Borough bonds pass; tax proposals fail

Kenai Peninsula voters shot down two tax proposals but supported two bond issuances for new projects in Tuesday’s elections.

Voters in the Kenai Peninsula Borough decided on the future of four ballot propositions Tuesday.

Proposition 1 approves the issuance of more than $10 million in bonds to fund the construction of future cells at Central Peninsula Landfill outside Soldotna, which serves the majority of the borough’s population.

Proposition 2, decided by voters in the South Kenai Peninsula Hospital Service Area, approves $4.8 million in bonds to fund new facilities at South Peninsula Hospital and the Homer Medical Center. Both passed — a little more than 53 percent of voters supported Proposition 1, and about 57 percent of voters supported Proposition 2, according to the unofficial results.

The other two ballot propositions generated controversy throughout their discussion.

Proposition 3 would have raised the maximum amount of a purchase subject to sales tax from $500 to $1,000, but exempted residential rentals from sales tax.

Proposition 4 would have gradually eliminated the borough’s optional senior property tax exemption, reducing the total exemption available to peninsula seniors to $200,000 by 2024. Current recipients would not have lost their exemptions.

Proposition 3 failed, with 57.53 percent of voters opposing it. Proposition 4 failed dramatically, with 71.68 percent of voters against it, according to the unofficial results.

Both propositions arose from a comprehensive review of the sales and property tax code from Borough Mayor Mike Navarre’s administration over the last year. The borough assembly reviewed both proposals after discussion, but both needed voter approval before going into effect.

Prop 2 was a bright spot in the results.

 

South Peninsula Hospital Service Area voters on the lower Kenai Peninsula easily passed by 57 percent to 42 percent a $4.8 million bond to expand the Homer Medical Clinic and install new heating and ventilation systems for the hospital operating rooms.

SPH spokesperson Derotha Ferraro said she was relieved but not surprised at the results.

“Over and over again, for 60 years to be exact, this community has prioritized access to locally controlled, high quality healthcare, and they did it again tonight,” she said on Tuesday.

Ferraro said she thought voters approved Prop 2 because it was a win, win, win situation.

“The projects improve access to care that use the least expensive financing available and with no additional burden to the taxpayer,” she said. “It was just a triple win whereas some of the other things on the ballot weren’t an all-around win.”

Design work for the operating room heating and ventilation system starts this week. On Wednesday, the Homer Advisory Planning Commission was to consider a conditional-use permit application for the medical clinic expansion. Once that passes, requests for bid proposals will go out. At press time early Wednesday it was not known how the planning commission would vote on the CUP.

Because of higher property assessments and some refinancing of other hospital debt, the bond can be paid for without raising the SPH service area mill rate.

Navarre proposed the increase in the sales tax cap because the amount had not increased since 1965, when it was set at $500 per individual transaction. The change, which would have gone into effect on Jan. 1, 2017, would raise approximately $2.9 million in additional revenue for the borough. Because of concerns for the effect on renters, who would have to pay more in sales tax every month, Navarre proposed exempting residential rentals.

Many of the voters said they saw the merit in raising the tax cap, though others disagreed with raising taxes. Christopher White of Soldotna said he disagreed with the rental property exemption.

“I didn’t like the byproduct of that sales tax thing, which was like people wouldn’t be taxed on their rental dwellings even though they live there, so I voted … no on that,” he said.

Diana Spann of Soldotna voted yes on Proposition 3 because she said it was time to raise the sales tax.

“… I think that we need to share the burden of the benefits that we reap while we live here,” Spann said.

The question of whether to eliminate the borough’s portion of the property tax exemption raised controversy throughout the discussion because of the potential effect on seniors. The state requires that municipalities maintain at least $150,000 in property tax exemption for seniors and disabled veterans, and the borough offers a $50,000 residential property tax exemption for a total of $200,000. The portion that would be phased out is an additional $150,000 the borough opted into.

Navarre said he proposed the reduction because as the peninsula’s population ages — the Alaska Department of Labor and Workforce Development projects that approximately 23 percent of the peninsula’s residents will be age 65 or older by 2030 — and more property value becomes eligible for exemptions, the tax burden will shift toward the younger population, which will comprise less of the total.

“The senior population is growing at 10 times the rate of the regular population,” Navarre said at a June 21 borough assembly meeting. “If we get to a point where we have 50 percent seniors and 50 percent non-seniors, should the non-seniors pay twice as much in order to pay for the services for the seniors?”

Voters had mixed reactions to it. Gary Hinkel of Kalifornsky Beach Road said he would have been more willing to support it had he been voting to revoke current seniors’ exemptions, not the exemptions for those in the future.

“It feels like a cheap shot,” Hinkel said. “If they need it now, take it now.”

Margo Reilly of Kenai said she voted against the reduction in the senior property tax exemption because many seniors have fixed incomes.

“I’m disappointed to be voting on the senior tax exemption,” Reilly said. “I think they’ve earned that.”

 

Reach Elizabeth Earl at elizabeth.earl@peninsulaclarion.com.

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