Bed tax receives mixed reviews

Hearings set for ordinance

Posted: Thursday, February 03, 2005

An ordinance that proposes to ask voters next fall whether the borough should impose an 8-percent bed tax on hotel and motel rooms got a mixed review from the few who testified at the measure's introduction by the Kenai Peninsula Borough Assembly on Tuesday in Soldotna.

The assembly voted 8-0 to send Ordinance 2005-05 to public hearings scheduled for March 1, 15 and April 5. Member Chris Moss of Homer had an excused absence.

The measure's sponsor, Assembly member Betty Glick of Kenai said it represented one option for countering the loss of state revenue-sharing dollars. Language in the ordinance mirrors that of tax provisions on transient accommodations in the Matanuska-Susitna Borough code, Glick said.

By law, voters must approve a tax on hotel and motel accommodations, and the measure, if approved by the assembly, would appear on the Oct. 4 municipal election ballot. Bed taxes are considered sales taxes.

The borough's legal department is researching whether a portion of any bed tax collected inside cities could be returned to those cities as if they'd imposed a bed tax of their own. That would make any bed tax levy uniform across the borough.

Troy Tankersley, accounting supervisor for the borough's sales tax division said Wednesday he was "still working the numbers" in an effort to pin down how much revenue could be expected from such a sales tax.

Soldotna Mayor Dave Carey said it was important to discuss issues of taxation along with issues of service, but he spoke against the proposed bed tax saying it could have an impact on the level of tourism on which local economies depend.

"Before the assembly ap-proves putting a bed tax before the voters, I hope they will provide full and complete information to the voters," he said. "Because tourism dollars are limited, what effect on commercial interests will this tax have? If tourists have to pay 8 percent of their money to the borough, what will be the negative impact on local businesses by diverting the revenue source to government?"

Carey said it was inaccurate to believe that only Outsiders stay in local hotels and motels. Locals, such as athletes and their families attending sporting events, or those attending other events away from their own communities also would pay any bed tax imposed by the borough. The 8 percent tax, he said, could lead some people to restrict their travel.

Lloyd Schade, who lives east of Homer, said bed taxes never bothered him. In fact, he noted, they are so commonplace, travelers rarely bat an eye at the extra charges on their hotel and motel bills.

"It's a lost revenue that has been overlooked way too long," he said.

Schade said he would prefer that the tax be imposed as quickly as possible, suggesting a special election might be considered so that revenue could be garnered from the upcoming tourist season.

Steve Anderson of Soldotna, who operates a bed-and-breakfast and a fishing charter business, voiced his support for a bed tax, calling the revenue it could produce "low-hanging fruit."

"It is long overdue," he told the assembly, adding he did not believe tourists would object to paying a bed tax.

He did say, however, he wanted to see bed tax revenue rolled back into marketing efforts on behalf of the tourism industry, rather than simply becoming part of the general fund.

The assembly also heard from representatives of Alaska Permanent Capital Management Company, the firm that has managed borough investments for the past 18 months.

When the company assumed managerial control of the borough's investment portfolio, it was worth about $75 million. Using a conservative approach that met the borough's policy of protecting the principal and maintaining liquidity, that money grew over 18 months to about $77.3 million, said Randy Sears.

He also said that had the borough taken a somewhat more aggressive investment stance, it might have done better. Sears suggested perhaps as much of $1 million better, but noted that would have meant assuming more risk.

He said the borough's portfolio was over-weighted with agency securities, comprising about 70 percent of the total, which was about double that held in the so-called "benchmark" government portfolio managed by Lehman Brothers against which the borough portfolio's performance is managed.

Sears said over the investment period, the managers reduced the over-weight condition and increased the portfolio's treasury notes and bonds.

He said the company was remaining "defensive" in terms of protecting the borough's principal against loss.

The borough invests the money it has in relatively short-term vehicles to add value and leave it mostly available, or liquid, when needed.

About $50 million of money invested comes from bonds associated with the Central Peninsula General Hospital project. The rest includes bond proceeds and other funds held by service areas and working capital of the borough.

Sears recommended looking at other benchmarks, considering other kinds of securities, and weighing risks to see if the borough's portfolio would realize more gains.

Assembly President Gary Superman said the information had "planted some seeds of thought" among the assembly members.

In other business, the assembly:

n Adopted Ordinance 2005-01, a housekeeping measure regarding health insurance premiums.

n Postponed action on Ordinance 2005-02 until Feb. 18. This measure would incorporate the goals of the city of Soldotna into that city's 1995 Comprehensive Plan.

n Adopted Ordinance 2004-19-33, rescinding the unused appropriation of $60,000 to the School Capital Improvement Fund and returning it to the Land Trust Fund.

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