We all expect a certain level of service from government — good schools, well maintained roads, fully staffed first responder agencies, for example — but figuring out how to pay for those services continues to be a sticking point for municipal government.
This past week, the Kenai Peninsula Borough Assembly introduced an ordinance that would put a bed tax measure in front of voters in the October municipal election. As proposed, the additional 8 percent tax on lodging would generate between $3.1 million and $3.8 million, according to borough administration estimates.
Why the need for millions more in funding? Well, when the borough assembly approved the budget for the fiscal year that began July 1, it did so with some extra funding for Kenai Peninsula Borough schools — about $1.5 million more than it had committed to previously — and expectations that more Kenai Peninsula residents will become eligible for the borough’s property tax exemption, eroding that revenue stream.
However, the assembly did not enact a proposed mill rate increase, nor did it do much cutting in other areas of the budget. That left borough mayor Mike Navarre looking for alternatives to ensure that the borough is balancing its budget and drawing as little as possible from its fund balance when he leaves office after the election.
Many communities look for ways to get a few more bucks out of visitors, and if you’ve done much traveling, you’ve probably contributed to everything from airports to convention centers to sports stadiums by way of bed taxes, head taxes, tolls and other fees.
The borough’s bed tax proposal is different in that, instead of funding a specific project, it would fund government operations. Specifically, sales tax collected by the borough is dedicated to education. Currently, the borough’s contribution to the school district is greater than the amount of sales tax collected. Presumably, revenue from the bed tax would offset some of what is allocated from other tax revenues, allowing that money to be put to use elsewhere in the budget.
While a bed tax is frequently pitched as impacting visitors rather than residents, it’s hard to envision those in the tourism industry feeling good about a tax increase on their industry, which already operates under a different set of sales tax rules and would not see a direct benefit from the tax revenue raised.
What’s more, we’ve already seen tax changes that would affect other groups of residents in the borough rejected — last fall, voters declined to raise the cap on the amount of a transaction subject to sales tax and kept the borough’s senior property tax exemption intact.
The assembly has scheduled two public hearings on the bed tax measure, at its Aug. 1 and Aug. 15 meetings. Should the measure go to the ballot, there will be another month and half to debate vet the measure before the Oct. 3 election.
At that point, voters will have one more chance to make a decision on increasing revenue to cover the cost of services. Should the answer be no, it will be up to the next administration and assembly to start making the tough decisions we keep hearing elected officials say they’re going to make, namely, cutting those services so that the budget is balanced.