To fund the new police station, council leans toward a seasonal sales tax

Mar 28, 2018

Credit Image Courtesy of the City of Homer

The Homer City Council moved forward with discussions on how to pay for a new police station Tuesday. During a work session, council members leaned toward a seasonal sales tax to pay for part of the roughly $7.5 million project. However, several details still need to be ironed out.

The council was presented with a range of options on how to pay for a new police station from increasing property taxes, a seasonal sales tax to a year-around sales tax option.  

The council has already set aside $2.5 million for the project, and plans to ask Homer residents to pay for the remaining $5 million via one of those options.

Council members took some choices, such as an increase in property tax, off the table and focused on a seasonal sales tax.

But exactly how many months out of the year residents would be taxed is still to be decided. Most council members agreed the city should tax residents half the year, but council member Shelly Erikson suggested four months, which would be in line with the current seasonal sales tax on food.

Council members weighed both a .5 and 1 percent increase to pay for the new station.

If we could look at what percent tax increase would we need to raise the funds we need for the bond payment, I think that would be a good thing to see so that we know what that tax might actually be,” she said.

How much the city will ask residents to pay for was also up for discussion. City Manager Katie Koester suggested the city go to bond for $5 million.

However, council member Rachel Lord suggested dipping into the general fund in order to build on the $2.5 million the city already plans to pay up front.

“Our revenue is fairly stable, and I never want to rest our laurels on that but we do have pretty stable revenue,” Lord said. “And insofar as we could possibly pull that bond down even by $1 million, it's going to potentially be beneficial.”  

Koester and Aderhold cautioned against pulling a large sum from reserves.

If we are judicious with the use of reserves or a general fund balance, I could go there a little,” she said. “But I really am concerned that we need to make sure that we have balances there since we're not going to be putting much money toward that in the coming years.”

There was also a question over whether to include a sunset clause on a seasonal tax , removing the tax after the bond is payed off. Council member Tom Stroozas said he wouldn’t vote for the bond without one.

“I think that would bode very well with the citizens of Homer knowing that we're not going to continue to keep a tax on, that’s just going be there, just because we kind of forget about it now,” he said. “This is for a bonafide purpose and this purpose only.”

There was uncertainty too over how the city would pay for increased maintenance costs. The city estimates on the low end, the new building would cost about $81,000 more per year to maintain. On the high end, maintenance costs could jump about $136,000 annually. But, due to some efficiencies in the new building, such as natural gas heating, the cost is likely to fall somewhere between those numbers. 

The council was initially aiming for a $6 million design, which came out to a roughly 9,500-square-foot building, but council members thought the cheaper design left out crucial features and settled on a design with a daylight basement. That design would be roughly 12,300 square feet. 

Council Member Heath Smith has been a vocal proponent of keeping the size of the building down in an effort to reduce O&M costs throughout the council’s discussions.

There's probably a portion of that [tax] that probably should not sunset because a portion of that is going to have to be accounted for in the operation and maintenance of the facility,” he said.

The council will pick up the discussion on funding at its next work session, but a date has not yet been set. The council will need to make a decision by the last meeting in July in order to put the bond and  tax on the ballot in October.

Correction: A previous version of this story incorrectly stated how much maintenance costs would be for the new police station. O&M costs are estimated to be between about $218,000 and $273,000, an increase of about $81,000 to $136,000 compared to the current police station.