The city of Soldotna is eschewing the Kenai Peninsula Borough’s wintertime exemption on collecting sales tax on nonprepared food items and will collect the 3 percent tax year-round, now that it has the authority to do so.
Soldotna City Council members unanimously approved an ordinance at their Wednesday meeting that will reinstate the grocery tax during winter months. There is already a 3 percent sales tax on nonprepared foods in summer months. Wednesday was the first meeting for new council member Tyson Cox and returning member Lisa Parker.
The city already taxed groceries year-round until a borough-wide vote at the October 2015 election reversed an ordinance that had allowed general law communities to opt out of the borough’s wintertime exemption on collecting the tax. At that point, Soldotna had to follow suit and collect taxes in the same manner as the borough, which means only collecting the sales tax during summer months.
Then, in the October 2016 municipal election, a majority of Soldotna residents voted to accept a home-rule charter during this year’s October election and Soldotna became a home-rule city with the power to opt out of the wintertime exemption on collecting the sales tax. Kenai is another home-rule city that has opted out of the exemption and collects the tax year-round.
Resident Scott Davis, who testified Wednesday in support of restoring the year-round tax, chaired the Soldotna Charter Commission that was elected to come up with the home-rule charter voters approved, and said reinstating the city’s sales tax was a motivation of the group that worked on the push for home-rule.
“We did this for a reason, and the reason was to spread out the burden of services provided by the city within our city, to all people that (do) business in our city,” Davis said. “And I believe this what the reinstatement of taxation on nonprepared foods does. It takes the burden off of just the land owners.”
The year-round grocery tax will go into effect starting Dec. 1. It was originally scheduled to go into effect immediately, but Vice Mayor Linda Murphy proposed an amendment Wednesday to push the date back.
City Manager Mark Dixson said a later date was settled on after he got some feedback from Craig Chapman, the borough’s finance director.
“When the nonprepared (food sales tax) exemption went into place about a year and a half ago — it went into effect immediately — it caused quite a consternation at the borough level and also with all of our local businesses trying to manipulate all their computer systems (and) things of that nature so that they could comply with the statute,” Dixson said. “He and I talked and we determined that Dec. 1 would be a reasonable time for not only the businesses but also the borough to be able to change their systems.”
The amendment to move the date back was approved by a 5-1 vote. Council member Paul Whitney voted against the amendment, saying it would make more sense to choose the end of the quarter, Dec. 31.
Several members of the public turned out Wednesday to testify for and against reinstating the tax. Some supported its return, saying that it will help spread the burden of raising revenue more evenly throughout the borough and those who come into Soldotna and use its services.
“We have 25,000 citizens that live outside the city of Soldotna that shop in the city of Soldotna, that use all of our facilities,” said Pat Cowan, who owns Birch Ridge Gold Course. “They pay no real estate taxes to the city of Soldotna. So if this tax is not reenacted, then that means ... the city will have to get the tax money somewhere else. Where are you going to get it? Real estate taxes for the people who live within the boundaries.”
Others argued that restoring the year-round sales tax will have an adverse affect on those with lower incomes.
“It’s a really bad idea to increase the taxes on food because it’s going to (disproportionately) affect the poorest people of this community like myself,” said Jason Hoffman, who lives between Soldotna and Sterling and whose wife has a business in Soldotna. “You’re (disproportionately) affecting people that are older, that don’t have a steady income, or that work seasonally like myself.”
Council members said without the sales tax on nonprepared foods the city would have to look at making up for lost revenue in other ways, such as raising its mill rate, which currently sits at 0.5 mills.
“I just wanted to point out that without the tax on nonprepared foods we would be looking at at least quadrupling — and probably more than quadrupling — our property tax rate,” Murphy said. “And if Fred Meyer’s property tax is quadrupled I can guarantee you that you’re going to see that in the cost of goods that you purchase there, including nonprepared foods. You’re going to see it in the cost of everything that you purchase in the city of Soldotna because any merchant, whether it is Kaladi Brothers Coffee or Beemuns (Variety), is going to have to raise prices to cover the cost of the extra property tax, and so I think this is a fair way to spread the burden to those who don’t live in the city and who use our services.”
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