Here are all the taxes the assembly is talking about

The Kenai Peninsula Borough Assembly shot down one revenue option Tuesday night but has a number of others waiting for upcoming meetings.

The assembly has been wrangling over how to raise revenue to close the gap in its budget. Last year, the assembly approved a budget with no new revenue and an approximately $4 million budget gap, drawing down on its fund balance to pay the bills. With spending cuts and about a 5 percent increase in the property tax rate, the gap has been reduced to about $2.7 million. The assembly is considering other options to try to that could close it completely.

Those options include a bed tax on temporary lodging, tobacco tax, an increase in the months that borough collects sales tax on nonprepared foods, and an increase in the $500 cut-off point for charging sales tax on individual purchases. A bed tax would require a public vote, but the other three technically do not.

Sales tax

Assembly Members Kelly Cooper and Hal Smalley co-sponsored an ordinance that would have asked voters in the October election to increase the borough-wide sales tax rate from 3 percent to 3.5 percent, raising about $5 million a year. However, the assembly turned it down 5-4, with Cooper, Smalley, Paul Fischer and Willy Dunne voting in favor.

Cooper had proposed the sales tax increase as a broad-based revenue source to support the general fund, in part because all borough sales tax dollars go specifically to fund schools. A number of people came forward to offer support for a sales tax increase campaign to help it win in October.

“I would note that we haven’t had a sales tax or mill (property tax) rate increase in 10 years,” Cooper said during the assembly’s Finance Committee meeting.

Bed tax

Assembly member Dale Bagley is sponsoring an ordinance that would ask voters in October to approve a 12 percent tax on hotel rooms and other types of temporary lodging, called a bed tax. The lodging industry would be exempt from the general borough sales tax under the ordinance.

Kenai City Manager Paul Ostrander offered support for the bed tax over the proposed sales tax increases, and said the bed tax likely has a better chance of passing on the ballot because it targets more non-residents than a sales tax.

“There seems to be a focus that whatever the solution it is, it all needs to be one tax that covers the entire gap,” he told the assembly. “I would say it doesn’t need to be a solution that covers everything. If you look at the bed tax, it generates about $3.1 million … a bed tax generates most of that fiscal gap.”

Grocery tax

Bagley has also sponsored an ordinance that would change the current tax structure on nonprepared foods, known as the grocery tax. Nonprepared foods sold in stores are currently exempt from borough sales taxes for nine months per year. Bagley’s original ordinance would have removed the exemption for the entire year, but he introduced an amendment Tuesday to reduce it to six months.

Fischer and Norm Blakeley said they would only support the change if it went to the voters. Bagley said he would consider adding ballot proposition language to the motion, and the assembly agreed to postpone the ordinance to the June 19 meeting.

Excise tax

During the Finance Committee meeting, Borough Mayor Charlie Pierce pitched the idea of an excise tax on tobacco to help raise revenue.

He didn’t propose anything formal Tuesday, but said his administration had been investigating it and would bring something to the assembly in the near future on it. “It does not require the ‘what-ifs’ of if it goes to the ballot, whether it will or won’t pass,” the mayor said.

Unlike a sales tax, which is collected on the purchase item, an excise tax is charged on volume, such the state tax of 10 cents per cigarette.

The mayor also told the assembly he will look into adding marijuana and alcohol to the tobacco tax proposal.

Sales tax cap

Assembly Member Kenn Carpenter proposed an ordinance that would remove the voter-approval requirement for the assembly to raise the cap on taxable sales. The assembly has sent a proposal to the ballot the past two years, asking voters to raise the cap from $500 to $1,000, allowing the borough to collect tax on sales up to $1,000. At the borough’s current 3 percent tax rate, that would add $15 in tax on a $1,000 purchase.

Currently, the assembly has to ask voter permission to raise the cap. Carpenter’s ordinance, set for hearing July 17, would remove that requirement. Voters haven’t raised the cap since it was established in 1964. Dunne noted that voters passed an initiative in 2005 to require voter approval to raise the cap, and could pass another initiative to require voter approval within a year via referendum.

Assembly Member Brent Hibbert noted during the Finance Committee meeting that voters had said no to the increase twice. “And the voters have told us three times on the bed tax and twice on the food tax.”

Land trust fund

Carpenter has also proposed withdrawing $1.75 million from the borough’s land trust fund to help pay for general government, with a public hearing set for June 19.

The proposal is a revision to a plan Pierce originally pitched to use part of the land trust to pay for the fiscal year 2018 budget, though Carpenter reduced the amount.

“It’s sort of trying to compromise from the $3.5 million deficit we were in,” he said. “I figure we can compromise, take half of that from the land trust. It’s even written there that we don’t have to use it, we can put it back in the land trust, but if we need it it’s there, available for a one-time option only.”

Reach Elizabeth Earl at eearl@peninsulaclarion.com.

More in News

"The Bouyman" participated in the 2021 Fourth of July "Whatever Floats Your Boat" Parade down Pioneer Avenue. (Photo by Sarah Knapp)
July 4 events held around the bay

Weekend in Anchor Point, Homer and Seldovia features parades, games and barbecues

Central Peninsula Hospital is photographed on Oct. 19, 2021, in Soldotna, Alaska. (Peninsula Clarion file)
College of Health building renovation aims to increase number of grads, address worker shortage

Health care expert says building is one of many steps needed to address shortage

KPBSD Summer Work Program Coordinator Olivia Orth welcomes guests to a program celebration in the Soldotna High School Library on Tuesday, June 28, 2022, in Soldotna, Alaska. (Ashlyn O’Hara/Peninsula Clarion)
Summer Work Program students celebrated

The program places current KPBSD students with disabilities in local businesses

The U.S. Coast Guard Cutter Reef Shark replaced the USCGC Liberty as the cutter for Sector Juneau earlier in June, stationed at Don D. Statter Harbor. (Michael S. Lockett / Juneau Empire)
Reef Shark replaces Coast Guard Cutter Liberty in Juneau

The new cutter has big boots to fill, but brings the enthusiasm to do it

Kim Kovol will be the acting commissioner for the new Alaska Department of Family and Community Services which debuts Friday. (Courtesy Photo)
New state department gets new commissioner

Kim Kovol, a longtime social services worker, will head the Department of Family and Community Services

Former Democratic state Rep. Beth Kerttula holds up a sign reading "Vot No Con Con," during a Saturday rally at the Dimond Courthouse Plaza in Juneau. Opposition to a constitutional convention, which could alter the Alaska State Constitution to allow for banning abortions was a frequent topic during the protest. (Ben Hohenstatt / Juneau Empire)
Constitutional convention ballot question in November becomes focus in Alaska’s abortion fight

Abortion rights supporters urge ‘no’ votes on question, while abortion opponents seek changes to constitution

Cassidy Hutchinson, former aide to Trump White House chief of staff Mark Meadows, arrives to testify as the House select committee investigating the Jan. 6 attack on the U.S. Capitol continues to reveal its findings of a year-long investigation, at the Capitol in Washington, Tuesday, June 28, 2022. (AP Photo/Jacquelyn Martin)
Aide: Trump dismissed Jan. 6 threats, wanted to join crowd

Cassidy Hutchinson, a little-known former White House aide, described an angry, defiant president that day

Gov. Mike Dunleavy signs Alaska’s fiscal year 2023 operating and capital budgets into law on Tuesday, June 28, 2022, in Anchorage, Alaska. (Photo courtesy Gov. Mike Dunleavy’s office)
Dunleavy signs budget

$3,200 in payments to Alaskans, money for local projects included

Most Read