Assembly hears familiar opposition to bed tax, postpones vote

Jun 5, 2019

Credit Courtesy of the Kenai Peninsula Borough

The Kenai Peninsula Borough Assembly is putting the latest iteration of a bed tax proposal on hold. During its meeting Tuesday, the assembly heard what is now familiar opposition to putting the idea of a 12-percent bed tax on the ballot in the fall. Assembly members postponed their vote on the issue until later this month.

The measure calls for a 12-percent bed tax on all temporary lodging except for RV parks, but would also allow cities to share revenue with the borough by implementing their own bed tax as high as 6 percent. If incorporated municipalities decline to do so, lodge owners would remit all 12 percent collected to the borough. The borough estimates the tax would bring in about $4.4 million annually, solving most if not all of its fiscal woes. 

Both Kenai and Soldotna city councils have passed resolutions in favor of the move, but many from the lodging industry testified against it with three main arguments: the largest being that lodging is not subject to the borough’s $500 tax cap.

“Unlike virtually every other tax collecting entity in the borough, there is no tax cap on hotel rooms,” Duane Bannock, owner of the Uptown Motel in Kenai, said. “Specifically when the customer stays at the Uptown Motel, if their stay exceeds $500 in a single stay, their tax cap max does not apply.”

Others argued the proposal targets the tourism industry and that any increase in the price of a hotel room may push visitors away from the Kenai Peninsula. Carol Fraser represents Aspen Hotels, which has locations throughout Southcentral and Southeast Alaska.

She encouraged the assembly to shoot down the proposal and work with the lodging industry to craft something it could support.

“Specifically in Anchorage, there’s a partnership, a public and private partnership. Of the 12 percent, 4 percent goes to the municipality, 4 percent goes to the Dena'ina Convention Center to operate it and 4 percent goes to market Anchorage, to get future visitors to Anchorage,” Fraser explained. “Your 12 percent goes to education, nothing to get more travelers to come to the Kenai Peninsula.”

Many also encouraged the assembly and the borough to find a way to crack down on vacation rentals such as AiRbnb and VRBOs that may not be remitting sales tax. However, Borough Chief of Staff James Baisden told testifiers that the borough plans to acquire “compliance software” to tax vacation rentals.

While opposition to a bed tax overwhelmingly came from the lodging industry, at least one comment in favor of the idea came from Kenai resident Don St. John.

“I’m 110 percent for it. I think the rate is half of what it should be – 24 percent sounds great,” St. John said to a few laughs. “You guys aren’t hurting a damn thing out of your business. The damn tourists are paying for it. I’d prefer that they stay home so I didn’t have all the traffic on the roads, but let’s get some money in the borough to help pay for our budget.”

Assembly members did not signal where they stand on the bed tax proposal, which the assembly has shot down three years running. It will vote on the issue during its next meeting on June 18.