On the ballot: Assembly sends grocery tax exemption repeal to voters

Posted: Thursday, April 07, 2011

The Kenai Peninsula Borough's annual budget deliberations are narrowing down to a simple, yet wrenching choice for residents -- What's more important? Food or schools?

The Kenai Peninsula Borough Assembly will leave this question up to the voters in the municipal election this fall: Should the nine-month grocery sales tax exemption be repealed?

The assembly had originally entertained an ordinance to repeal the non-prepared food sales tax seasonal exemption altogether, but members amended it to leave that decision to the taxpayers.

"Looks like we have a ballot question for October," said Gary Knopp, borough assembly president.

The seasonal non-prepared food tax exemption has been an issue for the borough this budget cycle. With the increasing costs of health insurance, and the looming multi-million dollar fee to convert the Homer landfill to a transfer site, Borough Mayor Dave Carey is looking at other sources for education funding.

According to borough code, all sales tax is dedicated to the Kenai Peninsula Borough School District. This year the borough said it would give schools a minimum of $42.3 million. That amount would likely be made up by all the sales tax revenue, and some from local property taxes.

Last budget cycle the assembly used half of all property tax revenue and the some of its fund balance to finance the school district.

Carey's thinking is if the seasonal grocery sales tax exemption was lifted that extra revenue dedicated to education would free up some money in the borough's general fund for other expenses.

With the assembly's actions Tuesday night, it's ultimately up to the voters to decide if they want more funding going to schools.

At the meeting, some residents spoke out against the borough repealing the exemption without a vote, as well as the need for additional education funding.

"We don't want it repealed, we just want it left as is," said Kasilof resident George Pierce, who testified to the assembly. "If you can't do that, it's up for the voters to decide."

He said the borough should cut back on funding to the school district.

"Whatever it takes to cut back on the taxes. Everybody is hurting here and all I can see is more funding, more funding, more funding," Pierce said.

Soldotna resident Fred Sturman said he was part of the group that collected signatures to get this on the ballot in 2008.

The budgets for the borough and school district keep going up, he said.

"My income has not been going up," Sturman said. "How much more do I have to cut back when it seems like government doesn't have to cut back?"

At least one resident was happy to see the sales tax exemption brought back before the voters.

"I think you do a good job of keeping the taxes down but we do need to pay some taxes for some services," said Bryan Zak, of Homer.

Assemblyman Mako Haggerty, the South Peninsula representative, said he did not think it was good public process for the assembly to repeal the tax exemption that voters enacted by initiative.

Calling it "representative politics," assemblyman Hal Smalley, of Kenai, said he thought it was the responsibility of the body to make the decision on the tax. He did not support the amendments to bring the ordinance to voters.

But to other members of the assembly, it was less about the body's responsibility to fiscally manage the borough, as it was about its responsibility to the voters.

"We have some community relations here," said assembly member Bill Smith, of Homer. The assembly can "do this without causing big commotion in the community by putting it on the ballot."

Carey said he appreciates and doesn't question the assembly's authority to repeal the sales tax exemption but said the discussion should not be about that.

"I believe the discussion should be about these funds as they relate to schools," he said.

According to borough calculations cited by Smith, the borough loses $2.8 million from the nine months without the grocery tax. That equals $313,889 per month. If that sum was divided up amongst the borough's 55,000 residents it would mean $5.71 a month per person.

"For my money $5.71 per month to keep my kids going to school is not a bad deal at all," Smith said, relaying a comment he heard from a borough resident to the assembly.

The question of whether to repeal the seasonal grocery tax exemption will be up to voters to decide Oct. 4. If repealed, it will go into effect in September of 2012.

Brielle Schaeffer can be reached at brielle.schaeffer@peninsulaclarion.com.

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