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Pipeline value discrepancy settled in Supreme Court

By Emily Carlson 12:56 AM February 20, 2014

Ruling means the boroughs stand to collect hundreds of millions of dollars more in property taxes.

ANCHORAGE – It was a huge victory for some Alaska communities after the Alaska Supreme Court ruled on how the state should determine the value of the trans-Alaska pipeline.

For years Fairbanks, Valdez and North Slope boroughs have claimed the state was devaluing the pipeline, costing them hundreds of millions of dollars in property taxes.

In 2006, the boroughs filed a complaint with the State Assessment Review Board.

The problem was a discrepancy of value. The oil companies claim the pipeline is only worth $850 million, the state said it was worth $3.6 billion, while the boroughs said it’s worth more than $11 billion. So who’s right? On Wednesday, the Alaska Supreme Court said the boroughs are calculating correctly.

The ruling clears up the long-debated question as to how the state should determine how much the pipeline is worth. A former member of the State Assessment Review Board told KTVA the state had been using an approach that assumed the pipeline would last 30 years.

The boroughs argued for a different approach, assuming that the pipeline will last 60 to 90 years. That’s the approach the Supreme Court ruled was correct. It means the boroughs stand to collect hundreds of millions of dollars more in property taxes.

“I think this decision is a victory for Alaskans and for Alaska communities,” said former State Assessment Review Board Member Marty McGee.  “It’s an appropriate decision and it’s fair. That’s what we in assessment try to base it on. If you have to pay a tax on your home based on the value of your home, then the owners of the pipeline should pay a tax based in fair value of the pipeline.”

McGee was dismissed from the board last month. He claims it was a move by the Gov. Sean Parnell to stack the board in favor of the oil industry.

However, a Parnell spokesperson denied that claim, saying the governor wanted a fresh perspective on the board.

As for Wednesday’s Supreme Court ruling, spokeswoman Sharon Leighow said the governor hasn’t had a chance to read the 50-page ruling.

“Although we are still reviewing the decision, the state’s methodology, upheld by the court, leaves more money in the people’s treasury,” she released in a statement.

The ruling stems from a dispute that stretches all the way back to 2006. That means property owners now owe municipalities seven years of back taxes. What still isn’t clear is if they will also owe interest on those back taxes.

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