Repeal of grocery tax passes

Proposition 1, a controversial ballot initiative to remove the year-round grocery tax in Soldotna, passed in a landslide Tuesday night.

 

Proposition 1 is the continuation of a 2008 citizens’ initiative to repeal the winter grocery tax in the Kenai Peninsula Borough’s general law cities. Groceries are exempted from borough sales tax from September through May.

Once enacted, the proposition will repeal a 2008 borough ordinance that allows general law cities to levy their own sales taxes at their discretion, the same way home-rule cities like Seward and Kenai do. Soldotna was the only city that opted to levy the 3 percent tax.

Most precincts in the borough voted for the proposition. Only Soldotna, Kalifornsky Beach and Kenai No. 3 voted against it — Soldotna with a nearly 27 percent margin, Kalifornsky Beach with a less than 1 percent margin and Kenai No. 3 with an approximately 5 percent margin. Mackey Lake tied.

Soldotna city officials have vocally opposed the ballot initiative. Soldotna Mayor Nels Anderson, who will leave office and be replaced by Pete Sprague, said in a radio ad that the initiative would cause Soldotna to lose $1.2 million in revenue, potentially raising property taxes. However, many have said removing the tax in the winter would help families in the borough financially, especially because many shop for groceries in Soldotna.

Sprague said the city will have to focus on the issue once he enters office to find a way to quickly recover the lost revenue. He said he was unsure what effect the cut would have on the Soldotna city budget, but he was pleased that Soldotna did not support it.

“That’s something we’ll have to address immediately,” Sprague said. “Our budget has already been approved for this year.”

Voters were fairly evenly divided Tuesday over the proposition. Mark Craig, a Soldotna resident, said he voted for the proposition because the cost of groceries is already a burden on many.

“Taxing groceries in the summer is fine because the city should gather income from tourists, but residents shouldn’t be taxed year-round,” he said.

However, others sided with the administration, such as Nikiski resident LeAnn McGahan.

“I said I don’t want it repealed,” McGahan said. “I listened to what Nels Anderson said, and again that had to do with raising property taxes versus what people pay in the store for taxes, and there was a big difference.”

Soldotna voter Kyra Bodnar, who voted for the first time Tuesday, said she initially sided with repealing the tax to reduce the cost of groceries. However, after doing some research, she changed her mind, she said.

“I just did some research and found that I thought differently, and that was the main reason I came out to vote,” Bodnar said.

Kenai resident Chad Schaefer said he also came out to vote primarily because of Proposition 1.

“If it passes, it will be a blow to the city,” Schaefer said. “That was really the only thing I wanted to vote about.”

Brad Nyquist, a Kenai voter, said the tax was unfair because it came down on a necessary product.

“People shouldn’t have to pay taxes on the most fundamental need they have,” Nyquist said.

In the city of Homer, Proposition 1 passed with an even wider margin than borough-wide, with yes votes taking 63.79 percent compared to 34.63 who voted no. After the seasonal sales tax passed in the borough in 2008, the Homer voters on an advisory vote elected to keep the seasonal sales tax holiday on nonprepared foods. Though several ordinances came up over the years to repeal it, those never got traction in the Homer City Council.

Anchor Point resident Tara Kain of Alaskans for Grocery Tax Relief Now helped lead the campaign to pass Proposition 1. Despite aggressive campaigning by the city of Soldotna, Kain said she was not surprised by the wide margin of victory.

“We are pleased with the results,” Kain said. “We do believe it’s a big win for the voters who have decided to uphold the 2008 grocery tax exemption, and the other half of it, getting rid of the cities’ grocery tax portion on it. It was brought to the voters to decide again, and it looks like they have made their decision on that.”

Kain noted that two previous votes on the seasonal sales tax were in years with a borough mayor’s race and higher turnout. With lower turnout this year, voters still upheld the seasonal sales tax, she said. The 2015 results were close to the 2008 vote, Kain said.

Homer has been balancing its budget without food tax revenues since 2008. This month, the council will consider its budget. At town hall meetings on revenue options and the budget, taxing food year-round had been an option, but not one officials seriously considered. The city of Soldotna, which had been taxing nonprepared foods year round, mounted an aggressive campaign against Prop 1.

Kain said the city’s use of public funds angered some voters.

“They definitely did launch a pretty big campaign against us,” she said. “One of the issues we had with that was it was taxpayer money. A lot of people were not happy they used taxpayer money to fight this.”

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com. Homer News reporter Michael Armstrong contributed to this report.

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