Kenai Peninsula Borough Mayor Mike Navarre attended the Homer City Council meeting on Monday, where he talked with council members and Homer's Mayor about two propositions that will appear on the Oct. 4 municipal ballot.
Both propositions address Borough tax code. Mayor Navarre said the proposed tax increases are needed.
“We embarked over a year ago on looking at a comprehensive review of the Borough sales tax code and property tax code, something that had not happened in a long time. What is driving spending decisions? Quite frankly, we made a determination over a year ago to increase spending on education and we did that last year, we did that this year. The result is that the borough will in the future need to increase revenues or reduce spending,” said Navarre.
Navarre pointed out that 68 percent of the Borough’s budget goes toward education.
The Borough’s tax rewrite has produced four ordinances. The Borough Assembly passed them all. Two of the ordinances require voter approval and will appear as ballot propositions in the upcoming election.
Navarre said the intention of the changes is to find a balance.
“What are we proposing in the changes? It’s really to look at the mix between property taxes and sales taxes with the idea towards increasing some revenue, but also keeping the balance that we’ve seen over the years between property taxes and sales taxes,” said Navarre.
Ballot Proposition 4 would allow a gradual reduction of the Borough’s optional senior property tax exemption. Navarre said the change paired with projected demographic shifts offers potential for steady revenue generation.
“Last year about $850,000,000 in senior-owned property was off the tax rolls, that’s about 12 percent. As we go out into the future, the senior demographic is growing faster than any other place in the state in terms of percentage of our population,” said Navarre.
Ballot Proposition 3, would increase the maximum amount of a sale subject to sales tax from $500 to $1,000 with the exception of residential rentals. Navarre says the net impact of the proposition would be significant.
“This is the biggest item in terms of revenue. It raises a net of about 2.9 million. It helps balance the budget out into the future,” said Navarre.
Navarre says the tax changes are, in part, an effort to get ahead of state cuts related to declining oil revenue, that are expected to impact the Borough’s budget for years to come.
The Borough’s tax code has not been updated since it was instituted in 1965.