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New tax on the ballot?

Assembly to consider measure to fund economic development

Posted: June 2, 2011 - 8:21am

Kenai Peninsula Borough assembly member Linda Murphy recently confirmed she would co-sponsor an ordinance she hopes will end annual discussions of funding for a certain part of the borough’s budget.

That funding is for economic development and, more specifically, the borough’s non-departmental agencies, which were allocated $460,000 in total last year.

“My feeling was that the assembly shouldn’t be having this discussion every year — that we need to have a funding source that is dedicated to economic development issues and that would encompass all of the non-departmentals that we currently deal with,” she said. “It would free us up to talk about more important budget issues.

“We seem to spend an awful lot of time talking about very small pieces of the budget. I would like to get away from that and look at the budget overall in more depth.”

The ordinance, which Murphy will co-sponsor with assembly member Bill Smith, will outline a measure to be proposed to voters in October’s borough-wide election. The measure proposes increasing the borough’s sales tax by one-tenth of a percent, or from the current 3 percent to 3.1 percent.

The ordinance will be introduced at the borough’s June 7 meeting and would need assembly approval to be placed on the ballot.
Smith said the sales tax increase would amount to “a penny increase on a $10 sale,” but estimated about $900,000 would be collected as a result of the increase per year.

The current 3 percent borough-wide sales tax is dedicated funding for the Kenai Peninsula Borough School District, Smith said.
Smith said businesses he has told about the proposal have been generally supportive of it.

“But … there are people that it doesn’t matter what the tax rate is, it is too much, regardless,” he said.

Murphy said the idea of the tax increase is to fund all things related to economic development — which could include all non-departmental agencies like the Kenai Peninsula Tourism Marketing Council, Kenai Peninsula Economic Development District, Small Business Development Center, and the Central Area Rural Transit System.

“The assembly every year goes through a lot of angst of, ‘Are we going to fund these non-departmentals or not,’” she said. “This would give us a revenue stream to do that.”

This year, Borough Mayor David Carey has not included funding for any of the non-departmental agencies in the budget he submitted to the assembly, save for funding to the Kenai Peninsula College totaling $657,791.

“Mayor Carey’s approach was to basically make them sound like they were non-legitimate,” Smith said. “Even though they are non-departmental, I consider most of those expenses to be legitimate.”
If approved and passed by voters, Murphy said the ordinance would let assembly members decide how to allocate funding between the organizations each year at budget time.

“The voters can’t actually dedicate funds, the constitution doesn’t allow that,” she said. “However, the voter intent would be to dedicate that one-tenth of one percent of sales tax to economic development.”
The proposal from Murphy and Smith differs from a recent proposal from the KPTMC to implement a 1 percent sales tax on tourism-related businesses to fund its operations and locally based, municipal marketing efforts.

The organization is still consulting with the Kenai Borough Attorney’s office regarding the legality of that idea and working to examine other funding ideas, executive director Shanon Hamrick said.

Murphy said she doesn’t think people “would even notice” the one-tenth of a percent increase.

“I don’t think most people in the public have heard about it,” she said. “I haven’t heard any negatives, but that doesn’t mean I won’t hear any negatives. But, we are going to put it out there and see what people think and I hope the voters go with it.”

Assembly president Gary Knopp said he was unsure where he stood on the proposal because he is unsure of its specifics. He said, however, the issue needed to be addressed in some manner.

“Every year we go through this budget process and hear, ‘Fund us, fund us, fund us’ and the argument has been made on both sides of the fence, good and bad,” he said. “So, I am thinking if we are going to make it a habit to do this, instead of having these organizations have to come to us every budget cycle requesting funds and never knowing if they are going to get funds, maybe we should start appropriating money and entering into three-year contracts to start appropriating money.”

Knopp said he might also support competitive bidding of economic development services to private companies as well.
“No matter what you do, it is going to be a voter question and I think things like that, especially when it comes to taxation should come to the voters,” he said.

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