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Mayor, assembly members talk ballot issues

Posted: September 16, 2011 - 8:00am  |  Updated: September 16, 2011 - 8:57am

Several elected officials gave Wednesday a summary and explanation of two ballot questions concerning sales tax collections in the borough that will appear before voters in a few weeks.

At a joint luncheon between the Soldotna and Kenai Chambers of Commerce, Kenai Peninsula Borough Mayor David Carey spoke to Proposition No. 1, which would repeal the seasonal sales tax exemption of non-prepared food items, if approved.

Currently, all sales of non-prepared food items are exempt from regular borough sales tax from Sept. 1 through May 31 as stipulated by Ordinance 2008-01, which was approved by voters in the 2008 regular election.

Carey said several residents have asked him if the question was worded the way it is to intentionally "mix people up."

"We are required to ask, ‘Shall we repeal this,'" he said. "So I have heard some people say if we are for it, we have to vote no, if we are against it, we have to vote yes. What you are doing is repealing an ordinance of the assembly, and I just want you to know the wording wasn't a trick, it was what's required by law."

Carey, who said he personally opposes the ordinance, argued in favor of it Wednesday, but said the idea to repeal the exemption would be most "proper" if placed before the voters.

"I believe it would be wrong for the assembly to overturn any citizen initiative except during an emergency," he said.

Since the exemption has passed, sales tax collections - which are dedicated to the Kenai Peninsula Borough School District - have been reduced to the tune of about $3 million, Carey said, requiring additional borough funding from property tax revenues.

"Many individuals have said to me personally and as well in testimony before the assembly that they were not aware in 2008 of the consequences of this vote as it affected school funding," Carey said.

The school district, Carey explained, recently gave back about $650,000 to the borough because it took in more funding last year than they were allowed to have.

But, Carey said one could argue for the need to reduce property taxes, especially when considering the struggles of the low and middle-class residents of the borough, and a vote in favor of the proposition would likely secure that.

"The borough government, I believe, doesn't need more money, but it would be good to reduce property taxes and a yes vote should be supported for this purpose and to ensure that our public schools will get the support they deserve," he said.

Borough assembly members Bill Smith and Linda Murphy explained the reasons behind placing Proposition No. 2 on the ballot.

Voters will weigh in on whether or not to increase the borough-wide sales tax from 3 percent to 3.1 percent for funding of economic development. The .1 percent increase would raise $900,000 annually and amount to an additional 1 cent on a $10 sale.

Smith said its purpose was to try and resolve the annual "fight to get funding" for non-departmental organizations such as Kenai Peninsula Tourism Marketing Council, the Small Business Development Center and the Kenai Peninsula Economic Development District, and others.

Specifically, Smith said KPTMC came to the borough asking for a way to have a reliable funding source and floated the idea of implementing a targeted 1 percent sales tax on tourism-related businesses.

"I like the idea of supporting the tourism business because I think it is a vital part of the Peninsula, but I was uncomfortable with the 1 percent and it is also a pretty difficult one for the borough to administer," Smith said.

Smith said KPTMC wasn't completely satisfied with the idea because it wasn't solely dedicated to tourism funding.

"However, there is a broader scope of work that needs to be done," he said.

If passed by voters, he said it would about double the amount of funding the borough currently allocates to all non-departmentals for tourism and economic development.

"When I think economic development, it is not just new businesses coming in to town, it is also supporting the enterprises that people have built their lives on here," Smith said. "It is a part of the second-class borough's job to work with economic development in cooperation with the cities."

Murphy seconded Smith's thoughts.

"If we had $900,000 in additional revenue each year, and if that was dedicated to economic development, we could see expanding our efforts in the future," she said.

Smith said the borough would also have to enter into agreements with local cities to administer economic development powers, if the measure is approved.

"In order to exercise this power on an area-wide basis, meaning including the cities, we have to have agreements with the cities to exercise the power ... which means if the borough doesn't come to terms with the cities ... then the sales tax won't even go into effect," he said.

The audience asked if voters don't support the measure, would the assembly take that as a sign residents didn't support the organizations, or funding them at all.

Smith said the proposition was to clarify the funding would come through sales tax, not "to make a choice between funding them and not funding them," he said.

"The bottom line is that I am trying to find ways to protect the fund balance and to protect the mill rate," Smith said. "And if we can move this small amount, relatively, onto sales tax, it will be one more tool to help protect our basically historically low mill rates."

Murphy agreed.

"I don't see this as a referendum on economic development spending on the part of the borough, I see it as a funding issue," she said. "Where are we going to take the funds - from sales taxes, or property taxes."

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Offcenter 09/16/11 - 07:55 pm
sales tax on unprepared food unethical/immoral

Ask ANY economist and he will tell you that a sales tax is regressive; it places a greater burden on the poor than it does on the "rich." A person with a lower income spends more of his income out of necessity than a rich person does. Since every dollar he spends is taxed, a greater percentage of his income is taxed. A rich person can save money, or has ways of spending money so that it is not taxed (or not as much), so less of his income is taxed. A sales tax on unprepared food, the most basic of needs, traps poor consumers even more.

A sales tax on unprepared food builds the borough on the backs of those who can least afford it. Does the borough need money that desperately? At least a property tax matches tax to ability to pay. It is assumed that if you can afford a $300,000 house, you can afford the taxes. But why should someone be forced to put food back on the shelf because she can't afford it after the sales tax?

The sales tax on unprepared food during the summer is a sham as it is. Tourists are on vacation; they aren't "cooking." The tax hits residents and hits hardest those who can least afford it. The least we can do it keep it seasonal if we can't get it stopped altogether.

Hmmm 09/17/11 - 09:15 am
It's very simple

If you check into what makes it expensive to live here in Alaska, it is food cost. Taxing food will only broaden that cost. Companies will have to make up that measure in order to get employees to work for them. So, if I'm bringing new business in, why would I pick the Kenai borough? This is a disastrous choice in my opinion.

witchwitch 09/17/11 - 12:52 pm
More Borough lies of omission....

The Borough claims that $3 million was "lost". The citizens' initiative was passed after the Assembly increased the sales tax rate by 50%, from 2% to 3%. And now the Borough "needs more money".

The schools were fully funded and were given $650,000 more than was legally allowed, which they were forced to return... and they still "need more money"!??!

The grocery tax initiative would have ended grocery tax collection completely, had the Borough not passed ordinance 2008-28, which granted the general law municipalities the right to tax groceries just three weeks before the people voted for the tax holiday. The Borough Assembly determined that the municipalities "needed more money" !!!

No other tax directly empties the pockets of Borough residents. If the tax holiday is ended this will empower the Assembly to continue its assault on the pocketbooks of local citizens.

The Borough states that sales taxes are for schools, but when taxes were raised 50% the schools did not receive 50% more funding. The Borough has no problem using threats and lies of omission to gain their goal of grabbing more money. We have less children in school, yet they always need more money. Addressing this problem with higher taxes does not solve this problem.

Even if property taxes were raised, residents would still be better off as property taxes are shared with by nonresident property owners, and by industrial and commercial facilities. However, I question whether the Borough really needs more tax money, they need to exercise restraint.

Please learn about the issues and vote NO on Proposition One.

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