FAIRBANKS -- Residents of the Fairbanks North Star Borough will decide Tuesday whether to impose a fuel transfer tax that supporters say would collect about $24 million and lead to a sharp drop in property taxes.
But the two-cent tax on each gallon of fuel -- including jet fuel shipped to Anchorage -- will face a long legal battle if voters approve it.
The tax would apply to the first transfer of gasoline, heating oil and jet fuel within the borough or refined in the borough and transported out. That means the Williams Alaska refinery in North Pole would collect the lion's share of the tax for its sales to dealers and others. Petro Star Inc. also has a refinery in North Pole.
The issue is on the ballot because of Merrick Peirce, who formed the group called A Bright Future for Fairbanks and gathered more than 2,000 signatures to bring the issue to a vote.
The tax would raise enough money, Peirce argues, to lower property taxes by about 40 percent. It would cost little to collect, he says, and hasn't already been rejected by voters, unlike a sales tax.
Peirce also says the fuel transfer tax is fair. ''It would be passed off to consumers the maximum extent possible by the refineries,'' he says.
Jeff Cook of Williams Alaska Petroleum Inc. says most of the promised 40 percent property tax reduction would come from the jet fuel Williams Alaska sells to customers in Anchorage. But that's assuming the tax didn't cut Williams' market share, roughly half the sales at the airport.
''We won one of our fuel contracts (by) one one-hundredth of a cent,'' Cook said in March when the tax effort was just under way. ''A penny to an airline is a huge, huge deal. We simply couldn't pass this tax on.''
Williams Alaska believes state law exempts jet fuel from such local taxation. Without jet fuel in the mix, the fuel tax would bring the borough an estimated $5 million annually, for a property tax reduction of 8 percent.
Both sides, while disputing the legality, fairness and economic impact of the tax, agree the tax would be tied up in a lengthy court fight and that the borough would not see any revenue for years.
Tax supporters argue that putting more money in the hands of property owners would stimulate the economy. They also say that lower property taxes would help attract business.
Tax opponents say higher fuel costs would raise the cost of doing business and thus turn businesses away. They also say the tax would send an ominous message to business: that a single industry can be singled out for taxation.
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