To tax or not to tax

• City Council shifts into budget talks; wants the $697,000 from winter food tax holiday for city expenses
By Naomi Klouda
Homer Tribune

HOMER TRIBUNE/Naomi Klouda - Kelly Cooper (LEFT) receives the Pancreatic Cancer Awareness month proclamation from Mayor Beth Wythe. (RIGHT).

HOMER TRIBUNE/Naomi Klouda - Kelly Cooper (LEFT) receives the Pancreatic Cancer Awareness month proclamation from Mayor Beth Wythe. (RIGHT).

Residents may see their food sales taxes rise Jan. 1 in a move to fund three new city staff positions and to sock away savings in rainy day accounts, but judging by testimony at the Homer City Council meeting Monday night, the idea isn’t going down easy.
Testimony, mostly against reapplying the sales tax, came before a 2013 budget talk that showed what the estimated $697,000 in revenue would be spent on.
The council accepted two ordinances to be voted on Dec. 10. One proposed by Councilman Bryan Zak would outright reinstall the city’s 4.5 percent taxes on all nonprepared foods between Oct. 1 and May 31. Another, proposed by Councilman David Lewis, would leave the tax holiday in place on meat, fish, poultry, dairy, grains and all other foods except for so-called junk food. These include cookies, soda pop, chips, ice cream and frozen TV dinners, which Lewis argues, are not “non-prepared” foods.
Lewis took the hot seat, however, in a Monday afternoon work session when it came to logistical questions from his colleagues. How, for example, would grocery stores separate out the non-taxable from the taxable?
Cash registers are programmed to tax or not tax certain items, Lewis responded. He doesn’t foresee this will be a problem. Councilman Beau Burgess said he would be more comfortable about the concept if it were tied to an already established index.
“Looking at it from a bookkeeping or business standpoint, it’s a nightmare to figure out. I would like to hear from retailers about what the impact would be on them,” Burgess said.
City Attorney Tom Klinkner checked into the legality of rescinding the tax holiday on just certain items and found it is allowable under borough code. Lewis mentioned that groceries were separated out in the past by the borough for tax or nontaxable items. But it was challenged in court and not allowed. Borough tax collector Craig Chapman said retail stores use their own software to update taxable inventory. He did not recall taxing certain items and not others as ever being challenged in the borough.
Lewis was asked numerous questions in the work session on his softer tax collection proposal. But Zak’s tougher ordinance grabbed the focus of public testimony.
Doug Stark spoke in favor of Zak’s ordinance 12-53.
“The city needs the money to maintain our quality of life. At the time Homer enacted the moratorium to match the borough’s, all the rest of the cities on the Peninsula chose to continue their sales tax,” Stark said. “Sales taxes have the advantage that they’re easy to collect, but also that they cover buyers from the whole area so that only about half of the income comes from Homer residents.”
Megan Murphy also supports putting the tax back on. “It seems like a common sense, forward looking thing to help community programs,” she said.
Resident Larry Slone also agreed that if citizens want to see city programs and services, they need to ante up and contribute through their sales taxes.
But others had strong words against the proposal. Lifelong Homer resident Ray Kranich said cities can always use more money.
“The people spoke twice (through ballot measures) that they didn’t want that tax on food and here you go again. I know you have the authority to do it,” Kranich said, “(but) it’s time the city manager and department heads sharpen those pencils a little more. You should do that before you take an action on the population. There’s always room for cuts.”
Frank Bauer told the council the tax shouldn’t be reinstated. “The power to tax is the power to destroy incentive, investment and purchasing power of the people,” he said. Resident Wes Head called taxing food the “most regressive” since it hits those on the lower income end harder than those at the middle or top.
“Listen to the voters and do not reinstate the tax,” Head said.
The council then took a look at a lengthy list of budget amendments proposed by Zak. These proposed expenditures were based on his assumptions that the council will vote Dec. 10 to rescind the sales tax holiday and over the course of 2013, the city would be $697,000 richer. The draft budget for 2013, proposed by the city administration, is currently at $11.4 million.
Council member Barbara Howard was the most outspoken about this budget approach. It disenfranchises the voter when government “turns around and doesn’t honor the outcome” of their vote. “I’m not going to support that ordinance and therefore I can’t support this amendment,” she said.
Additions proposed to the expenditures include:
• A 2 percent Cost of Living Increase for city employees and a police dispatch position for $70,780, a new library tech at $49,569 and city contribution to the Homer Senior Center of $50,000. Burgess wanted to reduce the senior stipend down to $20,000. In a vote, other council members agreed to this reduction.
• Lewis proposed that an amendment by Zak to pay council members more, up to $100 per month, be struck down. This would bring the monthly stipend to $150. Burgess wanted to see it remain to attract more people to the pool of candidates in the next election. Wythe didn’t believe she wanted more compensation. “I consider it an honor to serve,” she said. In the end, the council voted to keep the $4,820 stipend in the budget proposals after a four-two vote.
• Zak also wanted to give the Homer Chamber of Commerce $50,000. The chamber is in line to receive $21,000 per year, so this would push their allocation to $71,000 in 2013. Lewis proposed reducing that amount down to $10,000 – bringing the total contribution to $31,000. Roberts felt the marketing money for the chamber would be well spent. Burgess said in other towns, a bed tax or other revenue is specially dedicated to spending on marketing. To make Homer competitive with such communities, the chamber is given marketing funds.
Zak also praised the chamber’s work since it brings revenue to the local economy. “This is one of the cogs in the wheel that make it run more efficiently,” he said.
Wythe agreed it would be good to give the chamber more money, but not the $71,000 amount. In the end, Councilman Jim Dolma suggested reducing the $50,000 to $19,000. This would increase the chamber’s allocation to $40,000. Wythe’s vote broke a tie to pass forth the $19,000 allocation.
• The COLA was proposed to be reduced from 2 percent to one percent, cutting in half the $110,967 allocation. This proposal centered on the pros and cons, since city staff have not had a COLA for several years. On the one hand, Burgess said, the bulk of the budget goes for city staff. “Those are the meaty items that make or break the city’s budget. I have a hard time giving a COLA knowing the private sector area is not doing nearly as well. It’s hard for me to support, knowing the other side of the coin.”
On the other hand, city employees had their pay lowered through increasingly shouldering health care costs, Lewis noted.
In the end, the COLA remained at the proposed 2 percent increase.
• The remaining amount, about $185,000, would go into reserve accounts for Public Arts, City Hall, Parks, Planning, the airport, the library, fire, police and public works. Each account would gain between $5,000 and $50,000.
At the end of the process, Howard again expressed frustration that the proposal is to take money from mother’s grocery budgets to add to the city’s savings accounts. “I feel we are doing some bad public policy. I am wondering about the whole general concept. I don’t like where we are tonight.”
But strengthening the town’s rainy day depreciation accounts makes the city stronger overall, Zak said.
No decisions are finalized until the Dec. 10 vote on the budget, Burgess said.
All of these amendments are contingent on whether Zak’s proposal to rescind the tax holiday passes. No calculations were made on how much Lewis’ ordinance rescinding the sales tax on some items would bring in.

In other matters:
Homer Chamber of Commerce Director Monte Davis visited the city council to talk about the marketing work the organization has done for Homer for more than a decade. Last year’s budgeted amount of $21,000 was tripled to $65,000 with the leverage of other monies added in. The chamber hosts the annual Winter Carnival, Get to Know Homer, the Kachemak Bay Shorebird Festival, the 4th of July Parade, in addition to the derbies. “We present these events to and for our community,” Davis said. “Quality of life issues are economic development issues.”
This year, 91,000 visitors guides were given out, a key sign of the visitor volume.
• Mayor Wythe issued a special proclamation designating November Pancreatic Cancer Awareness month. There were about 60 deaths in 2012 in Alaska, and there is as yet no cure and no significant improvements in 40 years. The Pancreatic Cancer Network in Homer supports the research funding efforts. Kelly Cooper, who received the mayor’s proclamation and lost her husband to the cancer, said as they wrap up awareness month, there will be a 6 p.m. Thursday vigil at WFKL Park to honor all survivors.
•Jerry Lawver, lead operator for the City of Homer water system, was awarded the 2012 Water Operator of the Year by the Alaska Rural Water Association. Mayor Wythe acknowledged his honor in a public proclamation.
• Green Dot Program: the council heard from Economic Development Coordinator Katie Koester about the Green Dot Program for responding in issues of domestic violence and sexual assault. The national program links in with towns to create trainers. The Council on Domestic Violence and Sexual Assault is working on customizing the program in Alaska. Currently, they are looking at two communities for model programs, but the state has not yet selected which ones.
• The council agreed to pay $100,000 from the general reserves to fund a tidal power incubator project at the Deep Water Dock. This budget item was linked to the repaving project on Fish Dock Road. The 2012 capital budget already contained an appropriation of $212,270 from the Homer Accelerated Roads and Trails Fund (HART) for the road.
Peninsula Borough Assemblyman Bill Smith, involved in the tidal incubation project, said the first step is learning more about currents to understand ocean-power resources on the Homer Spit. The study will collect data to determine if beneath the dock is a good site.
• The council passed an ordinance to designate $20,000 from the trails fund account to pay for a cost estimate to construct the Kachemak Drive Nonmotorized Trail. This is the first step toward finding out if the trail is feasible. It is not a guarantee the trail will be built, noted Mayor Wythe.

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Posted by on Nov 28th, 2012 and filed under Headline News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

3 Responses for “To tax or not to tax”

  1. What the says:

    “The city needs the money to maintain our quality of life.”

    You ‘need’ leather furniture. Your wants are beyond our means. Sorry.

    Taking money out of our family’s mouths lowers our quality of life. If you were worried about a rainy day fund, you should not have wasted all the money you did have on City Hall.

    Homer Citizens need a full account of all money spent by this City Council.

    For instance, I do not want to be taxed to give to the Chamber of Commerce, ridiculous. They can fund themselves. Talk about takers!

    “give the Homer Chamber of Commerce $50,000. The chamber is in line to receive $21,000 per year, so this would push their allocation to $71,000”

  2. raised by wolves says:

    What amazes me is how easy it is to spend “someone else” money. All the funds in the city’s coffers belong to the people of Homer’s “quality of life” not just the people who work for the city. The programs and derbies are fun and nice representation of the community (Hamlet by the Sea), but they are not necessary for our quality of life. Our quality of life depends on how well people can heat their homes, respond to fires, serve the sick and dying, feed the families, and to still maintain a reasonable lifestyle while they pay the taxes that support the city government.

  3. Louise says:

    Thought the private sector wasn’t for government handouts? What’s changed?

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