Voters will find a bed tax on the ballot this October, after the Kenai Peninsula Borough Assembly passed an ordinance, Tuesday night, imposing a 10% tax on rentals of temporary lodging, including motels, hotels, bed and breakfast businesses and overnight camping facilities.
Several amendments were made to the ordinance before it passed, including two introduced by Assembly Vice President Dale Bagley, who introduced the ordinance. His amendments added overnight camping facilities into the ordinance and another helped clear up language for the proposition that will appear on the ballot. Assembly member Willy Dunne amended the ordinance to lower the rate from 12% to 10%.
With the new 10% rate, the borough could expect to gain $825,000 in additional revenues for FY 2020, and then $3.3 million in FY 2021 and FY 2022. The funds would be used to to support education.
“It would still be a significant source of revenue for the borough and for education, but it would be a little less burdensome on people paying the tax and it would just be a more prudent tax rate as opposed to 12%,” Dunne said during the meeting.
The bed tax, similar to ones defeated by the borough assembly in 2017 and 2018, was proposed to close budget shortfalls facing the borough.
“Due largely to the state’s current economic crisis and proposed reductions of state funds to local governments, the borough is currently facing a budgetary shortfall estimated to be substantial,” Bagley wrote in an April 25 memo to the assembly.
Bagley said he thinks there is a possibility the tax could pass the voters, despite ample testimony from residents hoping to defeat the ordinance.
The ordinance passed the assembly five to three, with assembly members Norm Blakeley, Wayne Ogle and Kenn Carpenter in opposition, and Kelly Cooper abstaining from the vote due to a conflict of interest determined by the borough legal department.
Blakeley stated he would not support the ordinance because the assembly plans to discuss raising the sales tax cap to $1,000. “I think that that’s a better situation to look at and do,” he said.
Many of the residents who offered public testimony on the ordinance were opposed, though the tax saw more support at Tuesday’s meeting than during the ordinance’s last public hearing, June 4.
Homer resident Dave Lyon runs a business on the Homer Spit. He testified Tuesday he’s in complete support of the bed tax, saying an additional 10% charge won’t deter visitors from Homer or the Kenai Peninsula.
“The arguments I’m hearing that it will defer people from coming to our community because of the extra 10% are completely erroneous,” he said. “I do not think that a bed tax — where the benefits of the money go to education, which is so desperately needed on the peninsula — justifies any sort of opposition … The idea that 10% is going to keep people from coming here is ridiculous.”
Jon Faulkner, owner of Land’s End Resort in Homer, told the assembly his rate prices have to be adjusted frequently to meet the needs of visitors.
“$5 or $10 matters to every single customer that comes to Land’s End,” Faulkner said. “We can’t kill the goose that lays the golden egg.”
Steve Anderson, owner of Soldotna B&B Lodge, spoke to the importance of tourism and tourism marketing during his opportunity for public comment.
“We need to wake up and figure out how to encourage more of those tourists to come here instead of encouraging them to go elsewhere,” Anderson said.
The tax will be on the borough election ballot Oct. 1, and if approved, would go into effect April 1, 2020.
