As candidates campaign for mayor, city council and borough assembly seats around the Kenai Peninsula Borough, there are other important decisions being put to voters. There are three propositions on the ballot this October asking voters about everything from marijuana to raising the tax cap, and Borough Mayor Mike Navarre has been giving presentations around the peninsula to educate voters on those decisions.
Navarre was in Homer Wednesday to give a presentation on ballot Propositions 2 and 3. Proposition 2 asks voters to approve spending $5 million on a new heating system for the borough administrative building in Soldotna, but Navarre spent most of his time on proposition 3, a question of whether to raise the tax cap from $500 to $1,000.
“The borough would generate additional revenues of about $3.6 million per year, and they’re needed because we have a $4 million budget gap,” Navarre explained.
There are a number of contributing factors that led to the borough’s current fiscal situation. Navarre says the Kenai Peninsula Borough Assembly passed a seasonal exemption on non-prepared foods in 2009. That led to about a $3 million drop in revenue, but sales tax from high oil prices picked up the slack until about 2014.
Then in 2015, borough coffers were hit with about a $1 million drop in revenue after the borough increased exemptions for property owners, and the property tax rate itself has been cut nearly in half since 2000.
The borough needs to find a way to shore up its $82 million budget in order to avoid depleting its savings account by 2020, but so far voters and the assembly has shot down most proposals.
“I did present a balanced budget to the assembly. It included an increase in the mill rate from 4.5 mills to 5 mills. That was turned down by the assembly,” Navarre noted.
The assembly voted against putting a bed tax proposal on the ballot this year after the lodging industry pushed back, and it declined to increase the number of months groceries are taxed on the peninsula this spring.
Borough residents also voted down a tax cap increase last year by a wide margin. Navarre says he has hope for the proposal to pass this year, citing that the borough’s tax cap is the second lowest in the state, and it hasn’t been changed since 1965.
“We did a little calculation. If you just adjust it for inflation over that period of time, the $500 limit would be at around $3,800,” Navarre said.
Most cities on the peninsula automatically mirror the borough’s cap. The borough estimates Homer would see about $350,000 in additional revenue. Kenai could see about $400,000 and Soldotna would see about half that.
When it came to Proposition 1, which would ban commercial cannabis outside city limits of the borough’s six incorporated cities, Navarre didn’t have much to say.
He did note the proposition passes, it won’t eliminate marijuana on the peninsula.
“Having it legal in some areas and not in others, it’s still going to be available legally, and it probably means more illegally will be available,” Navarre answered after an audience member asked him to comment on the issue.
He added that Proposition 1 is a question of whether voters want pot sales regulated and taxed. The borough estimates that the young industry will contribute about $100,000 in tax revenue this fiscal year, but Navarre expects that number to grow if the proposition fails.
“Competition does over time bring the price down. When it gets to or near the level of illegal sales, more of those sales will transfer over to legal sales, and the sales tax numbers should and probably will go up,” Navarre explained. “That’s what’s happening in other states.”
Currently, about 25 commercial pot businesses are up and running in the borough. Keep Cannabis Legal, a pro-industry group campaigning against the proposition, estimates those businesses have created about 100 jobs.
The fate of the industry will be put into the voters’ hands on Oct. 3, but those living within Seward, Soldotna, Kenai, Homer and Seldovia will not be able to vote on the measure as those communities regulate the industry within city limits.