Proposition 1 asks voters to decide if the borough should issue just over $2.5 million in general obligation bonds to finance capital improvement projects at borough schools. Issuing the bonds could actually save the borough a good deal of money, borough officials say. A 2005 state law provided the opportunity for state reimbursement funds covering 70 percent of the cost of school projects. Further, that law allows the borough to go back three years to recover costs already incurred.
Borough Finance Director Craig Chapman said the borough already had authorized expenditure of more than $2 million to cover the borough’s cost associated with four projects. If voters approve the sale of the general obligation bonds, he said, the borough would save approximately $1.032 million.
“To me, it’s a no-brainer,” Chapman said Thursday. The four projects include areawide arsenic remediation, roofing at Nikolaevsk School, Soldotna Elementary School windows, and roofing at McNeil Canyon School. The bonds would be paid off from property taxes. Assuming the $1.032 million reimbursement, the cost to property tax payers would be $2.01 per year per $100,000 of assessed value. This assumes that the debt is issued for a term of 10 years at a rate of interest of 4.25%.
The ballot question would read: “Shall the Kenai Peninsula Borough borrow up to $2,588,000 through the issuance of general obligation bonds for school capital improvement projects?”
A yes vote approves the sale of the bonds and allows the borough to be reimbursed approximately $1,031,959 from the state of Alaska.
A no vote prohibits the issuance of the bonds and the project costs would be funded entirely by the borough. Proposition 2 arose out of the stormy history of Ordinance 2005-09, a measure adopted by the assembly in June of last year in an attempt to raise new revenues that, among other things, increased the borough’s 2-percent sales tax rate to 3 percent. An initiative election last fall overturned the increase, re-establishing the 2-percent sales tax rate and requiring a 60-percent voter approval for future sales tax increases.
Ordinance 2005-09 had also included other provisions, such as authorizing application of the sales tax rate to recreational sales on a per-person, per-day basis; and authorizing appropriations (based on a specific formula) from the Land Trust Fund to the general fund.
In November 2005, the borough clerk’s office certified a referendum petition to repeal 2005-09 entirely, and suspended the provisions of the ordinance pending a referendum vote. However, that initiative resulted in all of the provisions of 2005-09, including the sales tax increase, to go back before the voters this fall.
Much has occurred in the borough’s economy since the sales tax election last fall, and there is a chance that voters might change their minds about a sales tax increase come Oct. 3. Borough officials are hoping that’s the case.
The proponents of retaining the 2-percent tax and the 60-percent provision - primarily the group Alliance of Concerned Taxpayers - hope voters will eliminate all of 2005-09 and re-approve the sales tax cap.
Voters will be presented with the following long referendum question: “Shall Kenai Peninsula Borough Ordinance 2005-09, ‘An ordinance amending the borough code to provide for increased revenue enhancement measures including increasing the borough sales tax rate to three percent, amending KPB 5.18 to provide that taxes on recreational package sales shall be calculated on a per-person, per-day basis, appropriation of a portion of the fund balance from the Land Trust Fund to the General Fund,’ be repealed?”
According to the clerk’s office, if voters approve the referendum, Ordinance 2005-09 would be repealed in its entirety. There would be no impact on the current 2-percent sales tax and that rate could not be altered for two years without referral to the voters.
Approval would have no impact on appropriations from the Land Trust Fund account made in the fiscal year 2007 budget. According to the borough legal department, the provisions regarding such appropriations in 2005-09 were unnecessary because other law gave the assembly the authority to make such transfers even without passing a specific ordinance.
Finally, approval by voters would result in the borough not taxing recreational package sales on a per-person, per-day basis, at least for a period of two years. If the referendum fails, all of Ordinance 2005-09 would become effective, returning the sales tax rate to 3-percent immediately upon certification of the election, unless the effective date were extended by assembly action, and recreational package sales would be taxed on a per-day, per-person basis beginning Jan. 7, 2007, unless the effective date were extended or unless the assembly repealed the provision prior to the effective date.
Again, win or lose, the authority of the assembly to appropriate funds from the land trust account would not be affected.
Hal Spence is a reporter for the Peninsula Clarion.
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