MEMORANDUM

TO: Pete Sprague, Assembly President

Kenai Peninsula Borough Assembly

THRU: Dale Bagley, Mayor

FROM: Shane Horan, Director of Assessing

DATE: July 22, 2004

SUBJECT: Resolution 2004-073, Valuation of Low-Income Housing Tax Credit (LIHTC) Apartment Projects

According to Alaska Statute 29.45.110(d)(1), the assessor is required to value low-income housing tax credit projects existing as of January 1, 2001, the effective date of the legislation, based on the actual income derived from the property. This can result in a value that is less than "full and true value" as defined for other property. These projects must be qualified and recognized under the United States Tax Code, 26 U.S.C. 42.

AS 29.45.110(d)(2) also requires the governing body to determine by ordinance whether projects that qualify after January 1, 2001, shall be assessed based on income derived in the same way as are pre-qualified LIHTC projects. If the assembly does not exempt newly qualified parcels from the income method, it shall determine on a parcel-by-parcel basis whether the property shall be assessed based on the actual income derived (also known as the restricted rent income approach) or at full and true value.

In accordance with state statute, the assembly, through Ordinance 2003-43, (5.12.085) may determine whether or not it wishes these four apartment projects to receive the preferential assessment based on the restricted rents, to be assessed at traditional full and true value, or to choose the method of taxation on a case-by-case basis.

The owners of four projects qualifying after January 1, 2001 as LIHTC property have submitted timely applications for a determination by the assembly on the method of valuation. If enacted, the ordinance would authorize the assessor to value these parcels based on the value of the restricted rents received instead of full and true value. The different values are shown in the resolution.