I have heard and read a number of misstatements and misconceptions about borough taxes, funding and ballot propositions that, as a former borough employee, I believe should be addressed.
First, the borough’s official election pamphlet is dead wrong in stating the borough sales tax was established by borough voters at 3 percent. In 1964, borough voters approved a ballot proposition that asked the voters whether the borough assembly should “be authorized to levy a borough-wide sales and use tax ... not exceeding three percent (3%).”
In 1965, the assembly, through Ordinance No. 9, levied a 3 percent sales tax. Later, the assembly reduced the sales tax levy to 2 percent by ordinance.
Alaska law, AS 29.45.670, requires that “an increase in the rate of levy of a sales tax approved by ordinance” must be approved by voters.
This means that the 1 percent sales tax increase, recently approved by a majority of the borough assembly “by ordinance” should have been put on the ballot for voter approval; but a majority of assembly members decided not to.
Second, this 1 percent borough sales tax increase will NOT increase school district (education) funding. The borough, to its credit, already fully funds local education to the maximum amount allowed by law.
Yes, there is a state statute that caps education funding at a certain level, and the borough has, for several years, funded education up to that level, using a combination of sales and property taxes sales tax revenue is not enough.
Revenue from the 1 percent sales tax increase will be used to replace property taxes in the pot of money used for education funding, making more property tax revenue available to fund general borough government operations.
Third, the borough budget deficit has been going on for a long time; it did not just happen, and it cannot entirely be blamed on state cuts in municipal revenue-sharing and increases in public employee pension contributions.
Going back to at least 2000, the borough mayor has proposed, and a majority of the assembly approved, a budget that spends more than revenue received from taxes and other sources. During this same time period, the borough cut the property tax rate and adopted more property and sales tax exemptions, leading to millions of dollars of lost revenue.
The borough used unreserved fund balance (the borough’s savings account) to fund these budget and revenue shortfalls and a fund balance that was $30 million in the late 1990s is now down to $13.5 million (fiscal year 2006).
Fourth, there already is a cap in place on borough capital project funding this is not something new. Currently, borough capital projects that cost more than $1.5 million require voter approval. This cap was $1 million until 1998, when the assembly raised it to $1.5 million.
State statute and local city ordinances contain similar caps. However, there has been a trend in the last few years for borough and city officials to try to avoid this voter approval requirement by using loopholes in ordinances.
Proposition 4 would lower the borough cap back to $1 million and close the loopholes, which allow large capital projects to go forward without voter approval.
In my opinion, if borough residents are required to pay for large projects, including staffing, maintenance and repair for the life of the project, we ought to be able to vote on whether we want this obligation in the first place.
Fifth, super majority vote requirements, like the 60 percent voter approval requirements in propositions 4 and 5, are also nothing new. Many municipalities in Alaska require 60 percent voter approval to levy taxes or increase tax rates.
The spin from some candidates for local office and this newspaper is that super majority requirements would allow a minority to “dictate what happens to all of us.”
However, it is important to remember that in our current system, a minority of residents registered voters who vote already dictate the outcome of elections. A super majority requirement would require more of this minority to approve a sales tax increase or a capital project that affects all residents.
In my opinion, if a tax or capital project enjoy public widespread support, a super majority vote requirement will not be a barrier to approval.
Kristine A. Schmidt has her own law practice in Kenai.
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