Fresh from its successes with two propositions on the Oct. 4 ballot, the Alliance of Concerned Taxpayers has filed another referendum with the Kenai Peninsula Borough Clerk’s office seeking to overturn a set of revenue enhancement measures adopted by the borough in June.
If certified by the clerk, the issue would become a proposition on the October 2006 municipal ballot.
The revenue enhancement proposed by Mayor Dale Bagley in Ordinance 2005-09 included raising the borough sales tax from 2 percent to 3 percent effective Jan. 1. Voters overturned that action Oct. 4 when they passed Proposition 5 and capped the sales tax at 2 percent. The proposition also required a 60 percent supermajority of voters to approve any future increases.
Ordinance 2005-09 took other steps aimed at growing revenues in the face of a declining fund balance and rapidly rising costs. It established a way to dip into the principal of the Land Trust Fund (a fund into which go the proceeds of land sales) to the tune of 50 percent of any amount in excess of the highest previous fund balance. That money would be available for appropriation to the borough’s general fund.
James Price, a referendum alternate prime sponsor, said using earnings of the Land Trust Fund for general government spending was one thing, but Ordinance 2005-09 “went far beyond that by withdrawing money from the principal, which is bad fiscal policy for any public trust fund.”
The 50 percent provision did not apply to the current fiscal year. Another amendment allowed the assembly to appropriate all money over $2.5 million in the fund. That amounted to about $1.43 million, according to Borough Clerk Sherry Biggs.
Price said the referendum to overturn these measures would give voters “the final word on the im-portant issues contained in Ordinance 2005-09.”
Another part of Ord-inance 2005-09 changed the way certain sales taxes would be figured for recreational packages. ACT members said the new formula was complicated and labor intensive and that the assembly should avoid passing laws that might make the peninsula a less attractive destination for tourists.
“There are some serious legal issues with Ordinance 2005-09,” said Mike McBride, president of ACT, who said it was the group’s position that the ordinance probably violated state law.
Mayoral candidate John Torgerson said the referendum's success would make a difference to the budget of the next fiscal year. It could produce a deficit between $9.1 million and $9.5 million, he said.
Candidate John Williams said he favors some of what the referendum intends. He said he was not happy with the way the current administration handled the Land Trust Fund issue. He said any proceeds from land sales should go into a permanent fund, of sorts, established by voters.
“Lands are the legacy to help the borough grow,” Williams said, adding that no surplus should be employed for other purposes unless all the expenses associated with the sale and maintenance of borough lands are taken care of first.
He said he would support the referendum regarding the land trust, but hopes that issue can be separated from ACT’s other concerns with Ordinance 2005-09 by the time the question reaches voters.
Mayor Dale Bagley said it wasn’t clear that ACT understands what it is doing and he expressed some surprise that they oppose the land trust amendments. He said he thought most who would support ACT were people who believe the borough ought to be selling land. The land trust provision is an incentive for future assemblies and administrations to do just that, he said. But the proceeds shouldn’t just sit there.
“If you have a land fund that never rolls over to support government, how big is it supposed to grow, thirty or forty million dollars? I think it was a good thing to cap the fund and to roll some of it over to support government.”
According to Borough Clerk Sherry Biggs, while a provision to cap the fund at $2.5 million was discussed, it was deleted and does not appear in the final version of Ordinance 2005-09.
Bagley said he believed that it is the issue of recreational packages, rather than spending land trust proceeds, that may actually be driving support for ACT’s referendum. Professional guides have “found a loophole” in the sales tax law, he said, that allows them to bundle together expensive recreational activities and sell them at one price, thus taking advantage of the $500 sales tax cap. He called that unfair to other borough sales taxpayers.
Biggs said certification of the referendum would freeze sections of Ordinance 2005-09 having to do with computation of the maximum sales tax and with the recreational package tax accounting and prevent them from taking effect until the results of the election were known next fall. Those portions were scheduled to take effect Jan. 1, 2006.
The Land Trust Fund amendments took effect in July of this year and money has already been transferred, Biggs said. Certification cannot retroactively prevent that transfer, she said.
The clerk has until Oct. 27 to verify the required signatures and certify the referendum petition, ACT said.
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