Assembly votes down bed tax, puts stock in sales tax increase
The Kenai Peninsula Borough Assembly, once again, took up the topic of new taxes Tuesday in order to fill the roughly $4 million fiscal gap it’s facing going into budget season. The assembly had two tax items on its agenda, a bed tax, which it declined to send to voters, and a sales tax increase, which will be hashed out next month. The assembly heard from the Southern peninsula lodging industry and residents who said a bump to the sales tax was the most appealing option.
The assembly heard from hotel owners both in person and by phone from the Homer Annex Tuesday, and a common thread was apparent in their testimony.
“Our small industry already contributes a huge amount of sales tax dollars to the borough’s bottom line,” Adrianne Sweeney told assembly members over the phone.
Sweeny co-owns the Driftwood Inn and AJ’s Steakhouse in Homer. Sales tax on lodging isn’t subject to the borough’s $500 sales tax cap, and Sweeny argued that an additional tax would hurt the tourism industry.
“Adding another tax on top of the uncapped amount that we already pay is not the solution to bringing in more sales tax dollars in our economy,” she said. “My business last year was slightly down. I believe that a 6-percent bed tax, which would make our tax here in homer 13.5 percent, will encourage visitors to stay outside of Homer and to not stimulate our economy or attract visitors to our area.”
That’s something Homer Chamber of Commerce Executive Director Debbie Speakman agreed with in general. She did say a bed tax may not deter people from coming to the peninsula, but she said more taxes would reduce the money visitors spend elsewhere.
“This is my $20 bill for my vacation, lodging, lodging taxes, flight, food,” Speakman said as she ripped up a piece of paper to represent taxes cutting into tourists’ spending money. “Retail is left with left with this much and that’s what I’m worried about. We want to spread it across the board. Let’s do a broad-based tax instead of keeping it to a bed tax. It’s very small and we have a lot of lodging members in my area, but I’ve also got a lot of restaurants and retailers that need their cut too.”
Speakman, Sweeny and others said they would support a sales-tax increase. Ocean Shores hotel owner Mike Warburton vocally opposed a similar bed tax proposal last year, and led a campaign against the idea when it was on the ballot in 2005.
“I promise that myself and a number of people in the lodging industry will support and campaign for the .5-percent sales tax increase in lieu of a bed tax,” he told the assembly. “On the other hand, we will very vigorously campaign against a bed tax like we did in 2005. The voting public listened to us then, and as Mr. Bagley corrected me, we did not win by 10 percent, but we did win by 9 percent in that public election.”
The assembly declined to send the bed tax proposal to voters in a five to four vote. South peninsula assembly members Kelly Cooper and Willy Dunne split their votes.
Cooper voted against the bed tax, agreeing with lodge owners that it would negatively impact the economy. Cooper did sponsor the sales tax increase, which was introduced Tuesday.
She thinks that the public will get behind the idea.
“Our residents get it. They want to pay their share. They understand sales tax is a value for education,” she explained. ”I’m counting on the public assisting us with getting that passed. I do like the idea of a mill rate as a caveat in case it doesn’t pass, but $2.50 for $500, that’s broad-based and the one that affects us the least.”
The assembly will hear testimony and vote on whether to send the measure to voters on April 3. If the assembly does decide to put the tax proposal on the ballot in October, it’s unclear just how popular it might be.
Kenai Peninsula residents voted down increasing the sales tax cap from $500 to $1,000 last year and residents also shot down other revenue proposals such as a property tax exemption for seniors in recent years.