Group forms to support tax increase

Citizens for a Positive Future says Prop 2 is bad public policy

Posted: Sunday, September 17, 2006

Claiming a growing membership from across the Kenai Peninsula Borough, a group of citizens has formed to oppose Proposition 2, a referendum measure on the October municipal ballot that aims to repeal a controversial tax ordinance adopted last year.

Citizens for a Positive Future (CFPF) is co-chaired by Soldotna attorney Dale Dolifka and former borough mayor Mike Navarre, and includes former mayors Dale Bagley, George Navarre and Stan Thompson.

In a press release issued Friday, CFPF said its members regard Proposition 2 as a “deeply flawed ballot initiative that threatens future funding for schools and local government services.” Members also argue that Proposition 2 would shift an unfair portion of local taxes to borough property owners.

Proposition 2 seeks to toss out Ordinance 2005-09, a measure adopted by the assembly in June 2005 that upped the borough sales tax from 2 percent to 3 percent, amended borough code so that recreational package sales could be taxed on a per-person, per-day basis, and allowed funds to be appropriation from the borough’s land trust fund to the general fund.

The Alliance of Concerned Taxpayers (ACT), which has actively opposed many of the taxation and spending policies of current and past assemblies and administrations, is behind Proposition 2. They argue, among other things, that Ordinance 2005-09 was adopted illegally when it raised taxes without a public vote.

Last year, ACT succeeded in placing two initiatives on the 2005 municipal ballot, both of which passed. One rolled back the 1 percent increase in the sales tax created by Ordinance 2005-09 and required that future sales tax increases be approved by a super majority of 60 percent of voters. The other placed a $1 million limit on how much money the assembly could appropriate to capital projects without a public vote.

Both were opposed by the assembly, the administration of former Mayor Bagley, and then-mayoral candidate John Williams, as well as by large minorities of borough voters. The fiscal impact of those propositions remains a source of concern for the borough.

Not satisfied with the sales tax rollback, ACT members last fall presented another initiative petition to repeal the entirety of Ordinance 2005-09. That petition became this year’s Proposition 2. However, placing the referendum on the ballot required all of Ordinance 2005-09’s provisions to be put before voters.

Thus, voters will have the chance on Oct. 3 to decide not only on the ordinance’s recreational package tax and land trust fund use provisions, but will again have an opportunity to decide the fate of the sales tax increase.

Borough officials are hoping that revelations earlier this year about the broadening scope of the financial crunch the borough faces will encourage many voters to reverse their 2005 positions and vote down Proposition 2, thus allowing the 1 percent sales tax increase and the other revenue-enhancement provisions of Ordinance 2005-09 to go into effect in January 2007.

Citizens for a Positive Future disagrees with ACT’s assertions about Ordinance 2005-09, and says Prop 2 must be defeated for the fiscal good of the community.

“The Kenai Peninsula Borough is at a crossroads,” Navarre said in Friday’s press release. “Its future and the future of its young people depend on the direction we take at the Oct. 3 election.”

Navarre said Proposition 2 would strangle the borough government’s ability to provide fair, balanced and reasonable taxes for borough residents.

According to the borough, 20 years ago the sales tax provided about 40 percent of tax revenue and property taxes about 60 percent, which CFPF members said was “reasonably balanced.” More recently, there’s been a shift toward real property taxpayers, who now supply around 70 percent of the tax revenue stream. Defeat of Proposition 2 would restore a more proper balance, CFPF members assert.

Sales tax revenues help pay the local share of the costs of running schools. Nearly $8 million would be raised by a 1 percent sales tax increase. An estimated one-third of that would come from visitors.

“Our schools face an ever-growing budget challenge and Proposition 2 threatens our ability to properly fund education in the future,” Dolifka said. “The best way to maintain our schools for our children and offer the best possible education is to vote ‘NO’ on Proposition 2.”

In 1964, borough voters gave the assembly the authority to levy a sales tax to a maximum of 3 percent. The assembly reduced that in 1975 to 2 percent on the first $500 of each sale, but did not give up the authority to tax to 3 percent. The assembly used that fact to justify raising the sales tax by 1 percent last year without a public vote.

The varying interpretations of the law governing that taxing authority may well end up in court. Some members of the assembly have said they would welcome putting the question before a state judge. In the absence of a court ruling to the contrary, assembly members say they acted in good faith and were on solid legal ground when they passed Ordinance 2005-09.

Taxing debate

Wrangling over the Kenai Peninsula Borough’s sales tax has been going on for years. Here’s the highlights of what’s happened so far:


· Voters approved a 3 percent borough sales tax.


· The assembly lowered the sales tax rate to 2 percent.


· The assembly passed Ordinance 2005-09 in June, which, among other things, raised the sales tax to 3 percent, citing the authority granted them by the 1964 vote.

· The Alliance of Concerned Taxpayers put Proposition 5 on the October ballot, which sought to roll back the sales tax increase to 2 percent and require the approval of a 60 percent supermajority of voters to increase it. Voters agreed.

· After the election, ACT launched another initiative petition, which sought to repeal all provisions of Ordinance 2005-09. In November, the petition was certified as Proposition 2 on the 2006 October ballot.


· Citizens for a Positive Future forms in September to oppose Proposition 2 and ACT’s efforts to repeal Ordinance 2005-09.

· The municipal election is Oct. 3. If Proposition 2 passes, all provisions of Ordinance 2005-09 will be repealed — meaning the sales tax will remain at 2 percent. If Proposition 2 is voted down, Ordinance 2005-09 will go back into effect, meaning the sales tax will increase to 3 percent.

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