No new taxes, but funding gap remains in borough's budget

Jun 8, 2017

Credit Courtesy of the Kenai Peninsula Borough

The Kenai Peninsula Borough Assembly voted down revenue measures after approving an $83 million budget Tuesday, leaving a projected $4.1 million deficit. Moves to increase property taxes and the number of months groceries are taxed both failed. But, more revenue measures could be coming down the line.

As the assembly pored over Borough Mayor Mike Navarre’s budget proposal Tuesday, there were fundamental differences on where the borough’s money should be spent, namely whether economic development spending actually benefits the borough.

The Kenai Peninsula Marketing Tourism Council and the Alaska Small Business Development Center received cuts.

Assembly Members Stan Welles and Wayne Ogle suggested those reductions, ranging from 10 to 20 percent. Both wanted to cut funding for the Kenai Peninsula Economic Development District, but the amendment was voted down. 

“I submit based on my 20 years experience in Homer as well as several years here that we would not see a reduction in tourism,” Welles said of the Marketing Tourism Council if it shut down.

Navarre argued the services provided by each non-profit comes at a bargain and is an investment.

“Getting people to Alaska is one thing, but getting them to the Kenai Peninsula is another thing,” he said.

He added that individual cities spend more on tourism than the borough.

Welles also moved to zero out $25,000 of borough funding for public transportation in the central peninsula area. That was passed in a 7-1 vote with assembly member Brent Hibbert declaring a conflict of interest.

The Kenai Peninsula Borough School District and Kenai Peninsula College both received good news. The district will receive about $1.2 million more than it requested, allowing 12 frozen positions to be filled. The college received a minor increase.

When it came to revenue measures, there was strong opposition. One Kenai resident feared more taxes would only bring economic harm.

“In these trying fiscal times that we hear about constantly, why is it a good idea to raise taxes?” he questioned.

Navarre wanted to bump the borough’s 4.5 mill rate up half a mill. Just a few residents supported an increase at the meeting. The mill rate started dropping from 6.5 mills in 2007 and was slightly higher during the 1990s.

Navarre fought the opposition, noting the budget on average has grown 2 percent since 2009.

“When’s the last time you heard, when the economy was good, that we should raise taxes and put money back into the fund balance in order to make sure we’ll have adequate funds in our fund balance to ride through an economic downturn?”

Assembly member Dale Bagley also pushed to tax non-prepared foods from October to March 31.   Currently, the borough only taxes groceries during the summer months, bagging some revenue from the swelling tourist population.

South peninsula representative Willie Dunne agreed additional revenues are needed to close the budget gap, but disagreed with Bagley’s proposal.

“I understand the compromise was to have a tax on non-prepared food during the summer months in order to capture some revenue from tourists, but I think there are better ways to do that,” he explained.

The ordinance failed in a 6-3 vote. Bagley, Hibbert and Schaefer voted in favor of the measure.

Dunne, who had expressed interest in a bed tax earlier in the meeting, said the assembly will need to find new revenue in the coming months. As of July 1, the borough will dip into reserves to fill the gap. 

Correction: The Kenai Peninsula Economic Development District did not receive funding cuts.