Court Opinion

ID: 5149423
Source: CourtListenerOpinion
Date Created: 2022-01-02 01:49:40.363731+00
Date Added: 2024-06-11T08:24:57.514706
License: Public Domain

MATTHEWS, Chief Justice,
dissenting.
Out of deference to the state's longstanding interpretation of the Oil and Gas Property Tax Act, today's opinion affirms the state's method of pro-rata reduction of "other" property. But deference to an agency interpretation is appropriate only when the interpretation is reasonable.1 In my judgment the pro-rata reduction interpretation is not reasonable. It conflicts with AS 29.45.080(c)'s ex-elusive formula for determining the portion of oil and gas property taxable by a municipality. It violates the requirement that municipalities tax oil and gas property at the same rate that they tax other property, and, alternatively, it violates the requirement that municipalities limit other property exemptions from taxation to those expressed in AS 29.45.030, .050 and AS 48.56.020. For these reasons, I dissent.
*1220Background
The Oil and Gas Property Tax Act was passed by the legislature in special session in 1973. Oil and gas, and thus oil and gas property, were regarded as resources which should benefit all Alaskans. Because oil and gas production and transportation property was concentrated in a limited area of the state, the legislature believed that the state should tax this property for the benefit of all Alaskans, while still allowing the municipalities whose boundaries encompassed oil and gas property to directly benefit from it to some degree. Governor Egan set the context of the special session in his opening remarks: "The extremely difficult problem we face is this: When vast amounts of taxable oil and gas property are situated unequally throughout the State, what manner of distributing tax revenues derived is fairest, both to the local governments involved and to the rest of the State?" 2
The disproportionate tax base in the North Slope Borough and in Valdez was of paramount concern. The Senate Committee on Community and Regional Affairs report of November 3, 1973, stated:
Even though the North Slope Borough will have both temporary and permanent impact, still the tax base available to them . would be so disproportionate to the rest of the State as to produce a shocking inequity. For example, upon completion of the pipeline, the North Slope Borough would have as a minimum approximately % billion dollar tax base.... With a population of 4,000 persons, the borough would have a tax base of $187,500 per capita. The State average tax base is $12,000 per capita. Anchorage, for example, is $17,500 per capita. Both the House and the Senate bills adopted the same mechanism and limited the per capita revenues. In the House it was limited to $1,000 per person and in the Senate $2,000 per person.... The figures suggested by either the House or the Senate provided per capita revenues ... greatly in excess of those received by any other community in the state. Anchorage, for example, has total tax revenues of approximately $350 per person. The higher $1,000 (or possibly $2,000) figure can be justified for the North Slope Borough because of the higher living costs in the North Slope Borough, the excessive construction costs for such things as sewers, schools, etc., and also because the North Slope Borough covers the gigantic Arctic North Slope Plain, extending from Canada on the east to the Chukchi Sea on the west. Although the $1,000 or perhaps even the $2,000 may be rational as a per capita limit on the North Slope, neither of these figures is rational as a per capita limitation in Valdez.3
As enacted in 1978, the Oil and Gas Property Tax Act had six sections, only four of which are important to the present issue. In discussing the act, I will describe it as it now exists, for no changes important to this case have been made since the original enactment.4
In section 1 of the act, AS 48.56.010(a) provides that the state may tax oil and gas *1221property at an annual rate of 20 mills, Subsection (b) of .010 provides that municipalities may also tax oil and gas property under AS 29.45.080. Subsection (d) provides that taxes on oil and gas property paid to a municipality under AS 29.45.080 are to be credited against state taxes levied under subsection .010(a).
In order to constrain municipal taxation of oil and gas property and thus prevent an undue drain on state tax revenues, important limitations are built into the act. The first is the equal rate requirement. Alaska Statute 43.56.010(b) provides that a municipality's tax on oil and gas property "shall be levied at a rate no higher than the rate applicable to other property taxable by the municipality." The reason for this limitation is obvious. If municipalities could tax oil and gas property at a rate higher than other property they would have little or no reason not to do so. The owners of oil and gas property are not well represented among municipal voters, and the state-which ultimately pays the municipal tax under the crediting mechanism of subsection .010(d)-is not part of the municipal body politic. Thus municipalities would tend to tax oil and gas property at maximum rates, while taxing other property either minimally or not at all. By imposing an equal rate requirement, the legislature hoped that the downward pressure imposed by the reluctance of owners of other property to pay higher levels of taxes would constrain municipalities from diverting to themselves state tax revenues from oil and gas property. We have confirmed this view of the purpose of the equal rate requirement:
This limitation was apparently intended to prevent a borough from shifting its fiscal responsibilities away from its general property owners and onto the shoulders of the oil and gas industry, and ultimately, due to the credit against state taxes, onto the state government. In other words, local residents should pay their fair share *1222of the cost of local government rather than casting the burden disproportionately onto the people of the state."5
Hand in glove with the equal rate limitation is a prohibition on the exemption of other property from taxation. Exemptions must be limited because otherwise a municipality might exempt a high percentage of other property-say 90% of value-while taxing the remainder-in my example 10%-at the same rate that it taxed the portion of oil and gas property it was permitted to tax. In this way a municipality would be able to argue that it was complying with the equal rate limitation, while in fact the effective rate for other property would be only 10% of the rate at which the municipality taxed oil and gas property6 To close this loophole, AS 48.56.010(b) limits exemptions to those already authorized by statute, with one exception, which is contained in section 2 of the act. This amends AS 29.45.050(a), permitting a $10,000 exemption for each residence.
Section 3 of the act enacted a new section, AS 29.45.080, which contains two alternative methods under which municipalities may impose taxes on oil and gas property. These methods are exclusive in the sense that they are the only methods by which municipalities may tax oil and gas property.7 The first alternative uses a revenue cap; the second, a property cap. The revenue cap method in subsection .080(b) allows a municipality to tax the full and true value of all oil and gas property within the municipality, but limits the tax rate to that which, when applied to all oil and gas property in the municipality and all other property, produces revenues of no more than $1500 per person.8
Our concern in this case is with the property cap method. Alaska Statute 29.45.080(c) caps a municipality's property tax base at 2.25 times the state per capita average. When the cap is exceeded by the sum of the value of oil and gas property and other property, subsection .080(c) permits a municipality to tax only a portion of the value of oil and gas property. How this portion of value is to be calculated is the nub of this case. The portion of value of oil and gas property taxable by a municipality is somewhat daunting ly described in .080(c) as "which value, when combined with the value of property otherwise taxable by the municipality, does not exeeed the product of 225 percent of the average per capita assessed full and true value of property in the state multiplied by the number of residents of the taxing municipality." 9
The property cap method was advocated in preference to the revenue cap method by the Department of Community and Regional Affairs. Commissioner Mallott explained its advantages:
The average per capita assessed valuation index is suggested as a compromise between those who would have the State assume exclusive authority for levy of an ad valorem tax on property used in conjunction with oil activity and those who have claimed that removal from municipalities of authority to levy on that property in support of services required would sharply restrict local capacity to act. The index chosen as the restricting factor-double the State average assessed valuation of property per capita-is offered that the *1223existing range of averages of particular municipalities is not unduly affected, but that future variations are held within tolerable limits, in light of essential local revenue needs as determined by elected officials in the municipalities concerned.!10
Commissioner Mallott proposed the property cap method because he questioned whether the revenue cap "is, and will remain, an upper limit sufficient to allow recovery of revenues for essential public services in municipalities affected."
To cite the North Slope Borough as an example, a limit of $1,000 per capita revenue return in ensuing fiscal years may not reasonably allow that unit of government to recover revenues sufficient to defray costs of constructing public facilities, operating schools, assuming responsibilities for public works and utilities, and addressing other public needs which its citizens may demand."11
Commissioner Mallott also noted that the $1000 revenue cap method would result in unusually low maximum mill rates in the oil and gas property advantaged communities of the North Slope Borough and Valdez. In each case the maximum mill rate would be under 3 mills after 1977.
Because the House of Representatives favored the revenue cap method and some senators favored the property cap method, both methods were included in the act. The free conference committee reached this resolution after a Department of Revenue official predicted that the difference between the two methods would not be great, about $1 million in the early years, increasing to about $3 or $4 million later."12
Once the act was passed, the State Department of Revenue initially construed the property cap method to require a reduction in the taxable portion of only oil and gas property- and not other property-when the total value of oil and gas property and other property in a municipality exceeded the 225% cap. This point is made clear in a February 1977 report prepared by the State Department of Revenue and transmitted by Commissioner of Revenue Gallagher to Governor Hammond: |
If the assessed value of taxable oil and gas properties would result in a total assessed valuation exceeding this product (225% of average per capita statewide assessed value multiplied by the number of the municipality's residents) when added to the assessed valuation of other property in the municipality, then the Department of Revenue designates what portion of the oil and gas assessment the municipality may tax. AS 43.56.010(c).13
But in 1978 this interpretation changed. Deputy Commissioner of Revenue Messenger, in a letter to the mayor of the North Slope Borough, described how the department "has modified its earlier position regarding the [225% cap)." Instead of designating "what portion of the oil and gas assessment the municipality may tax," as in the Gallagher report, the department under Messenger's method "will require a pro-rata reduction in the assessed value of all property in the municipality so that it comes within the limitation."
Although the Messenger letter proceeded to illustrate the pro-rata methodology, it did not analyze the language of the act. Nonetheless, the interpretation set out in the Messenger letter has been consistently applied since 1978. In late 1988 the state assessor issued a lengthy report critical of, among other things, the pro-rata reduction method. *1224This report triggered the appointment of a select advisory committee to the Senate Committee on Community and Regional Affairs. The select committee issued a report that defended the pro-rata method and ree-ommended regulatory changes and constraints on the authority of the state assessor. No action was taken on the report.
Calculating the Portion of Oil and Gas Property Taxable By a Municipality-A Plain Reading of the Act
Alaska Statute 48.56.010(c) provides that where the "total value of assessed property of a municipality taxing under AS 29.45.080(c)" exceeds the 225% cap, the Department of Revenue "shall designate the portion of the tax base against which the local tax may be applied." Subsection .010(c) does not itself include a formula that would control how the Department of Revenue chooses to designate the taxable portion of the local tax base. But subsection .O010(c) applies only to municipalities taxing under AS 29.45.080(c), and subsection .080(c) does contain such a formula.
Shortened for ease of understanding, AS 29.45.080(c) provides: "A municipality may levy ... a tax on the ... value of that portion of [oil and gas property] which value, when combined with the value of property otherwise taxable by the municipality does not exceed [the 225% cap]." This describes in plain language the formula for determining what portion of ofl and gas property is taxable by a municipality. From the 225% cap subtract "the value of property otherwise taxable." The remainder is the portion of oil and gas property taxable by a municipality. Expressed mathematically the equation is [portion of value of oil and gas property taxable by municipality] = [225% capl-[value of property otherwise taxable].
Onee the portion of oil and gas property taxable by a municipality is determined, it becomes a simple matter for the Department of Revenue to designate the portion of the tax base against which the local tax may be applied under AS 48.56.010(c). The Department arrives at that figure by adding the "value of property otherwise taxable by the municipality" to the value of the portion of oil and gas property taxable by the municipality, the latter of which has already been determined under AS 29.45.080(c). The sum of these two figures is the portion of the total tax base that the municipality may tax. Mathematically this equation is [tax base] = [portion of value of oil and gas property taxable by municipality] + [value of property otherwise taxable].
The fact that AS 29.45.080(c) clearly supplies a formula for determining the portion of oil and gas property taxable by a municipality does not necessarily mean that the plain language of that subsection is controlling. We have rejected the aspect of the "plain meaning" rule that bars a court from considering legislative history as an interpretative aid if a statute's meaning is facially "plain." 14 Nonetheless, the literal meaning of a statute will control unless it is convincingly contradicted by evidence of legislative intent. "Although we normally give unambiguous language its plain meaning, we may rely on legislative history as a guide to interpreting a statute. But 'the plainer the language of a statute, the more convincing contrary legislative history must be' to interpret a statute in a contrary manner." 15
In this case, the literal or plain meaning of the formula expressed in .080(c) is in harmony with the legislative history of the Oil and Gas Property Tax Act. The act was intended to permit the state to raise revenue from a property tax on oil and gas property, while also permitting municipalities whose boundaries encompassed oil and gas property to tax it for local revenue needs. The formula expressed in subsection .080(c) accomplishes *1225this purpose."16 Therefore, the literal meaning of this subsection is controlling.
Calculating the Portion of Oil and Gas Property Taxable By a Municipality-How Pro-Rata Reduction Conflicts with the Language of AS 29.45.080
In this part of this dissent I will explain why the pro-rata reduction method cannot reasonably be squared with the language of AS 29.45.080. For ease of understanding I set out here the pertinent language of that section, underlining for emphasis the words and phrases discussed in the following paragraphs. Alaska Statute 29.45.080 provides in relevant part:
(a) A municipality may levy and collect taxes on taxable property taxable under AS 48.56 only by using one of the methods set out in (b) or (c) of this section.
(b) [sets out the $1,500 annual per cap-ita revenue method]
(c) A municipality may levy and collect a tax on the full and true value of that portion of taxable property taxable under AS 48.56 as assessed by the Department of Revenue which value, when combined with the value of property otherwise taxable by the municipality, does not exceed the [225% property cap].
I believe that "the value of property otherwise taxable" in subsection .080(c) plainly refers to all taxable property other than oil and gas property taxable under 48.56. Under a plain language interpretation of .080(c), that subsection calls for the taxation of (1) the entire value of taxable property other than oil and gas property taxable under 48.46, and (2) whatever portion of oil and gas property would, when added to the value of property otherwise taxable, not exceed the 225% cap. But because the pro-rata method taxes a larger amount of oil and gas property than is taxable under the plain language interpretation, the amount of "property otherwise taxable" that can be taxed must be reduced in order to keep the total taxable value of property within the 225% cap. To sustain the Department of Revenue's pro-rata reduction method, therefore, "the value of property otherwise taxable" must be read as referring only to a portion of taxable property other than oil and gas property taxable under 48.56.
Although this interpretation is required by the pro-rata reduction method, it is contradicted by the language of .080(c). In subsection .080(c), the word "portion" is only used to modify "property taxable under 48.56." It is not used to modify "property otherwise taxable." This pointed omission clearly implies that all-and not merely a portion-of "property otherwise taxable" is to be used in determining the portion of 48.56 property taxable by a municipality. Because the Department's pro-rata reduction method taxes only a portion of property otherwise taxable, it runs counter to the language of .080(c).
When the lead-in language of subsection .080(a) is examined, two additional inconsistencies between pro-rata reduction and the language of .080(c) become apparent. Subsection .080(a) is explicit in stating that municipalities may tax 48.56 property "only by using one of the methods set out in (b) or (c)...." This language is important for two reasons. First, it indicates that subsection (c) sets out a method under which municipalities may tax oil and gas property. Second, it states that the method set out in subsection (c) is the only method under which municipalities may tax oil and gas property."17
Turning to the first of these reasons, if "the value of property otherwise taxable" in subsection .080(c) is read to refer to the *1226entire value of "property otherwise taxable," then municipalities and the Department can plug that amount into the formula provided by .080(c) and determine exactly how much 48.56 property is taxable. Subsection .080(c) would thus fulfill its mandated purpose of setting out a method under which a municipality may tax oil and gas property. But if "the value of property otherwise taxable" is read to refer only to a portion of the value of "property otherwise taxable," the formula provided by the statute would not yield any particular result. Instead, the amount of 48.56 property that could be taxed would depend on what portion of "property otherwise taxable" could be taxed. But subsection 080(c) does not provide any method for determining what portion of "property otherwise taxable" can be taxed. As a result, continuing with the assumption that "value of property otherwise taxable" refers only to a portion of such value, subsection .080(c) would not provide a method for the taxation of 48.56 property. It would therefore fail to fulfill its explicit purpose. The interpretation of .080(c) required by the pro-rata reduction method thus cannot be correct, as that interpretation would leave this subsection unusable in determining how municipalities may tax 48.56 property.
Turning to the point that the .080(c) method is exclusive, it is clear that pro-rata reduction is not the method prescribed by subsection .080(c) for determining what portion of oil and gas property may be taxed. Because the method specified by subsection .080(c) is explicitly the "only" method under which municipalities availing themselves of the property cap alternative may tax oil and gas property, pro-rata reduction is not a permissible option.
Pro-Rata Reduction Violates the Equal Rate Requirement
The only formula set out in the Oil and Gas Property Tax Act under which one may de- © termine the portion of oil and gas property that a municipality may tax is that expressed in AS 29.45.080(c). Since the formula in subsection .080(c) conflicts with the pro-rata reduction method, the latter method, in my judgment, necessarily violates the statute. But there is another reason why pro-rata reduction is wrong: pro-rata reduction violates the requirement that the portion of oil and gas property taxable by a municipality be taxable at the same rate as other property.
This can be illustrated by using the assumptions and the explanation of the pro-rata reduction method expressed in the 1978 Messenger letter. I quote here the Messenger letter assumptions and calculations:
Assumptions
Average per capita assessed full and true value of property in Alaska (assumed) ..... $ 30,000
North Slope Borough residents (assumed) 10,000
Assessed Value of AS 48.56 property within North Slope Borough (assumed) .......... 2,500,000,000
Assessed Value of non-AS 48.56 property within North Slope Borough (assumed) .... 500,000,000
Total assessed value of all property within North Slope Borough.. .................. 3,000,000,000
Calculation
1. ($30,000) x (225 percent) x (10,000) = $675,000,000
($675,000,000 is the total assessed value of property in the North Slope Borough that can be taxed.)
2. 8,000,000,000 > 675,000,000
(Apportionment of the tax base is necessary.)
[[Image here]]
(The entire tax base must be reduced to 22.5 percent of its full value to come within the 675,000,000 limit.)
4. 2,500,000,000 x .225= 562,500,000
(Value of AS 48.56 property that can be taxed)
500,000,000 x .225 = 112,500,000
(Value of other property that can be taxed)
[[Image here]]
675,000,000
Expressed textually, the Messenger calculations tell us that under the assumptions *1227used the 225% cap is $675,000,000. Pro-rata reduction of oil and gas property and other property requires that each element of the tax base be reduced to 22.5% of full value. This results in a figure of $562,500,000 as the portion of oil and gas property taxable by the municipality. Messenger describes this as the "value of AS 48.56 property that can be taxed."
Now assume that the municipality levies a tax of 20 mills. This is levied on the tax base as limited, $675,000,000. The municipality receives $13,500,000. Of this sum, the municipality receives $11,250,000 (.02 x 562,-500,000) from the owners of oil and gas property. The owners are indifferent to this tax, for it will be paid by a credit on their tax bill to the state. It is thus accurate to say that the $11,250,000 comes from diverted state revenues. The municipality receives $2,250,000 (.02 x 112,5000) from the owners of other property.
What is the actual rate paid by the owners of other property in this seenario? The municipality imposes the 20-mill tax on only 22.5% of the value of other property using the Messenger calculations. This means that the tax rate on other property is actually not 20 mills, but is instead only 4.5-mills (225 x 20 = 4.5). So an owner of taxable other property worth $100,000 in this municipality would pay property taxes of $450 ($100,000 x .225 x .02), which is the tax that would be produced by a 4.5 mill rate. By contrast, if the tax were actually 20 mills, the owner would pay a tax of $2,000.
But the $562,500,000 of oil and gas property-in Messenger's words, "the value of AS 48.56 property that can be taxed"-would in fact be taxed by the municipality at the rate of 20 mills Therefore the municipality would not be taxing the portion of oil and gas property that it is permitted to tax at the same rate of taxation that it applies to other property. This demonstrates that the pro-rata reduction method results in a violation of the equal rate requirement.
It is worthwhile, by contrast, to show what the result would be under AS 29.45.080(c)'s formula for determining the portion of oil and gas property taxable by a municipality. Again using the Messenger assumptions, the 225% tax cap would still be $675,000,000 and this would still be the tax base. Imposing taxes under the literal statutory formula at 20 mills, the municipality would still receive the same amount of revenue as it received under the pro-rata method, $13,500,000. But the makeup of the tax base would be different. From the 225% property cap of $675,000,000, the value of other property, $500,000,000, would be subtracted, leaving $175,000,000 of oil and gas property that could be taxed by the municipality. The tax base would thus consist of
- value of oil and gas property that can be taxed = $175,000,000
- value of other property that can be taxed = $500,000,000
- 225% property cap $675,000,000
Applying a 20-mill tax to these elements, $10,000,000 of total revenues would come from the owners of other property (who in this case are paying taxes at a 20 mill rate of assessment) and $3,500,000 would come from oil and gas property tax revenue diverted from the state treasury.
In summary, using the Messenger assumptions the state pays almost $8,000,000 more to the municipality under the pro-rata method than it would using the formula expressed in AS 29.45.080(c). Use of the pro-rata for-muta, in other words, causes exactly what the equal rate limitation was designed to prevent, a "shifting" of a municipality's "fiscal responsibilities away from its general property owners and onto the shoulders of the oil and gas industry, and ultimately, due to the credit against state taxes, onto the state government." "18 In this respect the pro-rata reduction method conflicts with the state revenue-raising purposes of the act. The objec*1228tive of the equal rate requirement, that "local residents should pay their fair share of the cost of local government rather than casting the burden disproportionately onto the people of the state," is thereby lost.19 And the constraint on high taxation of oil and gas property that would exist if the tax rates were equal is also lost, for the owners of other property pay taxes at a rate that is less than a fourth of the rate on oil and gas property."20
Alternatively, the Pro-Rata Reduction Method Exempts Other Property from Taxation in Violation of the Exemption Limitations Contained in the Act
In enacting the Oil and Gas Property Tax Act, the legislature took pains to restrict the exemptions that municipalities could offer to the owners of other property.21 This was done to prevent an end run around the equal rate requirement. But as is demonstrated by the Messenger letter calculations, the ef-feet of pro-rata reduction is to exempt from taxation a certain percentage of the value of other property. In the Messenger calculation the exemption amounts to 77.5% of the value of other property. This exemption permits a facially equal tax rate to have a distinctly unequal effect. In the words of Commissioner Mallott, this permits the "fiscal equity" inherent in the equal rate requirement to be "frustrated." 22
In passing the act the legislature intended that no portion of otherwise taxable property in advantaged municipalities should go untaxed, for this would occur at the expense of the rest of the state. The legislature built the prohibition on exemptions into the act in order to prevent exactly this result. The act was a response to what one legislative committee described as "a shocking inequity" between oil and gas property advantaged municipalities and other municipalities.23 Its purpose was to reduce this inequity by sharing tax revenues from oil and gas property statewide. No part of this purpose entailed state-funded tax relief to the owners of locally assessed property in tax advantaged municipalities. But by insulating a portion of locally assessed property from taxation, that is the effect of the pro-rata reduction method.
Conclusion
I would reverse the judgment of the superior court with respect to the pro-rata reduction issue. Although the pro-rata reduction method is longstanding, it has never been reasonable. It is contradicted by the plain language of AS 29.45.080(c), which, in turn, accords with the purposes of the act, while the pro-rata reduction method does not. The pro-rata reduction method also demonstrably violates the equal rate requirement of AS 43.56.010(b) and, alternatively and equally demonstrably, violates the limitation on exemptions to other property imposed by the same subsection. The result is a prohibited shifting of the tax burden in tax advantaged municipalities from the owners of other property to the state as a whole.

. See Totemoff v. State, 905 P.2d 954, 968 (Alaska 1995); Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 81 LEd.2d 694 (1984) (holding that deference may be given to agency interpretation only if it is based on permissible construction of statute). ,

. Senate Journal Supp. No. 1 at 3-4, 1973 Senate Journal Special Session.

. 1973 Senate Journal Special Session 77-78.

. The act, updated to reflect renumbering and minor amendments, provides:
Section 1. AS 43 is amended by adding a new chapter to read:
CHAPTER 56. OIL AND GAS EXPLORATION, PRODUCTION AND PIPELINE TRANSPORTATION PROPERTY TAXES.
Sec. 43.56.010. LEVY OF TAX. (a) An annual tax of 20 mills is levied each tax year beginning January 1, 1974, on the full and true value of taxable property taxable under this chapter.
(b) A municipality may levy and collect a tax under AS 29.45.080 at the rate of taxation that applies to other property taxed by the municipality. The tax shall be levied at a rate no higher than the rate applicable to other property taxable by the municipality. A municipality may not exempt from taxation property authorized to be taxed under this chapter. Exemptions shall be limited to those in AS 29.45.030, 29.45.050, and AS 43.56.020.
(c) If the total value of assessed property of a municipality taxing under AS 29.45.080(c) exceeds the product of 225 percent of the average per capita assessed full and true value of property in the state, to be determined by the department and reported to each municipality by January 15 of each year, multiplied by the *1221number of residents of the taxing municipality, the department shall designate the portion of the tax base against which the local tax may be applied.
(d) A tax paid to a municipality under AS 29.45.080 or former AS 29.53.045 on or before June 30 of the tax year shall be credited against the tax levied under (a) of this section for that tax year. If, however, a tax is not paid to a municipality until after June 30 of the taxable year, the department upon application shall refund to the taxpayer the amount of tax paid to the municipality under AS 29.45.080 or former AS 29.53.045. The credit or refund of taxes paid to a municipality may not exceed the total amount of tax levied by the department upon the taxpayer for the tax year, under (a) of this section.
[[Image here]]
Section 2. AS 29.45.050 is amended to read:
(a) A municipality may exclude or exempt or partially exempt residential property from taxation by ordinance ratified by the voters at an election. An exclusion or exemption authorized by this section may not exceed the assessed value of $10,000 for any one residence.
[[Image here]]
Sec. 3. AS 29.45 is amended by adding a new section to read:
Sec. 29.45.080. TAX ON OIL AND GAS PRODUCTION AND PIPELINE PROPERTY.
(a) A municipality may levy and collect taxes on taxable property taxable under AS 43.56 only by using one of the methods set out in (b) or (c) of this section.
(b) A municipality may levy and collect a tax on the full and true value of taxable property
laxable under AS 43.56 as valued by the Department of Revenue at a rate not to exceed that which produces an amount of revenue from the total municipal property tax equivalent 'to $1,500 a year for each person residing in its boundaries.
(c) A municipality may levy and collect a tax on the full and true value of that portion of taxable property taxable under AS 43.56 as assessed by the Department of Revenue which value, when combined with the value of property otherwise taxable by the municipality, does not exceed the product of 225 percent of the average per capita assessed full and true value of property in the state multiplied by the number of residents of the taxing municipality.
[[Image here]]
Sec. 4. AS 29.45.090 is amended by adding a new subsection to read:
(b) A municipality, or combination of municipalities occupying the same geographical area, in whole or in part, may not levy taxes
(1) that will result in tax revenues from all sources exceeding $1,500 a year for each person residing within the municipal boundaries; or
(2) upon value that, when combined with the value of property otherwise taxable by the municipality, exceeds the product of 225 percent of the average per capita assessed full and true value of property in the state multiplied by the number of residents of the taxing municipality.

. Kenai Peninsula Borough v. State, Dep't of Community and Reg. Affairs, 751 P.2d 14, 16 (Alaska 1988).

. See Leiter of Commissioner Mallott of the Department of Community and Regional Affairs, 11/2/73. ("[BJroader residential exemptions" would shift the tax burden. "In this manner, the fiscal equity sought by [the proposed act's] requirement that a local property tax 'shall be levied at a rate no higher than the millage rate, using the same assessment methods, applicable to other property taxable by the municipality may be frustrated.").

 See AS 29.45.080(a).

. Originally the limit was $1000 per person.

. A 3% (30 mill) tax cap on the taxation of property by a municipality pre-existed the enactment of the Oil and Gas Property Tax Act. This was not changed by the 1973 act and is contained in AS 29.45.090(a). But section 4 of the 1973 act added a new section (b) to , AS 29.45.090, which reiterated the alternative methods set out in AS 29.45.080(b) and (c).

. See supra note 6.

. See supra note 6.

. Free Conference Committee Minutes, November 10, 1973. The alternative cap methods now yield very different results. Using rounded figures for 1997, Valdez's operating revenue under the property cap method was $16 million; under the revenue cap it would have been $6 million; for the North Slope Borough the corresponding figures were $60 million and $19 million.

. February 1977 Report (language in parentheses is contained in the Department of Revenue report) (emphasis added).

. See City of Dillingham v. CH2M Hill Northwest, Inc., 873 P.2d 1271, 1276 (Alaska 1994).

. In re Johnstone, 2 P.3d 1226, 1231 (Alaska 2000) (quoting City of Dillingham v. CH2M Hill Northwest, Inc., 873 P.2d at 1276).

. It is important to note that a municipality's total tax base is the same under the formula expressed in subsection .080(c) and under the pro-rata reduction method. Thus local revenue needs can equally well be satisfied under the .080(c) method as under the pro-rata reduction method. The difference is that under pro-rata reduction tax advantaged municipalities are able to shift much of the burden of paying taxes from local property owners to the state.

. Other than the revenue cap method expressed in subsection (b) which is not at issue in this case.

. Kenai Peninsula Borough v. State, Dep't of Community and Regional Affairs, 751 P.2d 14 (Alaska 1988).

. Id.

. The Messenger assumptions are no longer realistic. For the tax year 1997-the most recent year in which figures are developed in the record before us-the basic data appear to be as follows for the North Slope Borough. I use rounded figures.
® 225% cap, $2,200,000,000.
* Oil and gas property, $11,500,000,000.
@ Other property, $300,000,000.
Using the Messenger pro-rata reduction method other property is reduced to .1864 of its value before it is taxed. As might be predicted there is little incentive not to impose taxes at near maximum rates, and the 1997 rate was about 28 mills. This amounts to an effective rate on the owners of other property of about 5 mills, shifting about $7,000,000 in payments from these owners to the state.

. See AS 43.56.010(b); AS 29.45.050(a).

. See supra note 6.

. See supra page 28.