A plan to set a 2.5-percent Homer bed tax stopped on the first step of a process that would have required ultimate approval by the Kenai Peninsula Borough Assembly. In 4-2 vote, the Homer City Council at its May 26 regular meeting spiked the idea.
Council member David Lewis had proposed putting on the fall ballot an advisory proposition asking voters to approve the tax. If the vote passed, it would then require borough assembly approval.
“We need to stop this here right now and not put it to the voters,” council member Bryan Zak said in voting against the bed tax.
Lewis said he put forth the idea after Kenai Peninsula Borough Mayor Mike Navarre vetoed a similar idea at the borough level.
“The mayor said, ‘If Homer wants it, let them vote.’ There have been people who have come up to me and said, ‘Why not a bed tax?’”
Those people didn’t speak in a public hearing at the second and final reading of Ordinance 15-13. Of 10 people speaking, all but one spoke against the bed tax. Former council member Kevin Hogan said he didn’t object to the tax, but did argue that under the Alaska Constitution the city couldn’t allocate funds from it. Lewis proposed that percentages of the tax go to things like parks, arts, recreation and culture programs. He estimated about $600,000 would be raised total.
“I would hope you have the wisdom not to alienate the visitor industry any more than our fishing industry,” said Collette Walker, owner of the Berry Patch B & B. Walker was one of a half-dozen bed and breakfast, motel and cabin owners who spoke against the tax.
Michael Warburton, owner of the Ocean Shores Motel, and Adrienne Sweeney, owner of the Driftwood Inn, said visitors notice things like bed taxes and calculate that cost in making tourist decisions. Lewis had said at a previous meeting that bed taxes were something tourists got used to paying and didn’t notice.
“I know from experience that’s not true,” Sweeney said. “They want to know what the full rate is.”
Sweeney said about 65 percent of her guests are Alaskans, and in the winter that goes up to about 95 percent.
“I realize you’re trying to increase city revenues. More taxes isn’t the answer. Economic growth is the answer,” Sweeney said.
Warburton said if Homer wanted to tax the tourist industry, he suggested a small 1-percent general tourism tax like is done in South Dakota.
In discussion, Lewis asked City Attorney Tom Klinkner if Alaska cities had authority to allocate taxed funds. Klinkner said the Alaska Constitution referred to allocation of state funds, not municipal funds, and it was allowed.
Zak, who also owns a B & B, spoke against the bed tax. City Clerk Jo Johnson said a memorandum from the city attorney said Zak did not have a conflict of interest.
“Forty years ago if we had done this we could have put a mattress on that big halibut hook on the Spit,” Zak said. “I don’t think we have to keep going down the road on a bed tax for Homer only.”
Homer Mayor Beth Wythe noted that Homer faces some budget shortfalls, including a reduction in funding for the state’s contract for prisoner services at the Homer Jail. In a letter from the Alaska Department of Corrections, the state said Homer will get $424,080 in funding for fiscal year 2016 starting July 1. Homer has adopted a formula of higher sales taxes and lower property taxes as a way to get funding from nonresidents without also harming property owners.
“We don’t have a lot of fluff. We could close the library. We could close community schools,” Wythe said.
Zak noted another agenda item, a $621,500 proposal by Wythe to fund design of the Public Safety Building out of the general fund.
“We want to spend over $600,000 out of the general fund, and we’re looking at putting this tax on businesses?” Zak asked.
In the end, Lewis could only coax one more vote, and with council member Francie Roberts voting with him, the bed tax idea failed.
In the proposal to fund further design of the Public Safety Building, Wythe pushed it as a way to get a plan on the table so that people could have something to look at it if the building went to a bond proposition or grants became available.
“If we quit now, we have nothing to put forward,” she said.
While the money would come from the general fund, Wythe said it was actually unallocated state revenue-sharing funds. When the city receives revenue sharing, unless it goes to a specific project, the money remains in the general fund. Because it cannot be relied upon as funding, however, those funds are not used to fund the general budget.
Council member Beau Burgess spoke in favor of moving ahead with a 35-percent design.
“This is at the core of what the city needs to support,” he said. “As awesome as our police and fire are, the workload in this city does decrease public safety.”
Zak asked if the city could renovate the Homer Police Station, but Wythe said that would not be financially advisable.
“That is not a safe working environment,” she said.
Ordinance 15-18(s) passed on first reading. It goes up for second reading and public hearing at the council’s next meeting, postponed to June 15.
Michael Armstrong can be reached at michael.armstrong@homernews.com.
Homer City Council meetings rescheduled to June 15, 29
With not enough Homer City Council members expecting to be available to make a 4-member quorum, the council has rescheduled its June meetings, Homer City Clerk Jo Johnson said in a press release last week. Meetings have been rescheduled for these times and dates:
• 4 p.m., June 15
• 4 p.m., June 29.
Regular meetings start at 6 p.m. and are held in the Cowles Council Chambers, Homer City Hall. The June 8 and 22 dates have been vacated.
