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Sales tax saves Seward

Posted: Sunday, June 15, 2003

The city of Seward is in better shape than some other Kenai Peninsula communities to deal with Gov. Frank Murkowski's cuts to state funding from the Revenue Sharing and Safe Communities programs, mainly because it already had planned to implement a sales tax increase in its fiscal year 2004 budget.

According to Kristin Erchinger, Seward's finance director and acting city manager, Seward will bump up its sales tax from 5 to 6 percent starting July 1. This will generate an estimated $725,000 in revenue.

"Had we not done that, we would have been in a real serious financial condition this year," she said.

Seward faced a difficult process in developing its fiscal year 2004 budget and decided to increase the sales tax as a way to avoid having a deficit budget, Erchinger said. But even with the new revenue coming in, Murkowski's budget cuts will put a strain on the community's finances.

Erchinger said Seward will lose about $70,000 in safe communities funding and about $84,000 in municipal revenue sharing money. Of the revenue sharing funds, $46,000 would have gone straight to the city, while $38,000 would have been forwarded to health facilities in the community, she said.

Seward also will lose about $75,000 from the governor's cut to municipal matching grants, which was earmarked to buy equipment for Seward's street department, Erchinger said. The city will have to do without that equipment and come up with a plan for absorbing the rest of the governor's cuts.

"We have not made a determination as to where these lost revenues will be offset," Erchinger said. "... We will likely have to make cuts to our budget to offset the lost revenue."

Erchinger expects Seward to get a one-time payment of $40,000 from the federal State Fiscal Relief Program money Murkowski said he would forward to municipalities. That money will give Seward's administration a little breathing room in deciding how to handle the governor's budget cuts.

"The effect of the one-year offset will buy us the time to better plan for how to absorb these losses," Erchinger said. "In the long run it just buys us a little bit of time to plan ahead for the reductions."

That one-time influx of federal dollars, along with the increase in sales tax revenue, puts Seward in better shape than other peninsula cities when it comes to absorbing the governor's reductions in funding.

"We are very fortunate in that the timing of the sales tax increase is going to help us soften the blow for Seward," Erchinger said. " ... The city of Kenai, with the loss of Kmart, it's really bad timing for them."



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