in local law include household goods, jewelry, and vehicles not subject to the motor vehicle registration tax such as snowmobiles.

The ordinance goes into effect immediately.