Tax exempt initiative drive slow going

Posted: Wednesday, June 26, 2002

An initiative drive to place a measure on the Oct. 1 municipal election ballot asking voters to exclude fruits, vegetables and other nonprepared grocery items from city and borough sales taxes is not gathering signatures as fast as sponsors had hoped.

Should the initiative petition be successful and voters approve the measure, municipal cupboards would be significantly barer next year, according to an analysis by the Kenai Peninsula Borough. The borough could lose upward of $2 million, while the various cities also would find healthy percentages of their revenue streams drying up.

A draft of an ordinance that would be considered by the borough assembly if the voters say yes includes a provision to exempt the same food items currently exempted under the federal Food Stamp Program.

James Price, prime sponsor of the sales tax exemption initiative, said he must gather at least 1,935 certifiable signatures and turn them over to the borough clerk's office by Aug. 13. But his goal, he said, is to gather at least 2,600, knowing some likely will be disqualified.

"I think it's being received quite well, but we're a little behind on the signature collection drive," he said Tuesday. "As of the last count, we have a little over 600."

Price said collection efforts would be intensified.

Eleven other people have picked up petitions and are collecting signatures, according to the borough clerk's office. Most are from the central peninsula area, with one from Fritz Creek on the lower peninsula and another from Cooper Landing.

"Six or eight have been active," Price said.

The borough signature collection forms require not only a signature, but also a signer's mailing and residential address. Price said signatures have been collected at a Soldotna mall, a recent gun show at the Soldotna Sports Center and the Kenai River Festival. He said the next large event would be the Fourth of July celebration in Kenai.

In a way, Price's past success has made the job of gathering signatures tougher. Last year, he led the fight against a proposed private prison. In that initiative drive he needed only about 1,000 signatures, he said. But the number of signatures needed on any initiative petition is a percentage of the number of voters who cast ballots in the previous election. The large voter turnout in the 2001 election nearly doubled the number of signatures required for the sales tax initiative this year, he said.

In an effort to garner more supporters willing to do the legwork collecting signatures, Price recently sent a mailing to as many voters as his funds would allow -- roughly 2,500 people, mostly in Nikiski, Sterling, Kasilof and Ninilchik, he said.

"Collecting signatures is quite a task," he said.

Despite lagging behind where he'd hoped the drive would be by this time, Price remains confident -- both that he will secure the required signatures and that the measure will meet with voter approval this fall. If the measure is approved for the ballot, he said he's hoping supporter donations will boost the campaign.

"We've been pretty much doing this out of pocket," he said. "We haven't gathered any money except from those actually doing it. I'm hoping to get some contributions through the mailer."

If Price's anti-sales tax proposal becomes law, it would have a measurable impact on the revenues of the borough and peninsula cities that depend on grocery sales for significant portions of their tax revenues.

Price estimated the city of Kenai alone would see a sales tax revenue reduction of between $700,000 and $900,000 a year. Kenai depends heavily on its 3-percent city sales tax. How would it make that up?

"They will have to increase the property tax, charge user fees or reduce services," Price predicted.

According to Kenai Finance Director Larry Semmens, a borough analysis of the tax initiatives' affect predicts Kenai would lose even more -- somewhere around $1 million a year.

"That would be devastating," he said.

Acting Soldotna Finance Director Marti Wilkison said Soldotna, where the sales tax also is 3 percent, would lose about $1 million. The revenue would have to be made up somewhere, she said.

"If you live in the city, your property tax bill would be outrageous," Wilkison said.

Homer, where the city sales tax rate is 3.5 percent, would lose approximately $400,000 a year, according to Homer Finance Director Dean Baugh, who cited the borough's analysis.

Seward could see its revenues reduced by $300,000. Seward has a 3-percent sales tax.

Seldovia, which levy's a 2-percent sales tax from October through March that jumps to 4.5 percent from April 1 through Sept. 30, could lose around $29,000, according to Ronda Haynes, director of finance. But that city's entire sales tax revenue is roughly $130,00, so losing $29,000 would sting.

"It would deeply affect us," Haynes said.

That same analysis predicted the borough, which depends on its own 2-percent sales tax, would lose as much as $2 million a year. Borough Finance Director Jeff Sinz said it would hurt.

Semmens said, however, he wasn't altogether convinced passage of a ballot proposition and adoption of a boroughwide ordinance would require Kenai to go along. He said Kenai is a home rule city, and as such may be able to tax items the borough chooses to exempt.

Meanwhile, Price said he knows the revenue streams of the various municipalities would be altered, perhaps dramatically, but that's something their governments would have to face. Price believes it isn't right to burden people, especially the poor and those on fixed incomes, with added costs on basic foods.

"The tax puts a burden squarely on the shoulders of families," he said. "Regardless of their ability to pay."

The governments of Kenai and Soldotna especially are running their governments on the tax income from residents not only of the municipalities themselves, but from people living beyond their borders who shop there, Price said.

"Is it fair for those of us who live outside cities to have to pay for city operations (through taxes on food) when we are already paying sales tax on everything else we are purchasing?" he said.

Price acknowledged that the very existence of the cities affords those living outside them a wealth of opportunities -- jobs, stores, parks, other services -- for which nonresidents should help pay. That's why he isn't proposing to exempt things other than nonprepared food, he said.

In most states, he added, food items are excluded from sales taxes because it's the "right thing to do."

In Alaska, the city of Fairbanks excludes nonprepared food items, he said. Anchorage, with about half the state's population, has no sales tax at all.

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