Homer Alaska - Opinion

Story last updated at 5:17 PM on Wednesday, September 21, 2011

Propositions 1, 2 reveal problems with tax strategy




When Kenai Peninsula Borough voters head to the polls Oct. 4, now less than two weeks away, they'll be asked to vote on two propositions dealing with sales tax and one dealing with how many representatives should be on the assembly and school board.

Proposition No. 1 asks: Shall the seasonal exemption of nonprepared food items from borough sales taxes be repealed?

No. The exemption should continue.

Call us naive, but we think voters knew exactly what they were doing back in 2008 when they approved the exemption of sales tax on nonprepared food items from Sept. 1 until May 31. And the circumstances that prompted the exemption haven't changed.

High costs — including the cost of food — are hammering borough residents. A lot of them are struggling financially. The exemption provides some financial relief for those who live here year round, which was what it was intended to do.

Voters knew there would be consequences, primarily less money for the borough. The borough estimates the exemption has resulted in approximately $1.6 million in lost revenue in fiscal year 2009, about $2.9 million the following year and about $2.8 million this fiscal year.

Is the exemption perfect? No. One of the problems is that when sales tax is collected it is for one month of the second quarter and two months of the third quarter. That can create a bit of a bookkeeping mess. The other problem is if we're philosophically opposed to taxing food, then shouldn't we be opposed to taxing it all year long? Because food is taxed during the busy summer season and not all year, it gives the appearance of upping the prices on our summer visitors.

Nevertheless, until the borough and peninsula cities come up with a comprehensive, fair, consistent tax policy, the exemption should remain in place.

Proposition No. 2 asks: Shall Ordinance 2011-23 providing for the imposition of a sales tax increase of 0.1 percent to be used solely for economic development purposes be ratified?

No. But that's not because we're opposed to economic development or the organizations that rely on some borough funding to help promote economic development. Groups — including the Kenai Peninsula Tourism Marketing Council, the Small Business Development Center and the Economic Development District — deserve borough funding. Those funding decisions, however, should be made during the budget process.

One of the problems with this proposition is that it raises more questions than it answers: How precisely would the money be used? What organizations would be eligible to receive it? How would it be divided? Who would make those decisions? If sales taxes are going up, will property taxes come down?

That two sales tax propositions are on the ballot points to a need for the borough to revisit its tax strategy and involve the public, including peninsula cities, in the process. If the goal is striking a 50-50 balance between sales and property tax, citizens need to be assured if one goes up, the other will come down. We like to believe residents aren't opposed to paying taxes to maintain the high quality of life they enjoy on the Kenai Peninsula, but they want to understand what they're paying for and why and how it benefits the greater good.

Proposition 3 asks voters to choose one of two plans for Kenai Peninsula Borough Assembly and Board of Education representation: Plan 1 is for nine single-member districts. Plan 2 is for 11 single-member districts.

Plan 1.

Nine members is working. More assembly members won't necessarily result in better representation for citizens, but it will result in higher costs.

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As always, it doesn't matter if you agree with us. What is important is that you exercise your right to vote on Oct. 4.

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