Bed tax and tax cap increase proposals advance towards ballot vote

Aug 2, 2017

Credit Courtesy of the Kenai Peninsula Borough

The Kenai Borough Assembly made two moves towards putting revenue measures on October’s ballot Tuesday. The assembly passed an underfunded budget earlier this spring, and it has been seeking ways to fill the remaining $4.1 million budget gap. But, a sales tax cap increase and a bed tax proposal both advanced during the assembly’s regular meeting.

The assembly approved the first reading of an 8-percent bed tax proposal, but it also approved an amendment by assembly member Dale Bagley to reduce the tax on temporary lodging to 6 percent.

The lodging industry showed up in force to oppose the measure during public testimony. Homer-based Ocean Shores hotel owner Mike Warburton testified in-person.

Like most who testified, Warburton thought the tax shifted the burden of the budget shortfall onto the shoulders of the lodging industry.   

“Maybe I’m naïve here, but I thought one of the benefits of having a representative democracy is where you would protect us from that, protect us from the majority singling us out, a small group, and taxing us,” he explained.

Warburton has suggested a tourism tax in lieu of a bed tax in past years and at recent meetings. He added he would be also be in favor of raising the cap on sales tax, which Homer representative and Assembly President Kelly Cooper introduced later in the meeting.

“So it’s time it’s actually raised if you actually think about it. It’s way behind the curve on that,” Warburton said, referring to other comments over the tax cap not being raised for decades.

Land’s End Resort owner John Faulkner echoed Warburton, although he did not say whether he supported other tax options as he testified from the Borough Annex building in Homer.

“So why would we fight so hard to resist this over so many years and so many different forms? The answer of course is what some of you refuse to admit, and that is that a bed tax will hurt our businesses,” Faulkner said of past attempts to implement the tax. “Those who claim otherwise simply don’t care if a tax hurts our business.”

Under the 6-percent proposal, consumers would pay $27 per night in taxes for a $200 room in Homer. That’s a $12 increase, and the 8-percent tax would have had consumers paying $16 more per night.

Homer Chamber of Commerce Executive Director Debbie Speakman also testified against the tax on behalf of the chamber’s board. Speakman said the increase will cause visitors to limit their time on the peninsula.

“Majority of Homer’s visitors are from Anchorage and the Mat-Su. These visitors already give us plenty of feedback about our 7.5 percent sales tax,” she said. “Adding another 8 percent on top of the 7.5 percent calculates to visitors staying one less day, eating one less time and spending less at the retail shops. It’s not just a few extra dollars, and they do notice.”

The ordinance would allow municipalities to implement their own bed tax and collet up to half of the revenue. Otherwise, the borough would collect all 6 percent, and the revenue from the tax would go towards school funding.

The bed tax proposal will be up for another public hearing and a final reading on Aug. 15.

The assembly also unanimously approved the introduction of Cooper’s tax cap proposal, which would raise the current cap of $500 to $1,000. The ordinance would exclude rental properties from the change.

That proposal will also be up for a public hearing at the assembly’s next meeting. Copper told KBBI in a previous interview that she would pull the tax cap proposal if the assembly votes to put the bed tax on the ballot on Oct. 3.