Borough mayor pitches tax restructure as budget deficit fix

In a presentation in Homer on Tuesday, Kenai Peninsula Borough Mayor Charlie Pierce unveiled a plan for closing the borough’s approximately $4 million deficit by raising the sales tax and lowering property taxes.

Pierce had originally sought to use $3 million, and later $4.5 million, from the borough’s land trust fund to close that budget gap. That measure was shot down 6-3 at the Kenai Peninsula Borough Assembly’s early May meeting.

Pierce outlined an alternative plan to offset the borough’s deficit at a Tuesday Homer Chamber of Commerce Meeting at the Best Western Bidarka Inn. It involves raising the borough’s sales tax from the current 3 percent to 4 percent. At the same time, Pierce said he wants to lower borough property taxes by half a percent. Because seniors age 65 and older already get a $300,000 property tax assessment discount, lowering property taxes would not offer them any relief; it would help younger property owners. Raising sales taxes would be a way to get more money from seniors and tourists.

“The plan we talked about that we’ve kind of thrown out there is a four and four,” he said. “Four cents on the dollar in the way of sales tax and then take the mill rate from … 4.5 (percent) down to 4 (percent). So property owners get a little reduction, (which) incentivizes (that) — it’s a shared effect.”

Pierce said that because the assembly will not allow him to use close to half of the borough’s land trust fund to lessen the borough’s deficit, he plans to flat fund the school district with the same amount ($49.7 million) it received last year. He called it “plan B.”

“The current budget flat funded schools and gave them an additional $1.5 million,” Pierce said. “And the caveat to that was that I was willing to offer that as long as I was permitted to use the land trust fund. I’m not going to get the support I need to use the land trust fund so we have to go to Plan B.”

Pierce said the solution to the borough’s budget deficit will involve new revenue, in terms of taxes.

“Somewhere along the way a decision that we make will not sit well with someone, but we have to agree, it’s back to that unity that I’m trying to create on the peninsula,” he said.

The assembly voted at the beginning of the month to set the school district’s minimum base funding at $49.7 million. This means in theory its members could decide to give the school district additional funds by the time they have to finalize the allocation, but that at the least they cannot fund the district below the identified $49.7 million.

Another area of concern brought up at the meeting was the dispute over where the boundary between the Central Peninsula and South Peninsula Hospital Service Areas should fall. The assembly has made several attempts over the years to move that boundary south, effectively moving current some SPH service area members into the CPH service area.

Homer residents, and especially representatives of South Peninsula Hospital, have been vocally opposed to this proposition, as it would remove members of the southern service area’s tax base, and therefore revenue. SPH would also have to cease offering services through the clinic in Ninilchik.

At the meeting Tuesday, Pierce said the boundary issue is something he’s “paying very close” attention to, and that it’s his wish for the two hospitals to work more in tangent, rather than be in competition.

“I think having two hospitals competing or working independent of each other is probably not a good business model,” Pierce said. “We own two hospitals here on this peninsula, and I think those two hospitals should work in unison. … Our business model should promote keeping those folks here.”

Reach Megan Pacer at mpacer@homernews.com.

Kenai Peninsula Borough Mayor Charlie Pierce speaks at the Homer Chamber of Commerce and Visitor Center’s luncheon on Tuesday, May 8, 2018, at the Best Western Bidarka Inn in Homer, Alaska. (Photo by Michael Armstrong/Homer News)