Area’s assembly members argue for, against bed tax

Editor’s Note: The Homer News asked Kenai Peninsula Borough Assembly members Bill Smith, who represents Homer on the assembly, and Mako Haggerty, who represents the rest of the southern peninsula, to share their views on a proposed bed tax. An ordinance that would put such a tax before voters in the October municipal election will get a second hearing before the assembly on July 22.


Proposal is way to restructure how we pay to attract visitors

By: Bill Smith

Should voters decide on a bed tax? The assembly is not enacting a bed tax: That decision belongs to the voters. The question before the assembly is whether or not to place enactment of a bed tax before the voters.

The proposal to ask voters about a bed tax is a question of restructuring how local government pays for the expenses of attracting and hosting our visitors. Should we continue to pay for these services with the taxes collected primarily from residents, or should we ask the visitors to pay a larger share for the services we provide?

One argument against asking our voters is that the visitors being taxed do not have a say in the vote. But, under that premise, no one from Anchorage would be paying borough or city sales taxes when they visit. Also no one living outside of our cities would be subject to city sales tax without being able to vote on the tax. Obviously not a workable proposition for local government.

Some would argue that the oil companies in Alaska are in a similar position, but one wag observed it looks like they already have their representatives doing their voting.

The proposal, for the voters to decide, requires all bed tax collected within cities to return to the cities and requires the money be spent for visitor industry promotion or visitor support services. Some question if they can trust the city to do what they want done with the money, or say there are no guarantees. 

If the city does not do what you want, you either do not have a good case to make to the council, or the other voters do not agree with you. Local government is about you and your fellow citizens managing your own affairs; it is not some foreign entity run by untrustworthy strangers.

The bed tax revenue collected from outside of cities would be used by the borough to fund tourism promotion through a contract with a nonprofit or other entity. This arrangement has been in borough code since 1990.

The borough has exercised its authority and responsibility to promote economic development by contracting for those services. We have moved away from the former practice of using in-house personnel and found ways to leverage the money spent for economic development. Contracting for tourism promotion is one of those economic development activities better performed by a non-government entity which is able to leverage the local government funds in ways the government cannot. Overall, it has meant more bang for the buck and limited government spending. 

Since the major Alaska population centers and many smaller ones have enacted bed taxes, the great majority of Alaskans have adopted bed taxes for their communities. It is a known and appropriate way for communities to fund the ever-ongoing challenge of enhancing economic development (in this case tourism) and supporting the activity to the benefit of our local businesses and residents.

Experience in other communities has shown that bed taxes do not discourage tourism or suppress other spending in a community. This has been clearly demonstrated in the city of Seward which has had a 4 percent bed tax for more than a decade.

I believe an amendment to change the bed tax proposal down to 3 percent will pass the assembly. So, the question for our voters to decide will ask if they wish to enact a 3 percent bed tax. This tax will help reduce demand on property taxes and increase the work that is being done to enhance tourism, one of our vital industries.

Bill Smith of Homer serves as vice president of the assembly. He was first elected to the assembly in 2007 and re-elected in 2008 and 2011. His term expires this year. 

Those on front lines say tax would hurt, not help industry

By Mako Haggerty


EOs, politicians, floor managers and generals would do themselves and their goals a big favor if theyd take a little advice from the folks on the front lines. 

Those on the front lines, the cashiers and office staff and owners, know how awkward, and sometimes uncomfortable, it can be explaining that we have a sales tax here in the Kenai Peninsula Borough. Bookkeepers, backing up the front line, know how complicated it can be calculating the  amount of gross sales that go to our borough for these taxes. This isnt something to complain about, indeed we should be proud that we know how to take care of ourselves in the Kenai Peninsula Borough. These taxes fund an excellent school system and go a long way to support our quality of life here on the peninsula.

Now we are being asked to consider a bed tax, or a transient accommodations tax. This will single out one niche of our visitor industry, the B&Bs and hotels/motels. The visitor industry has already been singled out in the form of a recreational per person per day basis§ sales tax in the charter industry, and the hotel and B&B sector must charge sales tax for every day of your stay.

This might be fair if these taxes went to our schools and helped support the infrastructure that is burdened by the visitor industry, but there is little support for that from the front line. Instead these revenues will be used entirely for marketing tourism on the Kenai Peninsula. If there is support to put these bed taxes into the general fund it will come from a small group of civically minded folks and this will engender a constant battle on how those funds will be appropriated.

We need to ask: Where did this idea come from?§ This concept is an attempt to support an important sector of our local economy. Unlike large corporations, our local visitor industry is made up of many small businesses that spend their money locally. The visitor industry also is important because it diversifies our economy. This is good for all of us whether you run a charter fishing business or own a gift store or work on a tug boat up Cook Inlet.

The word from the front lines is that the bed tax will have a chilling effect on the number of days a visitor will spend here on the Kenai Peninsula. Something we can ill-afford in such a short season. 

I believe that the $300,000 that the borough already funds tourism marketing is a small price to pay for the big return the tourism industry brings to our local economy. This is why I cannot support a bed tax.

As well intentioned as the bed tax idea is, it is time we recognize how much the visitor industry already contributes to our borough, both directly and indirectly. To add another tax to a small group in this sector is unfair. 

Just ask someone on the front line.

Mako Haggerty was first elected to the assembly in 2009 and was re-elected in 2012. His term expires in 2015.