The Kodiak Island Borough Assembly moved forward with an ordinance to modify the borough’s tax cap rules at last week’s meeting.
The borough currently has rules limiting the amount of money it can collect in any given year. If the borough decides to raise taxes in one area, like the tobacco tax, it has to subtract that addition from somewhere else.
There are some exceptions, such as inflation, new construction projects, paying bond debt and a few others.
These rules were put into place after a referendum in 2018, when voters approved a measure that limited the amount of money the borough could collect.
Last Thursday, the borough assembly voted to advance an ordinance that would modify the maximum allowable tax rules. If passed, it would cut out all other taxes besides real estate and personal property taxes from the cap. Those other taxes would include excise taxes on tobacco, alcohol and marijuana, severance taxes, hotel taxes and service district taxes.
The ordinance will go to a public hearing at the assembly’s next regular meeting on Feb. 18.
Passing the new ordinance would mean the borough could collect money from new areas without needing to worry about cutting revenues in others.
There are at least three reasons the assembly decided to move forward with the ordinance.
One, the referendum’s originators were really only focused on property taxes.
“Some of the sponsors of the initiative indicated shortly after passage that the primary objective was areawide property taxes, not service area, excise or severance taxes,” Borough Finance Director Dora Cross wrote in a memo to the assembly.
The new ordinance would retain that idea.
Two, administering taxes under the restriction is difficult. Service areas, for instance, are included under the cap. Since those are not area-wide taxes, factoring them into the tax cap is tricky.
Third, and most importantly, the assembly is hunting around for ideas to make the upcoming budget process less painful. It already voted to raise tobacco taxes and motor vehicle registration taxes, and extend the amount of public debate time by moving forward the due date for the borough manager to submit his budget.
This idea fits into that same push by giving the assembly more flexibility when looking to raise revenues.
Still, Borough Mayor Bill Roberts said he didn’t think it went far enough.
“I still think that having an ordinance that severely restricts our ability to raise revenues, especially in times that are so volatile as they are now, that kind of ordinance has no place on our books,” he said.
“Every assembly I’ve seen, including this one, have been extremely conservative on their budgets. I don’t think we need this.”
But most of the assembly has called for some kind of middle ground on the tax cap.
“I, for one, like the way it has balanced these issues, without doing away with it in its entirety, but I think it provides some clarity and fine tuning that makes it a little more on point as far as the original intent,” Assembly Member Duane Dvorak said.