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Sales tax addition possible in Homer

Funds could help build new projects

Posted: Tuesday, January 30, 2001

HOMER -- Summer visitors and residents of the area could be paying higher sales taxes as early as mid-2002, if Homer voters agree, City Manager Ron Drathman said last week.

"I'm close to proposing a seasonal sales tax," he told the Homer City Council.

Drathman said a 1 percent boost to the 5.5 percent sales tax that ran for six months could bring in about $600,000 a year. That money, he suggested, would "be devoted exclusively" to infrastructure, such as a new library, an animal shelter, a hockey rink and other projects that would increase the quality of life in the Homer area year-round.

Voters would have to agree to the increase. Drathman said he will propose an ordinance in the next few weeks that would put the question before Homer voters next fall.

He proposed that any tax increase law would have a three-year sunset date. It would have to go back to the voters again to win renewal.

Homer already has the highest sales tax rate on the Kenai Peninsula. Consumers here pay the city's 3.5 percent, plus 2 percent imposed by the Kenai Peninsula Borough.

Raising the city tax to 4.5 percent -- a 6.5 percent total -- would risk driving some shoppers to Kenai, Soldotna and Anchorage. Drathman believes, however, that if residents are convinced the revenue from such a tax would be applied to long-desired projects, they might be willing to pay through a sales tax.

"I don't think taxpayers are opposed to funding projects if they're sure that's where the money's going to go," he said.

Drathman's announcement came during discussion of a memo from council member Pat Cue, who was requesting that the administration provide the council with monthly written reports on progress toward construction of a new animal shelter.

Cue said she has been fielding questions from residents who wonder when the current shelter will be replaced. She also said having periodic written reports would be an aid to her each year when the council evaluates the effectiveness of the city manager.

Other council members, such as John Fenske, proposed broadening the monthly report to include progress reports on all major initiatives. He also suggested those reports come quarterly. Cue said she wasn't opposed to that.

Drathman said he was willing to provide the council with whatever reports it wants, but said doing so would require time he now devotes to actually working on those projects. He said he has an open-door policy and sees council members frequently during the week when discussions often center on one project or another.

The council could reach no decision on what a quarterly report should contain, so members voted down Cue's proposal, saying they would develop the idea for periodic written reports. Drathman asked that each council member tell him which particular projects they would like to track in more detail so they might be added to quarterly reports.

As for the tax proposal, Drathman said he needed to "work out the quirks." He said he doesn't know if the council is ready to raise the sales tax, and he is open to suggestions regarding better ways to raise the money for capital projects.

What he is sure of, he said, is how much an increased sales tax would generate. His figures are based on numbers compiled by the borough. Over six months, based on past consumer spending, just over $600,000 could be raised from April through September. Another option is to institute the tax for a shorter period, he said.

He said it can be assumed that some people will buy out of Homer, or at least plan major purchases for periods when the tax is not applied.

He said he doesn't believe an increase is tantamount to "gouging visitors," a complaint heard from some in the business community in the past about other revenue-generating ideas involving raising fees at the Homer Harbor.

Drathman said there is a general feeling of frustration around Homer that the city has yet to find the key to getting some long-awaited projects moving. He wants to see if people are willing to pay more to bring those projects to fruition.

Hal Spence is a reporter for the Homer News.



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