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Marketing council encourages bed tax for Kenai Peninsula

Posted: June 18, 2014 - 11:35am

A Kenai Peninsula Borough-wide bed tax may be headed to the October municipal election ballot.

But first the borough assembly has to consider whether to pose the question to voters.

After hearing from multiple members of the public at its Tuesday meeting, the assembly voted to hold two public hearings on whether to establish a 4 percent bed tax contingent on voter approval. The hearings will be at 6 p.m. at the July 1 and July 22 assembly meetings in the assembly chambers at the George A. Navarre Administration Building in Soldotna.

The ordinance, sponsored by assembly member Bill Smith of Homer, proposes that 75 percent of the tax collected in unincorporated areas of the borough go to tourism promotion for the borough. The remaining 25 percent would be used for borough school purposes. Tax collected in cities would go to their revenues.

“I’m trying to keep pressure off the general mill rate which hopefully if this bed tax passes it will help do that,” Smith said.

Shanon Hamrick, executive director for KPTMC, said a 4 percent bed tax is estimated to bring in about $2.4 million, based on 2013 taxable accommodation sales numbers.

Of the $2.4 million, about $1.4 million would go back to cities, $796,609 would go to borough marketing and $265,536 would go to schools.

“In order for the borough to maintain our schools for as good as we can, we’re going to be looking at spending more money on them than we have been,” Smith said.

While other percentages and allocation amounts were considered, Hamrick said KPTMC proposed a 4 percent bed tax, the same as what the city of Seward currently has in place.

“We settled on the 4 percent because … it was really important that … whatever we had was equal throughout the borough so that there wouldn’t be any areas that were charging a higher rate,” Hamrick said.

Homer and Seldovia both have sales tax rates of 7.5 percent. A 4 percent bed tax would create a total tax of 11.5 percent, still under Anchorage, Juneau and Sitka’s 12 percent bed tax rates.

“In many respects we have a competitive environment to get tourists to come and so (I) just wanted to be within … a good, reasonable tax that we see in other communities,” Smith said.

As laid out in current code, an accommodation tax would be on a per-night basis. However, hotel or motel room rentals for 30 or more consecutive days would not be taxed. Recreational vehicle parks would not be subject to the proposed bed tax.

If passed, Hamrick said with the increased budget KPTMC could participate in Outside and international sales missions to educate travel agents and tour operators about the Kenai Peninsula and push spring, fall and winter tourism.

Hamrick said she also would like to explore creating a position to work with Anchorage and state tourism to incorporate Kenai Peninsula in plans for people who travel to Anchorage for conventions.

“When people are coming to Anchorage for a convention, they want to be able to do other things while they’re in Alaska as well,” Hamrick said.

Hamrick will speak to various city councils in the borough this month about the proposed bed tax and ask for letters of support for the tax. The Seldovia City Council has already voted in favor of writing a support letter, Hamrick said, and the Soldotna Chamber of Commerce also agreed to provide one.

According to the ordinance, for 24 years, the borough has funded KPTMC to market the area as a tourism destination.

If the voters approve the tax, and the borough continues to choose KPTMC as the agency to market the peninsula, KPTMC would no longer request borough funding, which in recent years has been $300,000 annually. Along with the $300,000 from the borough, KPTMC contributes about $275,000, Hamrick said at a May borough finance committee meeting.

She said other state tourist destinations currently have bed taxes in place and are out-marketing the peninsula with larger budgets. Anchorage has a 12 percent bed tax and the largest budget at $7 million. The Matanuska-Susitna Borough has a 5 percent bed tax and an $850,000 budget.

Voters considered and rejected a 4 percent bed tax in 2005. Because it called for 75 percent of revenues to go to the borough general fund and 25 percent to go to a tourism marketing fund, Hamrick said KPTMC did not support the tax.

Following the hearings if the assembly approves, the proposition would appear on the Oct. 7 regular election ballot.

Kaylee Osowski is a reporter for the Peninsula Clarion. She can be reached at kaylee.osowski@peninsulaclarion.com.

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