Part of Gov. Mike Dunleavy's budget plan for the upcoming fiscal year relies on a bill which would repeal communities' local property taxes on oil and gas infrastructure – including the trans-Alaska pipeline.

Dunleavy presented his plan to reconcile a $1.6 billion state deficit on Wednesday morning alongside Donna Arduin, director of the state's Office of Management and Budget.

The state, as well as municipalities where oil and gas properties lie, levy taxes based on a state assessment. Oil companies can deduct local taxes from their state tax bills.

Under Senate Bill 57, the state would receive all of the revenue.

Preliminary estimates peg local governments' annual losses at $420 million. The vast majority of the blow, some $372 million, would fall on the North Slope Borough which is home to the state’s oil patch. The Fairbanks North Slope Borough and the city of Valdez, the pipeline's midpoint and destination, would also lose property taxes.

“Due to the credit allowed against the state tax levy for municipal tax payments, the state general fund receives only a fraction of the revenues generated by this tax," Dunleavy wrote in a transmittal bill for SB57. "This results in lower general fund revenues, from vital properties of statewide economic importance, to be appropriated to municipalities around the state and support of vital state programs.”

Lawmakers representing the North Slope Borough don't see it the same way.

“This bill asks the Alaska Legislature to approve a tax scheme that treats petroleum production property differently than other types of property,” Rep. John Lincoln, D-Kotzebue, said in a statement. “We would never consider telling the business hubs of Anchorage and Fairbanks that they can’t tax commercial properties anymore because the State needs that money.

“While Senate Bill 57 applies equally to all petroleum property statewide, it, unfortunately, would have a disproportionate effect on the North Slope Borough, which is where the vast majority of Alaska’s known oil reserves are located. Oil from the North Slope has historically produced upwards of 90 percent of the revenue to the State of Alaska.”

Sen. Donny Olson, D-Golovin, didn’t mince words when learning of the bill.

“Gov. Dunleavy and his staff I think are short-sighted,” he said. “I think his OMB director is steering him in the wrong direction. Because of that there is going to be mayhem when this shipwreck happens.”

Olson, who serves on the Senate Finance Committee, said he will likely take a trip during the legislative session to meet with borough officials.

Borough Mayor Harry Brower Jr.’s office could not be reached for comment Wednesday.

Copyright 2019 KTVA. All rights reserved.