Tax increase voted down: Assembly doesn't buy pitch on sales tax change

Posted: Thursday, May 05, 2011

After rounds of public testimony in opposition to the proposed sales tax cap increase, the Kenai Peninsula Borough Assembly unanimously voted down the ordinance at its meeting Tuesday night.

"I'm sorry this was even introduced," said Assembly Member Linda Murphy, of Soldotna. "I certainly can't support this ordinance. I can't support any increase in the cap."

The ordinance proposed to increase the maximum amount of a sale subject to sales tax, currently set at $500, to $2,500, in part to adjust for inflation when the cap was introduced in 1965. The ordinance was also an idea for the borough to increase revenue for schools in a time of swelling expenditures that could cause the borough to spend part of its fund balance.

Many assembly members said the timing of the ordinance was not right, and should be postponed at least until after the October election, when the voters will decide on a ballot measure to repeal the seasonal non-prepared food sales tax exemption. That measure was proposed as a way to fund schools with the additional sales tax revenue and not dip into the borough's general fund. Borough code earmarks all sales tax revenue to the Kenai Peninsula Borough School District.

But Kenai Peninsula Borough Mayor Dave Carey said he thought the timing for the ordinance was "exactly right."

Eighteen people came to testify against the ordinance, saying it would hurt small business, be a hardship for renters and that the government could make cuts elsewhere that would not necessitate the need for a higher sales tax cap. Carey asked why they didn't come to testify for budget cuts in past budget cycles, as well as petitioned for their support going forward as the assembly works through the his proposed budget.

"Can you make the commitment for the next two meetings?" Carey asked the public. There will be "people lining up for increases."

The testifying public -- which included mayors from the cities of Kenai and Soldotna -- vacillated between requesting the assembly to postpone the ordinance for more public education to asking them to vote it down altogether. Several times the statements were met with audience applause.

Tim Cashman Jr., a Soldotna property manager, was concerned that the increased sales tax cap would affect his renters. He said 30 percent of people on the Peninsula rent their homes and a $2,500 sales tax cap would be a significant increase to those who are already struggling to make rent.

"Eleven people can't make rent this month," he said. "They simply can't afford it."

He was also concerned about driving local business to Anchorage, something that George Pierce, of Kasilof, expressed discontent with as well.

"You're going to shoot yourself in the foot if you pass this," Pierce said. "There's no doubt in my mind. People are going to take their business to Anchorage."

The other problem with the ordinance, Pierce said, is it was undermining the an initiative passed in 2005 that sought 60 percent voter approval to any change to the sales tax cap.

"The voters have to have a say so," he told the assembly. "You people up here take our votes and throw them in the trash. We have an opinion here and that's what you should consider. We are the voters."

That super majority part of the voter initiative was found illegal in the state superior court and is currently in the Alaska Supreme Court.

But Pierce didn't care about the court's ruling one bit, he said.

"It's more government," Pierce said.

Ultimately, the assembly voted down the ordinance and chose to address the super majority clause in a separate ordinance.

Other Assembly action:

* Approved an ordinance waiving the public voter approval requirement for the upcoming Homer Solid Waste Transfer Facility project;

* Introduced a resolution determining the amount of money borough will fund the Kenai Peninsula Borough School District for the upcoming fiscal year;

* Introduced an ordinance to require assembly members who accept borough health insurance to pay 30 percent of the cost of coverage, up for pubic hearing June 7;

* Failed to introduce an ordinance eliminating the provision of health care benefits for assembly members;

* Introduced an ordinance appropriating funds for the borough's budget in fiscal year 2012, with hearings on May 17 and June 7.

Brielle Schaeffer can be reached at

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