Lodging industry prepares to fight against bed tax proposal

May 24, 2018

Credit Courtesy of the Kenai Peninsula Borough

A proposal to create a borough-wide bed tax has been revived, but the Kenai Peninsula Borough Assembly may scrap the idea if it approves putting another revenue measure on the October ballot at its next meeting.

The ballot proposition would call for a 12-percent bed tax, but it would relieve the lodging industry from collecting sales tax for the borough.

Assembly member Kelly Cooper, who owns Glacier View Cabins and Coops Coffee, opposed the bed tax at the Homer Chamber of Commerce Wednesday as she spoke to a group of lodging industry members.

She said assembly members think voters will be more likely to approve a new tax if the assembly gets behind one revenue measure. Cooper said she supports asking voters to approve a .5-percent sales tax increase over the latest bed tax proposal.

“If the half-cent sales tax passes, then the bed tax should go away for this year,” she said. “If the half-cent sales tax does not pass the assembly, then on the 19th, the 12 percent will be on the table, and I don't know that we have enough votes to stop it.”

A bed tax has been floated several times over the years, but the idea has faced stiff opposition from the lodging industry.

The assembly shot down the most recent proposal back in March. That proposal would have implemented a 6-percent bed tax on top of borough and city sales taxes. That left lodge owners within city limits charging more than others.

The idea behind the latest proposal is to level the playing field. Cities would be able to collect up to 6 percent between the local sales tax and bed tax. In Homer, that would mean the city would collect 1.5 percent from the bed tax on top of its 4.5 percent sales tax and the borough would collect the remaining 6 percent.

The ordinance’s sponsor, assembly member Dale Bagley, said he is still working out details with the borough’s legal department, but he said the proposal would homogenize taxes on the lodging industry throughout the borough.  

But Cooper and other lodge owners still think the tax places an unfair burden on the lodge owners, which unlike other businesses, lodging is not subject to the borough’s $500 tax cap.

Homer Mayor Bryan Zak owns Alaska Adventure Cabins.

“Really it's the job of the assembly members to do their best, to represent all of the people that they represent rather than to bring something before the voters that’s going to target a specific, narrowly focused industry,” he said.

Teresa Cosman owns Sleeping Bear Cabins in Anchor Point. She opposes the tax because she said the market won’t be able to support higher taxes.

"I can't even raise my winter rates to make money because the local economy will not hold it," she said. "I literally will go out of business.’

Executive Director of the Homer Chamber of Commerce Debbie Speakman said the chamber formally opposes a bed tax, and she said it could cause tourists to spend less money on food, fishing trips and in other sectors within the tourism industry.

The assembly is set to vote on the sales tax increase proposal during its regular meeting on June 5. If that fails, assembly members will consider the bed tax proposal on June 19.

Correction: An earlier version of this article incorrectly stated the date for the borough vote on the sales tax proposal. The assembly will vote on June 5.