Tax measures likely to draw attention to borough budget

Posted: Monday, May 16, 2005

The proposed $60.2 million fiscal year 2006 borough spending plan gets its final scheduled public hearing at Tuesday's meeting of the Kenai Peninsula Borough Assembly in Soldotna.

Ordinance 2005-19 in-cludes $13.8 million for general government operations and $35 million earmarked as the local contribution for running the Kenai Peninsula Borough School District.

Other expenditures covering such things as solid waste handling, service area expenses and assorted debt round out the rest of the $60.2 million plan.

That budget relies on revenue-enhancement provisions in another ordinance up for public hearing Tuesday. Ordinance 2005-09 would increase the borough's sales tax rate from 2 percent to 3 percent, provide that taxes on recreational package sales be calculated on a per-person, per-day basis and impose a cap on the amount held in the borough's land trust fund.

The sales tax increase would be expected to boost revenue by about $5.4 million annually. Amendments to the way recreational package sales are taxed are meant to eliminate an existing taxing disparity, while capping the land trust fund at $2.5 million would free up excess funds from ongoing property sales to help finance general government functions.

The sales tax increase could still draw public comment, but a controversial provision that would have lowered the unlimited exemption from property taxes on a primary residence enjoyed by senior citizens and disabled veterans that had been part of the Mayor Dale Bagley-sponsored ordinance was eliminated at the May 3 meeting.

Another controversial measure up for public hearing, Ordinance 2005-05, would place a transient accommodation tax (bed tax) on hotel, motel and bed and breakfast operations. Whether it will be its last hearing is not certain. Action on the ordinance, first introduced by Betty Glick, of Kenai, in early February has been postponed several times to accommodate added hearings.

As the proposed ordinance stands now, it would impose a 4 percent bed tax, but that tax would be conditioned on approval of a proposition on the Oct. 4 municipal election ballot.

Hotel, motel and especially bed and breakfast owners have lined up nearly unanimously against the proposed tax, arguing that it will drive tourists away. Others, including some on the assembly, have said such bed taxes are common and that tourists are unlikely to stay away because of the added cost.

Opponents counter that Alaskans, especially in winter when attending such things as sports events in which their children are participants, would have to pay the same tax.

In other words, they say, it wouldn't be just tourists from Outside who would be dinged.

After many years of running in the black, a combination of factors led to an expected deficit of between $5 million and $7 million this year. The various revenue enhancement proposals were meant to address that shortfall.

Another agenda item, Resolution 2005-043, would change certain property tax rates.

The resolution would set the borough tax levy at 6.6 mills, up from the current 6.5 mills.

The Nikiski Fire Service Area would jump from 2.3 mills to 3 mills, while the Nikiski Senior Service Area would rise from .15 mills to .2 mills.

The Roads Service Area tax levy would fall, however, from 1.4 mills to 1.3 mills.

All other levies would remain the same.

One mill costs the owner of a $100,000 home $100 a year.

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