Tax measure on to fall ballot

Assembly: No special election for referendum on controversial revenue issue

Posted: Friday, January 20, 2006

A referendum to repeal an ordinance passed last June that included controversial measures meant to generate new revenue for the financially strapped borough will appear on the fall municipal ballot.

The Kenai Peninsula Borough Assembly rejected a move Tuesday to hold the referendum vote on Ordinance 2005-09 in a special election this spring. Absent a special election, the matter automatically goes to the fall ballot.

The referendum petition, launched by the increasingly influential grass-roots group Alliance of Concerned Taxpayers, was certified and approved for the ballot by the borough clerk’s office Nov. 17.

Ordinance 2005-09 had three parts: An increase of the borough sales tax from 2 percent to 3 percent; a provision charging sales taxes on recreational package sales on a per-seat, per-day basis; and a method for annually withdrawing cash from the Land Trust Fund to cover general government expenses.

Those revenue enhancement measures, proposed by former Mayor Dale Bagley’s administration and enacted by the assembly, were considered necessary to offset decreases in the borough’s revenues resulting from the end of state municipal revenue sharing and rapidly growing costs associated with insurance and employee retirement programs.

Almost immediately, ACT members launched efforts at repeal. However, their first attempt failed when a referendum could not be certified for technical reasons in time to reach the fall ballot. ACT was successful, however, in promoting an initiative petition to roll back the sales tax increase to 2 percent and require 60 percent voter approval of any future increase. That initiative became Proposition 5 and 54 percent of borough voters approved it in the Oct. 4 election.

The initiative and referendum processes are similar, but different in key ways. With certain limitations, initiatives allow voters to write new or modify existing law. A referendum, when approved by voters, repeals specific actions taken by legislative bodies.

In response to the referendum’s certification, assembly member Ron Long, of Seward, introduced Ordinance 2005-51 on Dec. 6, calling for a February special election. That was replaced by a substitute, also proposed by Long, that sought to simplify the special election ballot by having the assembly repeal the sales tax increase (essentially, a formality since voters already had turned the increase back), as well as the provision to tap the Land Trust Fund. That would have left only the per-seat, per-day tax issue on the special election ballot.

Long’s ordinance suggested it would be better for budget-writing purposes for the assembly to know early whether the recreational tax revenue would be available. An amendment shifted the special election date into April.

ACT members opposed splitting the issues and a special election, arguing that its cost was unjustified. After lengthy debate, the assembly rejected the idea of a special election by a 2-6 vote. Assembly member Paul Fischer had an excused absence.

With no special election scheduled, ACT’s referendum automatically goes on the regular October municipal ballot. Getting there requires no formal action by the assembly.

A legal question remains regarding the referendum ballot measure, one that has yet to be resolved.

The success of Proposition 5 turning back the sales tax increase also imposed a new requirement — that future sales tax increases be approved at the polls by a supermajority of 60 percent. But that 60 percent requirement could come smack up against state law governing referenda elections, where a simple majority is all that is necessary to approve — or reject — a repeal.

If enough voters change their minds by next fall and reject the repeal, all of 2005-09 would then be active, including the 3 percent sales tax already overturned by voters, according to borough Attorney Colette Thompson.

And there’s the rub. Which takes precedence; the simple majority of referenda or the 60 percent imposed by initiative?

“Our tentative conclusion at this point — and I say tentative because I’m still looking at it — is that because the referendum statute specifically provides that if a majority of voters favor repeal of the matter referred, it is repealed. Otherwise the matter referred remains in effect,” Thompson said.

The state referendum statute implies simple majority rule or it would say supermajority or a different kind of majority, Thompson said. The initiative’s 60 percent provision is a “ratification process,” a different animal from that of the referendum. The referendum process has been given more deference by the courts, she said.

“So at this point, it is my view that for this piece (of legislation) it would require a 50 percent-plus-one vote to sustain Ordinance 2005-09, including putting the sales tax at 3 percent,” Thompson said. “That opinion may change, but that is where we are at this point.”

Meanwhile, members of the recreation industry testified Tuesday opposing the per-seat, per-day tax basis, saying the additional tax likely would result in many customers choosing other locations for fishing and tourist activities.

The assembly remains free to repeal 2005-09 on its own by ordinance, negating the need for a ballot measure next fall. That, however, would have the effect of a successful referendum repeal — meaning legislation similar to 2005-09 could not be reintroduced for two years.

The assembly has not ruled out such an action, but it is unlikely.

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