Kenai Borough Assembly to examine bed tax proposal

Jul 19, 2017

Credit Courtesy of the Kenai Peninsula Borough

The Kenai Peninsula Borough Assembly is still looking at ways to fund its $83 million budget. The assembly approved the spending plan earlier this spring, but failed to pass new revenue measures to fill a $4.1 million budget gap.  Borough Mayor Mike Navarre wants to put an 8 percent bed-tax proposal on the ballot this October to backfill the revenue shortage.  

The borough administration estimates the tax would generate up to $3.8 million. There’s also a provision that would allow municipalities to implement their own bed tax and collect up to 4 percent within city limits. The borough would collect the difference. If Homer were to implement a 3-percent bed tax, the borough would take the remaining 5 percent collected.

Currently, Seward is the only city with a bed tax on the peninsula. Lodging establishments outside of city limits would pay all 8 percent to the borough.

Mike Warburton owns the Ocean Shores Hotel in Homer. He told the assembly the tax would be a burden.

“The bed tax has been around a long time. It’s almost as old as the sales tax in the U.S. It kind of makes sense in Anchorage. They have the big convention centers, no sales tax,” Warburton said. “But, here in this location, in this era, there’s a much better solution.”

After combining the borough and Homer’s sales taxes, consumers would be taxed at 15.5 percent during checkout. A one-night stay runs about $200 at Warburton’s hotel. Customers would pay $31 per night in taxes under the ordinance, little over double the current cost.

Warburton said he would prefer a tourism tax similar to South Dakota, where tourist-driven businesses and services pay a 1.5-percent tax on sales.

“I would support the tourism tax. I’ve talked about this long enough now that I’m gaining support in the lodging industry,” he said. “They realize it’s way preferable to a bed tax. They realize that if a bed tax goes in, it’s all over for us.”

Mayor Navarre’s Chief of Staff Larry Persily listed other possible options to boost revenue in a memo to the assembly. He suggested raising property taxes half of a mill, which the assembly shot down earlier this spring. Persily also suggested raising the tax cap from $500 to $1,000 or raising the borough’s 3-percent sales tax half of a percent.

No assembly members commented on the bed-tax proposal during Tuesday’s regular meeting. The ordinance will need to be approved by the assembly before being put on the ballot. There will be two public hearings on the proposal on Aug. 1 and Aug. 15.