The assembly killed the sales tax increase. A citizen group is picking up the effort

Peninsula voters may get a chance to decide on the future of a sales tax increase this fall after all.

A group of citizens have launched an initiative campaign to place a proposition on the October ballot raising the borough’s general sales tax rate by .5 percent. Linda Hutchings of Soldotna, who filed the petition with the Kenai Peninsula Borough clerk’s office, said there are 10 sponsors who will be collecting signatures. They need 2,200 signatures of qualified voters by July 24 to make it onto the ballot.

“(The borough clerk) said it would be tight, but we (have enough time),” Hutchings said.

The initiative is the same motion that the Kenai Peninsula Borough Assembly voted down at its June 5 meeting. It would raise the general borough sales tax from 3 percent to 3.5 percent, or 50 extra cents on every $100. The assembly shot it down 5-4, with some assembly members saying they preferred other types of taxes as opposed to a sales tax increase.

During the months-long debate about the borough’s budget — which the assembly approved June 5 with a .2 mill rate increase and an approximately $2.7 million deficit — a variety of people spoke for and against the sales tax increase. Sales taxes in the borough are specifically dedicated to support education, and many teachers, parents and education supporters spoke in favor of the increase as a way to consistently support funding for the Kenai Peninsula Borough School District.

Lodge and hotel owners have also offered support for it amid the debate over a temporary lodging tax. Amid public comments before the assembly defeated the latest iteration of a temporary lodging tax on Tuesday, a number of people said they supported raising the sales tax instead of the bed tax because it affected a wider base than just the lodging industry.

Hutchings, an unsuccessful borough mayoral candidate in the 2017 election, said she has heard support for the increase from a wide variety of people. The group had already been doing groundwork for an education campaign if the assembly had approved the motion for the ballot, she said.

The borough finance department estimated the 3.5 percent sales tax would raise an additional $5 million annually. If the initiative qualifies for the ballot and passes, it would go into effect in January, about halfway through the fiscal year.

Other revenue still possible

Though the assembly voted down three possible revenue sources at its Tuesday meeting, others are still being actively discussed.

One is scheduled for consideration at the assembly’s July 17 meeting. Member Kenn Carpenter proposed amending the borough code to allow the assembly to raise the cap on taxable sales. Over the past three years, the assembly has twice asked voters to raise the cap from $500 to $1,000, and voters have decisively shot it down twice. Carpenter wrote in his memo that voter approval was not required for increasing the cap until 2005 and repealing it would give the assembly another tool to balance the budget.

Several members also discussed the possibility of reducing the borough’s portion of the senior property tax exemption. Soldotna resident Fred Sturman, who sponsored a voter initiative to increase the residential property tax exemption from $20,000 to $50,000, said he wished the writers had excluded seniors because the seniors already receive $300,000 of property tax exemption between the state and borough portions.

He said he wasn’t planning to sponsor an initiative to change it but was concerned about the number of seniors moving to the Kenai Peninsula who are eligible for tax exemptions.

“We have to do something because right now for the exemption we have in this borough, it’s about $8 billion (in value) for people who have exemptions on their house,” he said. “About half of that is seniors.”

Assembly member Kelly Cooper noted the same in her comments at the assembly meeting Tuesday, saying the Kenai Peninsula has the fastest growing senior population in the state and property “is falling off the tax rolls every year.”

In 2016 the assembly proposed scaling back the borough’s senior property tax exemption over several years, with all current exemptions being grandfathered in. Voters defeated it soundly. Cooper said she’d be interested in pursuing another ordinance to scale back the exemption in the future, but not this year.

“That is something I want to take on, but I need to make it a simpler initiative where the folks would understand it an I’m willing to help them try to understand it better,” she said. “(It) won’t be on this year’s ballot — I’m a big believer in not overloading the ballot.”

A tobacco and e-cigarette excise tax may not be completely gone, either. Borough Mayor Charlie Pierce had originally planned to introduce an excise tax on cigarettes and vaping products at the June 19 meeting, but withdrew it before introduction. He said he would table it until the assembly figured out a direction together for balancing the budget.

He said he also heard from constituents who said they wanted to see a balanced budget without new taxes, and he wanted to be responsive to their concerns. The assembly may choose to go forward with a tax option to support the budget, and he said he may support the assembly’s choice, but thought the sales tax initiative plan involved some politics and that it will fail at the ballot box.

“I’m working on trying to gain some confidence with the people who pay the bills around here,” he said. “…I’m not going to play the tax game.”

Reach Elizabeth Earl at eearl@peninsulaclarion.com.

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