A bed tax was introduced at last Tuesday’s Kenai Peninsula Borough Assembly meeting.

The 12 percent bed tax would affect temporary lodging across the borough and be exempt from general sales tax.

The tax is estimated to generate over $1 million in additional revenues in FY 2020, and over $4 million in the next two fiscal years, according to the ordinance.

The bed tax, similar to ones defeated by the borough assembly in 2017 and 2018, is being proposed to close budget shortfalls facing the borough, a memo from Assembly Vice President Dale Bagley reads.

“Due largely to the state’s current economic crisis and proposed reductions of state funds to local governments, the borough is currently facing a budgetary shortfall estimated to be substantial,” the memo said.“The fiscal situation has worsened and the borough needs to close that shortfall. I propose that we pass this ordinance and submit it to the voters for consideration in the next regular election.”

In his memo, Bagley says thousands of visitors traveling to the Kenai Peninsula contribute to the economy, while also creating a large demand on borough services.

“Examples of borough services provided to visitors include solid waste services, fire and emergency medical services, road services, hospitals, recreation services, 911 services and disaster assistance,” the memo reads.

The next borough election is on Oct. 1. If the tax is approved by both the assembly and the voters, it would take effect April 1, 2020. The memo says 49 cities and boroughs in the state have a bed tax, ranging from 4 percent to 12 percent.

The ordinance would exempt temporary lodging rentals from the general sales tax rate and instead would levy a maximum bed tax of 12 percent.

“These additional sales taxes would be used to support education,” the memo said. “They would also make other revenues available for services funded by property taxes and help to sustain the general fund.”

A public hearing on this ordinance will take place at the June 5 meeting.