The Kenai Peninsula Borough Assembly is still searching for viable options to fill the borough’s $4.1 million budget gap. The assembly passed an $83 million budget this spring and voted down two revenue measures. Earlier this month, the assembly began looking at a bed tax proposal. Now, Assembly President Kelly Cooper plans to introduce another option.
Cooper updated council members on the search for revenue at Monday’s Homer City Council meeting.
At the last assembly meeting, Borough Mayor Mike Navarre introduced a bed tax proposal. Cooper told the council she doesn’t think there are enough votes to put Navarre’s measure on October’s ballot. Cooper wants to put at least one revenue proposition to voters and plans to introduce a tax-cap increase, from $500 to $1,000, on Aug. 1.
“My purpose for bringing the sales tax cap to the table is to not only assist us with our shortfall. It would also allow the cities to generate some revenue without having to increase their sales tax rate,” Cooper explained.
Cities are not allowed to surpass the borough’s tax cap. If the proposal is put on the ballot and passes, Homer’s city code would automatically bump up the local tax cap to mirror the borough’s. Peninsula residents voted down the same proposal in 2016, with 57 percent of voters against the increase.
The borough estimates the measure would raise $3.6 million. Navarre’s bed tax proposal is estimated to raise slightly more at $3.8 million, but those in the lodging industry have opposed the measure. City council member Tom Stroozas said Monday that he agrees with hotel owners.
“We’re targeting a single industry in the tourism industry by doing that. So creating a tourism tax, which has proven to be successful in many areas in the Lower 48 and doesn’t single out any particular segment of an industry, seems to me to be a more fair and equitable way of doing it and may very well generate more revenue,” Stroozas said.
Cities would also be able to collect up to half of the bed tax if they implement their own. Seward is currently the only city on the peninsula that collects a bed tax. The borough estimates Homer could see up to $580,000 if it decided to participate. Otherwise, the borough would collect all 8 percent.
In Homer, consumers staying in a $200 room would pay about $31 in taxes per night under the proposal, a $16 increase.
Council member Heath Smith did not say if he supported the tax, but he said the cost to consumers is minimal.
“Homer is a location that you cannot compare to Anchorage, you cannot compare really to any other place in the state. So we offer a lot more,” Smith noted. “I’m not saying I’m in favor of it. I’m just saying it’s not that much more money. If you’re traveling, it doesn’t add up to a lot.”
There are other options for the borough to boost revenue, such as increasing the borough’s 3-percent sales tax half of a percent. But, neither a tourism tax or a sales tax increase are likely to be put on the ballot as the mid-August deadline approaches.
Cooper and Navarre’s proposals would fill most of the borough’s spending gap. Cooper notes she only wants voters to decide on one of the revenue measures, and she said she will withdraw her tax-cap proposal if the assembly votes to put the bed tax on the ballot.
Both options will have public hearings on Aug. 1 and Aug. 15. Homer residents can give testimony via phone at the Borough Annex Building on Pioneer Avenue.