Bed tax going to voters

Assembly barely passes ballot measure to let residents decide

Posted: Thursday, May 19, 2005

Over the objections of nearly everyone who testified on the ordinance Tuesday, the Kenai Peninsula Borough Assembly voted 5-4 in favor of a fall ballot measure asking voter approval of a bed tax on hotel, motel and bed-and-breakfast accommodations within the borough.

Assembly member Paul Fischer of Kasilof, who voted against the measure, called for a reconsideration vote at the June 7 meeting. Barring a change of heart by one or more members, however, it appears the final decision on whether the "transient accommodations tax" will become law now rests with voters who will see the proposition on the Oct. 4 municipal ballot.

Opponents of the tax, including many in the tourism industry, have expressed concern that while tourism industry members would by and large be inclined to vote no, the broader electorate, with little to lose, would vote in favor of setting a tax on accommodations.

Several amendments ap-proved Tuesday gave the controversial bed-tax proposal its final appearance.

As written now, Ordinance 2005-05, if approved by voters, would allow the assembly to impose up to as much as a 4-percent tax on accommodations boroughwide. How big a percentage actually was set would depend on the projected needs when annual budgets are written in the spring.

A city within the borough that also imposes its own bed tax would be allowed to keep up to half the borough tax revenue collected in the city.

The ordinance also establishes a Room Tax Fund into which would go at least 25 percent of the transient tax revenue stream collected in the prior year to be used to pay for tourism marketing efforts.

The balance of the revenues generated by the bed tax program would be available to support general government operations.

According to figures provided by the borough Finance Department, a 4-percent bed tax would be expected to net a little more than $903,000 a year from approximately 500 bed-tax accounts.

Administering the program could be expected to require the equivalent of a half-time person. Also, the borough currently lacks the appropriate software to administer a bed tax. The administration is researching a solution.

Lengthy testimony by a parade of tourism industry business owners was almost universally opposed to a bed tax at any level. Gerald Scholand's comments were typical.

"It's time, I think, to put this bed tax to bed — permanently," the East End Road resident said.

The tax could hurt the growing tourism industry, he said.

"It may be our only renewable industry," he added. "It is self-perpetuating and can be grown and does not exhaust our resources."

He urged the assembly to not penalize tourists who come here and spend money. He said the bed tax was "prejudicial to a small segment of the tourism industry."

A few speakers said they might support a bed tax if the revenues went to market the industry. Others said the assembly should be considering a seasonal tax.

Homer hotelier Jon Faulkner said the bed tax was "a bad idea" and that it was "divisive and unfair."

Faulkner, owner of Kenai Landing in Kenai, Land's End Resort in Homer and the Van Gilder Hotel in Seward said he is arguably in charge of marketing more peninsula hotel space than anyone else in the business.

"If I'm convinced it hurts my business, I would think you'd listen," he told the assembly. "It's an industry I've been in for 25 years and have helped build significantly."

He told assembly members Chris Moss of Homer and Millie Martin of Diamond Ridge he has heard from no one in those districts who supports the proposal. Both Moss and Martin have said there are constituents who want to vote on a bed tax.

Faulkner said the easy way out for the assembly would be to send it for a vote.

"But it wouldn't be the responsible thing," he said.

Following public comment, the assembly took up the debate over the tax. Fischer said he would oppose the ordinance, arguing the tax was a form of sales tax and the borough was moving away from its traditional use of the sales tax as a revenue generator.

Assembly President Gary Superman of Nikiski called the ordinance "highly problematic" and said the "sales pitch" that some funds would go to tourism marketing "doesn't settle well in my mind." Like Fischer, Superman said the borough needed to stay with its "traditional taxation methods." The ordinance, he said, was not necessary at this point in time.

Martin said aspects of the proposed ordinance continued to make her uncomfortable, even after being amended.

Assembly member Ron Long of Seward said there had been a lot of testimony arguing that if a bed tax is imposed, tourists will stop coming. He said Seward, which has had a bed tax since the mid-1990s, has experiences no such diminution of visitors as a result. In fact, he said, tourism has grown.

"(The tax) hasn't really been a factor in people's buying decision," he said.

Long was joined by the measure's sponsor, Betty Glick of Kenai, Moss, Dan Chay of Kenai and Pete Sprague of Soldotna in voting to send the proposition to the ballot. Fischer, Martin, Superman and Grace Merkes of Sterling voted against it.

Fischer's call for reconsideration will require a majority of the assembly to bring the ordinance back to the floor. He will have to find one of the supporters willing to change his or her mind.

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