By Naomi Klouda
Consumers may lose the 4.5 percent winter sales tax holiday on prepared foods if Councilman Bryan Zak and others on the council hold sway.
“I will be submitting an ordinance at the next council meeting,” Zak announced at the Monday Homer City Council work session. “It’s estimated to bring in $700,000 a year, or about that, I’m told.”
Councilman David Lewis also plans to introduce a measure to recoup at least some of the sales tax from what is classified as “non-prepared foods.”
According to the Federal Food Stamp program, “non-prepared foods includes things like pop, candy, chips, cookies, frozen T.V. dinners, energy drinks. Those are not non-prepared food items,” Lewis said.
“Just a portion would then be taxed.” He is prepared to name the ordinance “Non-Prepared Foods” to emphasize the point.
Kenai Peninsula Borough voters went to the ballot on Oct. 5, 2008 and responded to a ballot initiative asking if they favored a seasonal sales tax exemption from Oct. 1 to May 31. The majority voted in the three percent borough exemption, but cities were left with the discretionary ability to not implement the exemption for city sales tax. Homer voters were asked again about the exemption in October 2009, and again voted in favor of the measure.
Homer’s tax holiday totals a 7.5 percent exemption, including the city’s 4.5 percent.
Most all cities continued to collect the tax. On those grounds, Mayor Beth Wythe defends the new effort to rescind the sales tax exemption.
“We could have had sales tax the whole time. The borough gave cities a choice. We didn’t collect on the strength that our city believed this was the voters’ wish. We need to make sure people understand the why’s and wherefore’s,” Wythe said.
Gaining more revenue is the quest at hand. The 2013 budget process began in earnest at the work session when the body was given its first crack at discussing what they want to see in the budget and what they want to cut.
The Draft Proposed Budget for Fiscal Year 2013 was delivered to the council by City Manager Walt Wrede in early October. It proposes a $25.3 million total budget with $25.1 million in projected revenue. The task ahead for the council is to align those numbers.
The general fund spending and revenue have risen over the past four years, slumping as low as $8.6 million in 2008, but leaping steadily to $10 million in 2009, just over $10 million in 2010 and 11.3 in 2011.
This year’s general fund revenue is projected at $11.441,049 with expenditures projected at $11,403,413.
The city is trying to be conservative in its operating expenses, but still faces critical needs, Wrede told the council. He has described this as a ‘treading water’ budget because it doesn’t allow for an employee cost of living allowance increase, and no new police dispatch officer, an important necessity for delivering vital services, among other shortfalls.
“City staff has done an excellent job of increasing efficiency and doing more with less. However, we are getting very close to our limits and the point of diminishing returns. This needs further public discussion,” Wrede told the council in his budget introduction.
Other areas for raising revenue that are not recommended, Wrede told the council Monday, include port and harbor fee hikes. They are beginning discussions, however, on large vessel moorage rates at the Deep Water Dock to reflect a current problem presented by the Endeavour jackup rig. Though the city collects just under $900 a day for the 410-foot structure, this does not account for the total area the vessel occupies. This keeps out other revenue-generating ships that could be sharing the dock. The city charges dock space by linear foot, and that alone doesn’t account for the extensive space taken by the 410-foot high structure.
Another problem the city has encountered is a nearly 100 percent increase in fees related to health care costs. Wrede has asked for separate discussions to address this growing problem.
Zak, in the initial discussions, said the $700,000 collected through sales tax should go to:
• Depreciation accounts to help with general fund depreciation reserves for city buildings, including the library, city hall, police department, public works and public arts
• Homer Chamber of Commerce, $50,000.
• Provide for a 1 percent COLA for employees estimated at $140,000.
• Pay for a police dispatcher, $70,780.
• Library technician at $28,942.
• $150 restored per month to the city council budget (In 2011, the council reduced by half what they formerly received, $75 for mayor; $50 a month.
• Homer Senior Center, $50,000.
As they work through the budget requests, the city attorney will need to weigh in on whether code allows the city to dedicate sales tax revenue to these pocket allocations.
The council is working toward a Dec. 10 deadline to finalize the budget.
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