In an article this week in the Alaska Dispatch, reporter Alex DeMarban writes on a recent decision by the State Assessment Review Board (SARB) increasing the value of TAPS for property tax purposes above the level set by the Department of Revenue. See "Alaska undervalued oil pipeline by billions, assessment board finds," May 30, 2013.
The story does a thorough job of reporting on the SARB's decision, but does very little in assessing the full impact of the decision on the state. State property taxes on TAPS are divided among four entities, the state, the North Slope Borough, the Fairbanks North Star Borough and the Municipality of Valdez. The SARB's decision, if it stands on review, will increase the level of taxes received by all four entities.
But the taxes also will increase the costs of operating TAPS, and as a result, the rates charged for transportation down the pipeline. This, in turn, will reduce the wellhead value of the oil, reducing the amounts received by the state as royalty and in production taxes. None of the local entities will share in that loss.
The real story is in that additional effect, because the resulting reduction to the state in royalty and property taxes is not offset by the state's share of increased property taxes. In other words, the state is a net loser from the decision. The winners are the two Boroughs and Valdez, at the expense of the state.
Frankly, that may be something to keep in mind going forward when any of the three local entities ask for additional state assistance for this or that program. In the meantime, however, it is something that the Dispatch should keep in mind when reporting on the issue in order to provide readers with a complete story.