Bed tax nixed; fire bonds approved

Posted: Wednesday, October 05, 2005

Kenai Peninsula voters sent a proposed bed tax proposition down to resounding defeat Tuesday, saying no to a 4 percent sales tax on accommodations at hotels, motels and bed and breakfast operations.

Voters in the Central Emergency Service Area, meanwhile, agreed by a wide margin to support a $2.5 million bond package that will pay for planning, as well as building and equipping a new fire station in Kasilof and renovating another station in Funny River.

Proposition 1, the transient accommodations or "bed tax," was to apply to rooms rented for less than 30 consecutive days. It would have been added to the existing borough sales tax. The actual annual rate would have been determined during the yearly budget process. Some 75 percent of the estimated $900,000 the tax was expected to generate each year was to go into the general fund. The rest was to go into a special fund to be available for tourism marketing efforts.

Lodging business owners, especially around Homer, opposed the proposed tax, arguing it was unfair and would drive business away. As it turned out, that was the prevailing opinion over much of the Kenai Peninsula Borough. Proposition 1 failed by a wide margin. With all 26 precincts reporting, "no" votes outdistanced "yes" votes by 55.3 percent to 44.7 percent, or 4,866 to 3,931 respectively.

Jon Faulkner, a Kenai Peninsula hotelier, said he was somewhat amazed that Proposition 1, which he opposed, had indeed gone down to defeat. With Proposition 5, a measure to roll back and cap the borough sales tax also on the ballot, pundits had predicted the bed tax would be a certainty to pass, he said.

The negative vote was a clear message to borough government, Faulkner said.

"I think that voters are tired of increased government spending that isn't justified and this is a wake-up call, big time," he said.

He said the demise of Prop 1 and the success of Prop 5 confront borough government with the "perfect storm."

"I think this is a clear indication that the borough assembly didn't listen to the public," he said. "I don't blame the public. I blame the assembly. They were out of touch on this issue. A bed tax would hurt the tourist industry and the plan to spend the money was not well justified."

Proposition 2, meanwhile, enjoyed a nearly two-to-one approval rate. Nearly 60 percent of voters in the Central Emergency Service Area said yes to the bond package.

The bond debt will be paid for by property taxes levied on taxable property located within the Central Emergency Service Area. Based on 2005 tax year assessed values, that will cost property owners about $15 a year on each $100,000 of property value they own.

The success of Proposition 2 was predictable. In 2004, voters approved expanding fire protection and emergency medical service to include Funny River and the Kasilof-Cohoe-Clam Gulch areas.

A Kasilof station was seen as a way to reduce response times by emergency personnel. Likewise, renovations to the Funny River station would include facilities for staffing the station, thus reducing response times.

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