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Alaska Supreme Court reverses food-tax referendum decision

Posted: August 13, 2014 - 3:25pm

In a decision that clarifies the rights of Alaska citizens to change law by initiative and referendum, the Alaska Supreme Court on Friday said the Kenai Superior Court and the Kenai Peninsula Borough Clerk erred when they rejected a 2010 proposed referendum by James Price, a Nikiski citizen activist. Price sought to repeal a 2008 Borough Assembly ordinance that allowed the borough’s general law cities of Homer, Soldotna and Seldovia to continue charging a year-round sales tax on nonprepared food items. The Supreme Court decision in Price v. Kenai Peninsula Borough et al. reverses a summary judgment by the Superior Court that said Price’s proposed referendum could not proceed because it constituted “local or special legislation” in violation of state law. 

“I’m very excited about the possibility to be able finally to allow the people to have their say in this issue,” Price said in reaction to the ruling. “It’s lawfully appropriate for the people to make this decision. It’s unfortunate they were not allowed to make that decision in 2010.”

Kenai and Seward are home-rule cities and allowed by state law to levy and collect sales taxes. Under Alaska Statutes, general law cities may only levy and collect sales taxes “in the manner provided for boroughs,” unless the borough assembly authorizes general law cities to do so. The cities of Soldotna, Homer and Seldovia had requested the borough grant it the option to tax nonprepared food. Ordinance 2008-28 was passed 6-1 by the borough in September before voters later approved a referendum requiring nonprepared food taxes be exempt from sales taxes from Sept. 1 to May 31. Soldotna later used that power granted to it by the borough to make sales taxes on food year round. Homer put a vote on the seasonal sales tax exemption to the people, and they chose to keep the seasonal sales tax exemption. Kachemak City near Homer also is a general law city, but does not levy sales taxes.

The borough has 10 days to decide how it wants to proceed, said Borough Clerk Johni Blankenship, and borough attorneys are reviewing the Supreme Court decision to decide what action to take.

If Homer votes to become a home-rule city it would then have the same taxing powers as Kenai and Seward, a point made by borough assembly member Bill Smith.

 

 

Smith, who represents the city of Homer, voted in favor of Ordinance 2008-28.

In the Oct. 7 election, Homer votes on the first step in becoming a home-rule city, if it should form a charter commission and who will be on the commission.

Since Soldotna was the only city that used the taxing powers granted to it by the borough, if Price’s referendum made the ballot and passed, Soldotona’s tax revenues would take the biggest hit.

“He wants us to force the city of Soldotna to not charge that sales tax, by using the power of the voters of the borough as a whole,” Smith said of Price. 

In a decision written by Justice Craig Stowers, the Alaska Supreme Court not only considered the borough’s argument that the ordinance could not be changed by referendum because it was local or special legislation, but that it was unenforceable as a matter of law.

The borough argued and the Superior Court agreed that while the referendum would be voted upon by all borough residents, it would only affect Homer, Seldovia and Soldotna, and thus be local or special legislation. The court said it would first determine if such legislation is generally applicable. It said because the ordinance was passed by an assembly representing the entire borough — that is, some of whose members do not represent Homer, Seldovia and Soldotna — the same factors are relevant in considering if the referendum or ordinance is local or special legislation.

“We conclude that the ordinance is more akin to legislation that we have previously held to be generally applicable,” Stowers wrote.

The judge cited challenges to ballot initiatives that would have moved the state capital, Boucher v. Engstrom, and one that would have regulated large-scale mining, Pebble Partnership v. Parnell. In both cases the court found that both “initiatives were generally applicable although the effects of the initiatives would likely not be uniform statewide,” Stowers wrote.

In reference to Ordinance 2008-28, “borough residents who do not live in the general law cities have an interest … because they may shop and use other services in the general law cities.”

Ordinance 2008-28 is of borough-wide interest and does not violate the state’s prohibition on local or special legislation, the Supreme Court concluded.

The Superior Court decision did not consider the argument that the referendum was unenforceable, and Price did not consider it on appeal, but the Supreme Court went ahead and ruled on that point as well. The borough had argued that the power to authorize taxation is exclusive to the assembly and that a referendum would unlawfully delegate such power to the voters. 

“We conclude that the referendum would be enforceable,” Stowers wrote for the court.

The issue isn’t if a referendum authorizes cities to tax different sources than the borough, as the borough argued, but if it can repeal an authorization made by the assembly. State law doesn’t prohibit repealing by referendum an ordinance authorizing city taxation, Stowers wrote.

“The borough’s position, if adopted here, would impermissibly limit the referendum power,” Stowers wrote. “The Alaska Constitution expressly empowers voters to nullify the exercise of legislative power by rejecting legislative acts.”

Ballot Measure 1, a measure that would repeal Senate Bill 21 changing Alaska’s oil tax structure, is an example of asking voters to repeal legislative acts.

Price praised the Supreme Court for making the right of voters to reject legislation clear.

“They (the borough) should not try to stop the people from having their say in their government,” he said. “It’s our government. It belongs to the people.”

Price also said he was disappointed it took so long for the courts to rule. Acting on his own, or pro se, he appealed to the Superior Court the borough’s denial or his referendum. Attorney Joseph Skrha then helped him fund an appeal to the Alaska Supreme Court, and Anchorage lawyer Kenneth Jacobus presented the appeal. 

“It’s frustrating when it takes years and thousands of dollars to force the borough to get your rights you’re granted through Alaska Statutes and the Constitution of the state of Alaska,” Price said.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

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