Extra revenue for promoting tourism on the Kenai Peninsula is almost always a welcome sight. But when it came to imposing a bed tax to achieve that extra cash flow, a poorly thought-out plan might have become a reality. Local businesses in Homer made their case loud and clear in several public forums showing how a bed tax — on top of other taxes levied at tourism — would hurt the lodging industry.
Kenai Peninsula Borough Mayor Mike Navarre listened.
During Navarre’s three years as mayor, he hadn’t exercised his veto power on any other piece of legislation. But he brought the veto pen out to cross off a proposal that would have asked voters if they want a 3 percent borough-wide bed tax.
“It’s the only time I’ve used it,” Navarre told the Homer Tribune on Thursday. “Mostly with the Assembly, we agree on things and we work things out. This one had nuances or areas that, when we started in on it, I didn’t know until the public testimony.”
Citizens who grow discouraged at believing their voices aren’t heard can take heart that this time public testimony counted. Visitors who come to Homer already pay fees to visit Kachemak State Park. They pay a sales tax on their lodging at the 7.5 percent rate. And they pay sales tax every time they eat at a restaurant or shop in town. Another 3 percent sales tax would have pushed up a $100 hotel room by over $10.
Homer businesses were generally united in their opposition. A forum hosted by the Homer Chamber of Commerce recorded that all of those attending and speaking about the proposed tax didn’t want it.
The Assembly discussed and voted on overriding the veto at its Tuesday night meeting. Four assembly members voted to override the veto. For the override to pass, six of the nine assembly members would have had to vote in favor of it.
On the face of it, the mayor didn’t have a problem with the concept of raising funds for tourism marketing. The Kenai Peninsula Tourism Marketing Council does great work, and a revenue stream is needed to fund it. KPTMC was created as an economic engine by the borough 25 years ago.
Assemblyman Bill Smith proposed the ordinance as a way to help the council achieve a stable revenue source. A percentage also would have gone to cities such as Homer to help with marketing in a “what’s-collected in a town, stays in a town” provision of the ordinance.
But if the measure passed muster with voters, it would have applied borough wide. The mayor realized Homer voters may well fail the measure, but get stuck with a bed tax. And Seward doesn’t need it, because the town already has a 4 percent hotel tax. Why go borough wide if this is the case, Navarre asked. Besides, cities can ask for their own bed tax if they want. Let local communities make their own decisions.
As for the borough’s obligation to KPTMC to help fund it, another solution will be sought, the mayor said. The marketing council took a pretty big beating over trying to implement the bed tax. They put in a lot of work educating chambers and councils around the peninsula; emphasizing that the organization was created as an arm for the borough to rake in tourism. Each year, more than $7 million goes to the borough from tourism. But each year, KPTMC experiences funding insecurity at budget time.
The mayor also said he doesn’t like a dedicated tax. Taxes feeding the general fund ought to compete with funding priorities within perimeters of what’s reasonable, he said.
Speaking of taxes, Nikiski’s Alliance of Citizens Concerned about Taxes’ organizer James Price won a lawsuit against the Kenai Peninsula Borough on Friday. The issue wound its way through the courts for several years, before the Alaska Supreme Court got it, and issued its decision in Price’s favor.
He had collected the required amount of signatures for a citizen referendum to get on the ballot in 2010. The citizen initiative would have asked voters if they wanted to repeal a law the borough passed that granted cities powers to collect food taxes year-round.
Remember that voters in 2008 affirmed the winter tax holiday from October to June on non-prepared grocery foods. But the borough let cities decide whether they wanted to impose it or not. That left the door open for Homer, Soldotna and Seldovia to tax food all year. (Seward and Kenai are not subject to the provision because they are home rule cities.)
Only Homer has honored the voters’ decision by not applying the taxes in winter.
Price’s referendum to see if voters agreed with the borough’s power to override their grocery tax vote was turned down by the borough clerk. It was seen as violating code by prohibiting the special legislation enacted on the grocery tax. Voters didn’t get to vote on the matter, and a number of years went by while Price watched the courts debate the matter.
In light of the Supreme Court ruling that in fact Price’s referendum would be enforceable if passed, Price can now go back and repeat what he did in 2009: gather 1,000-1,500 signatures and resubmit the referendum to the borough clerk.
Then, finally, it will come before the voters next October.
In this case, Price’s patience has paid off.
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