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Bed tax best way to bring in new revenue

Posted: Friday, February 11, 2005

Let's get this out of the way first: No one likes taxes.

Having said that, the proposal now before the Kenai Peninsula Borough Assembly that would institute an 8 percent bed tax is an idea that's time has come.

The argument that such a tax will drive visitors to other places just doesn't hold water. In fact, it's hard to find a tourist destination today that doesn't have such a bed tax. Think about it: Did you ever let lack of a bed tax determine where you were going to spend your vacation? Did you ever change your destination when you found out where you were going had a bed tax?

We're willing to bet the answer is "no" on both counts.

And visitors to the Kenai Peninsula won't let something like an 8 percent bed tax deter them. While residents sometimes take the wonders of the peninsula for granted, visitors from all over the world are willing to pay for the opportunity to experience the wildlife, the awesome views, the great fishing, hiking, boating and other activities. Plus, where else are you going to get volcanoes, earthquakes, big fish and moose wandering the streets of town? There's a new adventure around every corner.

A bed tax is a fairly painless way to spread out the cost of government services to all those who use the services — and, yes, visitors do use those services. They take a toll on our roads, on health and fire services, on our recreation areas. An 8 percent bed tax is not an unreasonable tax for them to pay, and it helps take the burden off the property-owning resident who lives here year round.

With the loss of state-revenue sharing dollars, the borough needs to generate a new revenue stream or cut costs. Here's a quick multiple-choice test. Which is the least painful to borough residents:

A. Raising the sales tax cap.

B. Raising the sales tax.

C. Increasing property tax rates.

D. Reducing borough services.

E. Establishing an 8 percent bed tax.

The best answer is "E." As one Soldotna bed-and-breakfast operator told the assembly earlier this month, a bed tax is "low-hanging fruit." Exactly.

Yes, the bed tax could hurt local residents traveling within the borough — for example, students and their parents attending athletic events away from their own communities. Still, it's possible an exemption could be created for borough residents or at least for students participating in school-sanctioned functions. Even if such an exemption is not possible, the bed tax is reasonable enough that it should not be a deterrent in participating in those events.

While official numbers still are being crunched, estimates are the bed tax could raise roughly $800,000 to $1 million per year — and that would be money that would have the least impact on property taxpayers.

Assembly member Betty Glick of Kenai, who sponsored the proposal, has two goals in mind: to generate money for the borough without raising the mill rate and to create a stable, sustaining source of funding for the Kenai Peninsula Tourism and Marketing Council. In the most current fiscal year, the borough budgeted $157,000 for the council — money that comes directly from the borough's general fund.

Funneling some of the money generated from the bed tax back into tourism is a great idea. That money then can be used to generate more tourism, which increasingly is becoming a mainstay of the economy. In fact, the borough might want to look at how other communities spend their bed-tax dollars. St. John's County in Florida, for example, puts 40 percent of its bed tax back into tourism, 30 percent into arts and cultural activities and 30 percent into beaches and recreation. Tourism has gone up, and residents also reap benefits from the tax.

As much as possible, the borough should define how the money will be used — and include that information on the ballot question. Every effort should be made to share some of the revenue with the cities where it is collected.

The borough is preparing for an event that will attract visitors from all over in 2006: the Arctic Winter Games. Those who were fortunate enough to attend the games in 2004 in Fort McMurray, Alberta, Canada, likely noticed a 5 percent room tax on their bills. Did that detract in any way from their enjoyment of their games? Our guess is "no."

Neither will an 8 percent bed tax detract from visitors' enjoyment of the Kenai Peninsula.

Hearings on the tax have been set for March 1, 15 and April 5. The assembly should then move to place the bed-tax proposal on the October ballot. Of all the means to generate some needed revenue, this is the most painless.



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