Homer Alaska - Business

Story last updated at 9:46 PM on Wednesday, May 11, 2011

KPTMC makes tax pitch for tourism



By Brian Smith
Morris News Service - Alaska

Shanon Hamrick, executive director of the Kenai Peninsula Tourism Marketing Council, said her organization is working to find a long-term answer to its current funding woes.

Since March, Hamrick and the KPTMC board of directors have been gathering support for an idea they think could be that answer — an industry-driven 1 percent sales tax on tourism services in the Kenai Peninsula Borough.

Such a "self assessment" on the tourism industry would boost marketing funding for the area and be a stable source of money for the organization, which is currently funded through the borough's general fund, Hamrick contends,

She said her organization's funding has been "continuously targeted" to be cut from the borough's budget and the money it currently receives is "substantially smaller" than what other similar organizations around the state receive.

"So to be competitive, we have made the argument year after year that they needed to increase the investment in tourism marketing," she said. "But in time of tight budgets, something along the lines of a tourism marketing investment is something that is maybe considered low-hanging fruit when it comes to cuts."

The KPTMC board of directors started developing the 1 percent tax idea in early March after looking at several other ideas to find a new funding source. The tax would be collected by a wide array of businesses related to sport fishing, the lodging industry and other tourism-based services.

Such a tax collection would need to be approved by the borough assembly for placement on the borough general election ballot in October. KPTMC is currently working on drafting and organizing a ballot question to present to the assembly and working to raise support for the initiative among the tourism industry.

"We are not trying to drive a tax that the industry wouldn't support -- we're wanting to make sure they're on board because this would be a public initiative," Hamrick said.

So far, Hamrick said several local Chambers of Commerce and bed and breakfast associations have expressed support for the idea.

"People have suggestions on ways they would like to see the money divided up differently but really we have not had any opposition from the industry for a 1 percent assessment on tourism visitors if that money was returned back to support the industry," she said.

Currently, the KPTMC is receiving $300,000 a year from the borough and raising $225,000 on its own to provide its marketing, Hamrick said.

If approved by voters, the tax could raise about $1.6 million. Of that total raised, 3 percent would be kept for KPTMC administrative costs and $465,481.34 would be set aside for area marketing campaigns conducted by the organization, Hamrick said.

Money collected in the incorporated areas of the borough -- cities like Seward, Soldotna and Kenai -- would be returned in full to those local governments for marketing of that specific area, she said.

Hamrick said 90 percent of money collected in the unincorporated areas of the borough would stay with the KPTMC -- making up the proposed $465,481.34 -- and the remaining 10 percent would be placed into a tourism grant program to provide additional funding for unincorporated communities.

The KPTMC is also consulting with borough attorney Colette Thompson on the legality of the proposal, Hamrick said.

Thompson confirmed she was looking into the issue, but said she had not yet formed a final legal opinion on the tax.

"One of the issues is whether or not we have the ability to impose more than one sales tax in a borough," she said.

Thompson said she is also looking into whether a sales tax can be selective to one industry then earmarked back to one specific organization for its benefit.

"That's one of the issues that I am trying to track down, but I think is probably justifiable," she said. "We need to be careful to make sure though that there is a relationship that would withstand judicial scrutiny between the taxation and the benefit."

Currently, the 3 percent sales tax collected by the borough is allocated to the Kenai Peninsula Borough School District, Thompson said, but a KPTMC ballot proposal would have to outline to voters it would seek a different allocation.

Hamrick said if voters approve the tax it would likely drive the organization's funding needs instead of relying on the borough's general fund.

Borough Mayor David Carey said the budget he recently proposed to the assembly did not include funding for the marketing council. Carey said, however, he would cosponsor the council's request to place the tax on the ballot in October when it comes before the assembly.

"As long as we are asking the people then I absolutely think that is a valid way to look at it," he said. "This obviously would provide on-going funding for what the borough has been doing as well as provide funding to help the cities."

Hamrick said there has been some opposition to the tax idea, including comments that the $1.6 million that could be collected is too much money, she said.

"The fact that it is bringing in $1.6 million is just a testament to how important the tourism industry is on the Kenai Peninsula," Hamrick said. "The way that we have the money divided up does not give any one single entity a tremendous amount of money."

Instead, Hamrick said increases to the marketing council's funding would help in "leveling the playing field," for the organization and area's tourism to compete with other areas in Alaska.

Brian Smith can be reached at news@peninsulaclarion.com.

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