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Governor’s appointee withdraws from taxation board

By Rhonda McBride 5:38 AM March 14, 2014

Out-of-state appointee highlights a clash between state law and the Alaska Constitution

JUNEAU – A recent appointee to the State Assessment Review Board has bowed out. Dennis Mandell has decided the volunteer position is just too political.

Most Alaskans have probably never heard of SARB, but it’s important to the state’s bottom line, as well as a number of cities and boroughs with property along the trans-Alaska pipeline corridor.

The governor appoints all five of the board’s members. Their job is to review the property taxes of oil and gas companies, and that can get controversial.

Just ask Marty McGee, an Anchorage property tax assessor who advocated for higher taxes.

The governor removed McGee from the board earlier this year and replaced him with Mandell, who had two strikes against him: He lives in Salinas, California and has ties to the oil industry.

Critics like the Senate minority leader were angered by the choice.

“The governor wants to reach outside the state and bring somebody here to make important decisions, economic decisions,” said Sen. Hollis French. “And he wants to use a California oil man to make those decisions.”

“We should govern from within and govern ourselves,” French said. “And for whatever reason, this governor, Sean Parnell, wants to hire outsiders to make those crucial decisions. And in this case, it benefits the oil industry.”

French also believes the governor violated a state law that says you have to be an Alaska resident who was voted in the last general election to serve on a state board or commission.

But Parnell disagrees. He points to the Alaska Constitution which says the only requirement necessary is United States citizenship.

At a news conference Thursday, he defended that right.

“I want to do everything I can to preserve the constitutional authority of this office, as envisioned by the framers of Alaska’s constitution,” Parnell said. “So I had that in mind.”

Parnell also said Mandell was the most qualified of the candidates who applied for the seat.

“He’s an incredibly professional and qualified individual. Everybody who met him thought that,” the governor said. “But the politics of naming an out-of-state resident certainly played into this.”

French believes the governor has tarnished a tradition of appointing Alaskans to serve on boards and commissions going all the way back to the territorial days — when it was important to the emerging state to be free of outside influence and gain control of its destiny.

“This governor is asserting he has a right to do it again, and I think the people of Alaska would reject that,” French said.

House Speaker Mike Chenault, in anticipation of a difficult confirmation process for Mandell, asked a legal analyst from the Legislative Affairs Agency to weigh in.

In their opinion, legislative attorneys said the state constitution likely favors the power of the governor, though they acknowledged a conflict between the constitution and state statutes.

The specific statute in question is AS 39.05.100(a).

It states:

“A person appointed to a board or commission shall be and have been before the last general election, (1) a registered voter in the state…”

The attorneys wrote:

“The appointment of a nonresident of the state violates AS 39.05.100(a). However, there is considerable question of whether AS 39 05.100(a) is constitutional under the federal and state constitutions. Indeed, a court would probably find that AS 39.05.100(a) violates the Constitution of the State of Alaska.”

French said, given the conflict, the governor should have “harmonized” the two laws.

“The governor is saying they don’t reconcile, but I think they do,” said French. “The constitution says you should hire U.S. citizens. The statute says you hire Alaskans. My solution that benefits Alaskans is to hire U.S. citizens who live in the state of Alaska.”

Parnell said it’s possible he or a future governor may attempt to resolve the conflict in court. But since Mandell withdrew, he won’t pursue it at this time.

The governor acknowledged Mandell was part of a plan to take the board in a new direction, one that would be more balanced.

He said boards in the past tended to ask only one question: How could they raise the tax?

“I need board members who Alaskans can trust will follow the law, not tilt the table one way or another,” Parnell said.

A recent Alaska Supreme Court ruling in a 2006 lawsuit has heightened public scrutiny of oil company property taxes. The court found that the industry low-balled the value of the trans-Alaska pipeline by almost $10 billion.

“This is a question in which the municipality says this house is worth $11.5 billion, and the pipeline owner says it’s worth one-tenth of that,” French said. “They offered us a dime on the dollar for the value of the pipeline. They were wrong.”

The governor said the scenario for the pipeline is much different today than in 2006, when oil prices were high and more oil was flowing through the line. He said the declining throughput is hurting the value of the line and it probably won’t go up in value until there is more oil flowing through it.

The governor believes assessors need to take this into consideration.

The 2006 lawsuit has figured prominently in discussions of the governor’s efforts to launch the Alaska Liquified Natural Gas Project.

Oil and gas companies want to do things differently than they did with the trans-Alaska pipeline. Instead of paying property taxes, which are tied to the value of the property and fluctuate, they want to compensate cities and boroughs with Payment in Lieu of Taxes, or PILT.

French said the five SARB board members could be making decisions that could be worth millions of dollars to both state and local governments, which is why each board seat is so important.

For now, it’s a position that’s in the rearview mirror for Mandell, who believes his motives and intent have been mischaracterized.

Years ago, Mandell lived in Alaska and worked for ARCO. He said he raised his family here and still has many ties to the state.

Mandell, who said he is mostly retired, travels to Alaska two or three times a year.

In the past, he has worked on TAPS for the oil industry. He has also worked on the other side of the fence, such as the time he represented the Municipality of Anchorage in a lawsuit against Enstar, a natural gas utility.

The appointment of board members from outside of Alaska is not entirely unprecedented. Some boards, like that of the state-owned Alaska Aerospace Development Corporation, have out-of-state members. A law had to be passed to make this possible, because of the difficulty of finding people with expertise in the aerospace industry in Alaska.

The governor could do the same thing; get a law passed allowing non-residents to serve on the assessment board.

In the meantime, Parnell said he’s ready to move on from the controversy and is already looking for a new candidate.

“I don’t want us to be distracted from these super important topics that will benefit Alaskans,” said Parnell.

But critics have lingering doubts about Parnell’s attempt to put a non-resident on the board. They believe the governor has abused the process, and could do it again to try to stack the deck in favor of oil and gas companies.

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