Tax cap initiative petition OK'd

If enough people sign initiative petitions, Kenai Peninsula Borough residents could vote this fall on a proposal to limit the municipality's ability to tax sales and require super majority support at the ballot box for any future sales tax increases.

Borough Clerk Sherry Biggs has approved a pair of sales tax initiatives filed by the group Alliance of Concerned Taxpayers, or ACT. One initiative would cap the sales tax at 2 percent. The other would do the same, but also add a provision that all future increases to the borough sales tax would have to be approved by 60 percent of borough voters.

ACT members met June 23 and decided the initiative, including both the 2-percent cap and the 60-percent voter approval requirement, would be the petition circulated for signatures this summer. In a prepared statement, ACT officials said they believed the initiative bearing both provisions, labeled by the clerk as Initiative Ordinance 2005-14, would better serve the public's desire to have more control over borough taxes.

The borough assembly recently voted to increase the sales tax to 3 percent effective in October, a move deemed necessary to meet expected revenue shortfalls brought on, in part, by the state's decision to curtail municipal revenue sharing programs that for years had subsidized local government operations.

ACT members also are working on a referendum that would roll back the ordinance that boosted the sales tax to 3 percent from its current 2 percent.

Borough Mayor Dale Bagley warned that capping the sales tax at 2 percent, or repealing the increase, could cost the borough general fund as much as $6 million, forcing the fund balance down from $14 million to a precariously low $8 million.

"If that happened, next year we would have to look at increasing the (property tax) mill rate from 1.5 to 1.75 mills, putting raising the money we need on the backs of property owners," Bagley said.

The borough mill rate currently sits at 6.50 mills, which costs the owner of a $100,000 home $650 a year. The increase anticipated if a sales tax cap were approved by voters would amount to an additional $150 to $175 per $100,000 of real property value.

"This initiative does not eliminate future tax hikes," said initiative alternate sponsor Fred Sturman, "but will require the assembly to ask voter permission before increasing sales tax rates."

Petition booklets are expected to be available to sponsors within two weeks. Then begins collection of the required 1,530 signatures of registered voters needed to put Ordinance 2005-14 on the Oct. 4 ballot.

Many of the costs associated with operating the borough, such as building maintenance, utility fees, equipment and supplies, personnel costs, bond payments and the like, are unavoidable, and increases in retirement costs and insurance, as well as the loss of state aid to municipalities, have hit the borough hard, Bagley said.

"The borough government has not really changed in the last six years," he said. "The things that have changed are outside the borough's control."

Borough sales tax revenue has been instrumental in the borough's ability to fully fund local contributions to schools. The loss of sales tax revenue could impact the borough's ability to do that and meet its own operating expenses too, Bagley said.

Patricia Falkenberg, the initiative's prime sponsor, said borough residents had been generous in funding schools and could be expected to continue that support.

"If approved by voters, this initiative will not restrict the flow of money to public education, only require more accountability before tax increases are implemented," she said.

ACT has filed several requests for initiatives over the past several months, largely aimed at restricting the borough's taxing and spending authority. Some were rejected for legal or technical flaws. This latest round, however, easily met the borough's legal requirements, Biggs said.

"(ACT) made technical corrections as suggested and at that point we were able to accept them," she said.

ACT currently is circulating a petition seeking a ballot proposition requiring voter approval of all borough capital improvement projects costing more than $1 million.

The group also is working to correct technical deficiencies on a referendum to repeal Ordinance 2005-09, the revenue-enhancement measure sponsored by the mayor and approved by the assembly June 7 that included the jump to a 3-percent sales tax.

It also included a requirement that recreational package sales be calculated on a per-person, per-day basis, and a provision to cap the amount held in the Land Trust Fund. If voters agree in October, the referendum would roll back all those provisions.

ACT member James Price said he believes the ordinance "violated the spirit, if not the letter of the law," in ignoring a statutory requirement that citizens approve all sales tax increases.

Bagley said he's prepared to rely on the common sense of the voting public who may well favor spreading the rising cost of government to more people through a sales tax increase over adding to the burdens of property owners.

He noted that a similar tax initiative a couple of years ago seeking to end the sales tax on food was handily defeated at the polls, largely because that lost revenue likely would have resulted in increased taxes on property.