Adviser warns that state's bonding rating at risk

ANCHORAGE (AP) The state's financial adviser said Alaska's bond rating is at risk of being lowered because state legislators haven't moved toward a long-term fix for the state's huge, recurring budget shortfall.

New York-based Government Finance Associates said a lower rating would likely drive up interest rates Alaska has to pay when it uses bond debt to finance public projects. It could also raise the interest rates that local governments have to pay, therefore raising the costs of government for Alaska citizens.''

Copies of a memo from the firm were circulated Tuesday at the House Special Committee on Ways and Means' public hearing on the proposed 3 percent sales tax, the Anchorage Daily News reported.

I think there is a growing acceptance of the urgency of the overall problem that we face and the necessity of taking action,'' said Anchorage Republican Rep. Mike Hawker, the committee co-chair, who is working on the sales tax plan.

But only two weeks remain before the Legislature adjourns for the year, and putting together the technical details of a sales tax is a complex task. Also, a sales tax could be blocked by an alliance of conservative anti-tax Republicans, Democrats who argue it would be unfair to poorer Alaskans, and moderate Republicans who represent communities that have a sales tax.

Alaska's major cities, Anchorage and Fairbanks, do not have a local sales tax. But almost 100 other Alaska communities do. On Tuesday, local officials from Juneau, Kodiak, Ketchikan, Soldotna, Kenai, Craig and Skagway testified against the tax.

City officials predicted a 3 percent statewide sales tax, on top of their local sales taxes, would drive shoppers more to the Internet, catalogs and the Lower 48. This would have a significant impact on businesses,'' said Rod Swope, manager of the City and Borough of Juneau, which has a 5 percent sales tax.

But if they had to reduce their local sales taxes, Swope and other officials said, local services would be devastated.

Communities have offered different reasons for not wanting to shift the local tax burden over to property taxes, which fund city services in Anchorage and Fairbanks.

Some officials in the Bush, where federal and Native land often dominates, say there is not enough private property to support a shift to property taxes. Swope questioned whether voters in his town would agree to raise the local property tax cap. Kodiak city manager Linda Freed said the city mostly leaves property taxes to the Kodiak Island Borough, to help fund schools.