MEMORANDUM

TO: Pete Sprague, Assembly President

Members, Kenai Peninsula Borough Assembly

FROM: Chris Moss, Assembly Member

DATE: November 6, 2003

SUBJECT: Ordinance 2003-45, amending KPB Chapter 5.12 to provide for flat taxation of aircraft

The existing property tax scheme for the borough provides that all personal property excepting watercraft and motor vehicles is subject to an ad valorem tax. The first $100,000 in assessed value of personal property subject to an ad valorem tax is exempt from taxation. Watercraft and motor vehicles are both subject to a flat tax. This has no value-based exemption as the tax is not related to the value. Aircraft are similarly motor powered vehicles used for transportation, and it seems equitable to impose a flat tax upon aircraft rather than an ad valorem tax. Anchorage currently imposes a similar "registration tax" on aircraft situated in the Municipality of Anchorage.

If enacted, this ordinance would impose a flat tax on each aircraft in the borough of $75 per aircraft engine on each aircraft. It applies to all aircraft that have been issued a Federal Aviation Administration N number. Aircraft owned by scheduled carriers are excluded from this ordinance as they are taxed on an ad valorem basis, but only for the percentage of time spent in the borough. Imposing a flat tax would potentially result in either double taxation or a complete loss of tax revenue as flat taxes are not, by their nature, generally apportioned between jurisdictions.

Attached is a table prepared by the assessor showing a reduction of approximately $179,770 in tax revenues that would result from this change.