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KPTMC still looking for secure funding source

Posted: January 18, 2012 - 12:18am

Months after a ballot initiative to fund economic development in the borough failed, a local tourism promotion council is still looking for a secured and sustainable funding source.

The Kenai Peninsula Tourism Marketing Council would have stood to benefit from the implementation of Proposition No. 2, which would have raised sales tax 0.1 percent with the additional revenue supporting economic development likely for that organization and a host of others. But the proposition failed in the October election leaving KPTMC in the same position it was in this time last year — without a reliable annual funding source.

Currently, KPTMC is funded by the Kenai Peninsula Borough, which allocated the organization $300,000 in its current budget. However, that money didn’t come without extensive public testimony and assembly consideration, as is the case regularly when the borough considers its budget.

In response to the yearly uncertainty of whether the organization would get funded, KPTMC executive director Shanon Hamrick said the group’s board of directors pitched an industry-driven 1 percent sales tax on tourism services throughout the borough. The idea was sidelined over the summer when the assembly placed Proposition No. 2 on the ballot.

Hamrick said some people thought Proposition No. 2 was put forth by her organization, which it “absolutely wasn’t,” she said. KPTMC didn’t oppose the ballot measure strongly, yet it didn’t support it, Hamrick said.

“The reason being is that we would be slitting our own throats, basically by doing that,” she said. “We do believe that economic development on the Kenai Peninsula is important and that the borough should be making an investment in that, we just didn’t embrace the way they were trying to do it.”

Hamrick said the KPTMC board would discuss its funding situation at an early February retreat.

“Since we haven’t been able to get the administration or the assembly to be able to identify, ‘Yes, this money is coming from tourism,’ and, ‘Yes this the percentage that we are going to reinvest,’ now we are looking at a way to identify a very specific amount of money and say that is absolutely coming from tourism and we are going to reinvest this into growing the industry,” she said.

She said the 1 percent self-assessment of the tourism industry isn’t completely off the table. The group has been speaking with Kenai Peninsula Borough Mayor Mike Navarre about the tax, but no commitments have been made.

“It is still definitely something we would like to pursue,” Hamrick said.

Hamrick said her organization wants residents to understand it would like to derive its funding from visitors, not residents.

“We are still very interested in having the conversation about having a very direct tourism tax that will remove the resident from the equation,” she said. “These visitors are coming, they are used to paying taxes, they are used to paying high bed taxes everywhere they travel and we don’t have anything like that.”

In addition to the $300,000 KPTMC gets from the assembly, it raises $225,000 on its own to provide marketing.

The 1 percent tourism tax was estimated to raise $1.6 million when the idea was first presented in May of 2011.

Of that total raised, 3 percent would have been kept for KPTMC administrative costs and $465,481.34 would be set aside for area marketing campaigns conducted by the organization, Hamrick said.

Money collected in the incorporated areas of the borough — cities like Seward, Soldotna and Kenai — would have been returned in full to those local governments for marketing of that specific area, she said.

Hamrick said 90 percent of money collected in the unincorporated areas of the borough would have stayed with the KPTMC — making up the proposed $465,481.34 — and the remaining 10 percent would have been placed into a tourism grant program for unincorporated communities.

Assembly member Bill Smith, who was a sponsor of Proposition No. 2, said he proposed the measure after hearing about KPTMC’s proposal.

“I wasn’t fond of that, but I did tell them I would try and help and so that is where the tenth of a percent came from,” he said. “But they wanted … something totally dedicated to their industry and I don’t see that happening. I didn’t think their proposal was practical.”


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alaskakeith 01/18/12 - 11:47 am
Proposed Distribution

Here is a quick breakdown of how revenues would have been distributed if KPTMC's proposed tax had been in effect in 2010:

City of Homer $289,138.77 (17.96%)
City of Kenai $190,525.68 (11.83%)
City of Seldovia $6,517.64 (00.40%)
City of Seward $330,116.01 (20.51%)
City of Soldotna $228,075.69 (14.17%)
KPTMC $465,481.43 (28.91%)
KPB Admin. $48,296.15 (03.00%)
Tourism Grants $51,720.38 (03.21%)

TOTAL $1,609,871.75

See a pie chart of this distribution:

As currently proposed, KPTMC's 1% sales tax would be applied only to tourism-related transactions in our Borough. The proportions illustrated by the 2010 example above were determined by the volume of tourism-related sales and services rendered in each community.

Based on 2010 KPB tax figures, this "self assessment" on the tourism industry would have generated an additional $1.6 million in revenue.

Three percent of this amount would be kept by the Kenai Peninsula Borough to cover the cost of administering the tax.

Monies collected in incorporated municipalities would be kept in those communities and allocated by the various city councils for the purpose of tourism marketing and development of tourism infrastructure in their respective areas. Many cities may decide to allocate this new source of revenue to their Chamber of Commerce, or for use in funding capital projects.

Of the monies collected in the unincorporated areas, 10% would go in to a Borough-Wide grant fund for the purpose of promoting tourism in those areas.

The other 90% of monies collected in our unincorporated areas would be allocated, at the discretion of the Borough Assembly, to an organization for the use of marketing the Kenai Peninsula Borough as a whole.

Marketing the full-scope of the Kenai Peninsula as a travel destination is the primary purpose for which the EDD recommended that the KPB launch KPTMC in 1991.

It is likely that the Borough Assembly would choose KPTMC (an organization with 20 years of experience fulfilling this mission) as the recipient of this 90% share of unincorporated tourism assessment revenues.

If KPTMC did receive this allocation, it would continue the extensive reporting process that has been required by the Borough for the past 20 years.

While the use of a bed tax has been a popular industry standard throughout our State and throughout our Country, this 1% "self assessment" of the entire tourism industry was developed and proposed as a desirable alternative to a tax that would be carried by providers of lodging only; and to avoid the need for the time-intensive annual process of allocating KPB grants out of the general fund.

The KPB would retain the option to reallocate this money to another entity if it determined that KPTMC's performance was inadequate or another entity was more qualified to promote the growth of tourism on the Kenai Peninsula.

northernlights 01/18/12 - 12:08 pm
tax out of towners

Tourists seem like a drop in the bucket compared to the masses and hoards of Anchorage folks cramming our little towns to snag up some fish. Multiple car accidents caused from the panic of "the reds are in" Over crowding everywhere, hmmmm those crowds are going to continue growing, if you got a dollar per head, you would be wealthy. Economic growth, is that for the locals to earn more money or to intice more tourists? I hate what our little towns are turning into during the summer, thats my personal opinion. Tax the out of towners. I know you cant, just wanted to say it.

alaskanni 01/18/12 - 04:13 pm

Because the fish only belong to folks on the Kenai, sure. Horrible "Anchorage people". Of course none of the "out of towners" come from anywhere else in ALASKA except Anchorage. Talk about elitist.

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