Larry Persily, chief of staff to the Kenai Peninsula Borough mayor, speaks to the Kachemak Bay Rotary Club about propositions on the borough ballot for the upcoming October election during their Thursday, Sept. 21, 2017 meeting in Homer, Alaska. (Photo by Megan Pacer/Homer News)

Borough voters face several props

Kenai Peninsula Borough voters face a full slate of candidates and issues. All borough residents will select one of three candidates for borough mayor: Dale Bagley, Linda Farnsworth Hutchings or Charlie Pierce.

Residents in the unincorporated areas of the borough — on the lower Kenai Peninsula, voters living outside of the city of Homer and Kachemak City — will vote on Proposition 1 that asks if commercial cannabis will be banned outside incorporated cities. A “yes” vote approves the ban while a “no” vote rejects the ban and allows existing commercial cannabis operations, including growing, testing, manufacturing and retail sales.

All borough voters consider two other propositions. Prop 2 authorizes the borough to take on $5 million in debt to upgrade the heating and ventilation systems (HVAC) of the borough and school district administration building in Soldotna. Prop 3 would raise the sales tax cap from $500 to $1,000.

That is, the current maximum amount that can be taxed at the borough sales tax of 3 percent would go up from $500 to $1,000. The most amount of sales tax that could be charged would increase from $15 to $30 for sales in the borough or from $37.50 to $75 for sales in the city of Homer (including the 4.5 percent Homer sales tax). The tax cap would remain at $500 for residential rent but go up to $1,000 for commercial or office rent. The tax rate itself would not increase. All sales tax revenues from the borough sales tax go directly to support education.

At the Kachemak Bay Rotary Club’s last meeting, Larry Persily, chief of staff for Mayor Mike Navarre, made the pitch for both propositions. For Prop 2 or the HVAC upgrades, that system is almost 50 years old and has become expensive and difficult to maintain. In the winter, borough employees use electric space heaters because the system is so inefficient.

“You’ve got to replace it sometime,” Persily said. “You could plan or you could wait until the winter when it goes out.”

On Prop 3, the borough had tried last year to increase the sales tax cap. That was part of a ballot that also asked voters to reduce over time the $300,000 senior property tax exemption to the state mandated $150,000. Both propositions failed. The borough assembly brought the tax cap increase back as part of the need to address declining revenues, including state support through capital improvement grants or revenue sharing. The borough faces a $4 million revenue gap next year between anticipated revenues and a status quo budget.

“The assembly and the mayor thought they would like to try again,” Persily said. “The assembly said we have a revenue problem.”

Sales tax revenues fell about 2 percent last year, mainly due to cheaper motor fuels. The borough also has been bleeding sales tax revenue due to online sales like Amazon and other big web retailers, Persily said.

“The borough by law cannot touch those (online sales),” he said.

States can pass a user tax, but that’s difficult to enforce because tax collectors would have to go after consumers and not retailers, he said. Colorado got around that by requiring Amazon to report every sale and collect the user tax.

“My concern is regardless of the sales tax, more and more of the 330 million Americans are shopping online and it’s hurting America and not just Homer,” Persily said.

He understands that consumers can sometimes find better deals online.

“It’s hard to tell someone it’s better for your community if you pay more,” Persily said.

If the taxable cap increases to $1,000, the borough would receive $3.6 million and the city of Homer would receive $358,000. The Kenai Peninsula Borough has the second-lowest taxable cap in the state, just ahead of North Pole. Nome and Kotzebue have no limited sales tax cap and Juneau has a $12,000 limit. The peninsula cap was set in the 1960s, and if adjusted for inflation would be about $3,000.

Reach Michael Armstrong at michael.armstrong@homernews.com.

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