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Borough Settles Big Tax Case for $7 million

A 7-million dollar agreement to pay off delinquent property taxes has been reached between the Fairbanks North Star Borough and a military housing contractor. The borough assembly approved the contract language last night.

Corvias Military Housing is the borough’s largest delinquent taxpayer. The private contractor runs about 900 housing units on Eielson Air Force Base. The company has not paid property taxes to the Fairbanks North Star Borough since 2014, and has racked up a $12 million debt to the borough. Wendy Dau of the borough’s legal staff told the assembly the terms of the two part agreement have Corvias paying a lump sum of only $7 million to the borough to settle taxes, penalties, and interest it owes for 2015, 2016, 2017, 2018, and 2019. The second part of the agreement covers PILT or Payment in Lieu of Taxes.

Going forward, the company will pay about $600,000 each year on July 1.

“The PILT amount was negotiated to start at $600,000 per year. That’s the payment that Corvias will make starting for tax year 2020.”

The agreement will settle a long-running legal dispute over whether the borough can tax the properties, and how much they are worth. It actually started when a contract to build military housing at Eielson Air Force Base went out for bid in 2009, and Corvias Air Force Living was selected by the federal government to build about 900 housing units for military families. Even before Corvias closed on the property, the company approached the Borough to reduce the amount of property taxes. Negotiations went well into 2014, when the company filed a lawsuit to avoid paying property taxes, saying that because the housing was on a military base, it was on federal government land and could not be taxed by the local municipality.

“Corvias approached the borough before it closed on the project, and negotiations went well into 2014. At the time, the borough and Corvias negotiated a PILT amount of $580,000 per year. That would have been their payment instead of paying taxes.”

The Superior Court ruled held that their private property interests are taxable, and in 2018 Corvias paid their 2014 tax bill. The company also has been arguing with the borough how much the houses are worth. Since 2015 it has appealed the borough assessor’s valuations to the Alaska Superior Court. Those cases are pending. In the meantime, Corvias has put aside millions of dollars in case the court rules against it.

Borough Attorney Jill Dolan said the agreement would settle all the pending legal cases.

 “It will resolve all the court cases. We’ll receive $7 million for the past tax liability then moving forward, we’ll enter into the PILT agreement.”

But Borough Assembly member Aaron Lojewski (La-JIS-kee) thought the agreement lets Corvias compete unfairly against private landlords. He says it lets the company off the hook for millions of dollars in unpaid taxes which would be about $1.8 million dollars a year if assessed like other borough residences, not the negotiated $600,000 a year.

“If a North Pole landlord comes to me and asks, ‘why does this corporation on Eielson Air Force Base get a two-thirds tax discount, and I’m renting to military personnel and I get none’.”

Assembly member Marna Sanford, and Mayor Bryce Ward told the assembly that negotiations were long and difficult and the borough has already spent a lot on legal cases.

“I empathize that this is a hard pill to swallow, but I would just remind everyone gently, that the litigation and the mediation that took place is such that this is…this is a good deal.”

“I am very pleased that we are actually here having this conversation today, because there has literally been dozens of roadblocks that have come up and mad this a very difficult process.”

The Assembly approved the agreement language by a vote of 7 to 2, with Frank Tomaszeski and Aaron Lojewski voting “no.” The agreement must still be approved by Corvias’ management, and will take effect this spring.