Skagway considering a sales tax-free for locals

Posted: Tuesday, July 31, 2001

JUNEAU (AP) -- City officials in Skagway are considering a plan to tap into the pocketbooks of migratory tourists to provide a year-round source of revenues for its government.

Its city council is expected to decide on Thursday whether to ask voters to replace the annual 4 percent sales tax with a 5 percent tax that would be in place for the six-month summer tourism season. During off-season months between October and March the tax would be zero.

It's a proposal that has angered several residents in a town of about 880 that relies heavily on the tourism industry.

''Our community literally survives on this industry and what it brings us,'' said Steve Hites, who owns a tour company called Skagway Street Car Co. ''I believe it targets a certain group of people -- specifically the visitors in the summer -- and as such it's not equitable.''

Hites said he fears the tax could have a cumulative effect on cruise line passengers who are also paying sales and other taxes in other towns along the route.

''The cruise ships have other world destinations they can go to,'' Hites said. ''We are competing with Australia, New Zealand, Norway and Russian ports.''

City Council Member Dan Henry is a chief proponent of the tax. The proposal would bring in an additional $700,000 during the tourist season and mean about $226,000 less in revenues during the off-season, Henry told KHNS-Radio in Skagway recently. The town currently takes in $3.3 million in sales tax revenues, a city spokeswoman said.

''The reality is very simply that our tourism industry has grown dramatically year after year. Our services are not on par with them,'' Henry said.

But Henry said the tax would still be lower than in other stops that cruise ships make along the Inside Passage and the coast.

In Wrangell, the sales tax is 7 percent and it is 6 percent in Petersburg, Alaska Municipal League figures show. Combines borough and city sales taxes in Haines and Seward make their sales tax rate at 5.5 percent and 5 percent respectively.

Sitka and Juneau each have a 5 percent sales tax and Juneau has a $5 head tax on cruise ship passengers, municipal league figures show.

Mayor John Mielke said the city is not in ''dire straits'' financially, but that the tourism industry has brought with it added expenses.

''We've had to do some things that our sleepy little town normally wouldn't,'' Mielke said.

The city recently built a water tower to accommodate cruise ships that take on drinking water there and during the summer months the city employs two additional police officers for its six-member force. The city has also added two 911 dispatchers, he said.

The city also recently completed a $2.5 million street paving project and a $3.5 million restoration of city hall, said Mielke.

City Manager Bob Ward denied that the ordinance singles out tourists.

''Everybody in Skagway in the summertime pays the same tax whether they're visitors or residents, and everybody in Skagway pays, or does not pay any tax in the wintertime,'' Ward said.

Council member Tim Bourcy said towns dependent on tourism revenues already lean too heavily on vacationers, and he said more taxes could have a chilling effect on the decision to vacation in Alaska.

''It's a global market, and Alaska is by far the most expensive destination in our cruise industry,'' Bourcy said. ''At what point do the cruise companies say the client can no longer afford that, and then they go somewhere else.''

The city council is expected to decide on Thursday whether to put the ordinance on the October municipal ballot.

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