As discussions of a new police station on the Homer City Council narrow in on exactly how the city is going to pay for it, a seasonal sales tax is being identified as a more popular option.
Council members weighed this and other revenue measures during a work session before their Tuesday, March 27 meeting. Other than a seasonal sales tax, members considered the pros and cons of raising the general sales tax by half a percent, implementing a bed tax, using the general fund balance, raising property taxes by 1 mill and reappropriating general fund reserves to pay for the station.
The city plans to go out to bond to cover the cost of the new station, estimated at $7.5 million. There is already $2.5 million designated to the project. The question is how the city will ask residents to pay back the bond.
The council members generally agreed to remove the bed tax and property tax options from the list. Member Caroline Venuti pointed out that members of the Homer business community were among the most vocal in opposing the proposed bed tax on the borough level when it was in front of the Kenai Peninsula Borough Assembly.
Some members, and Mayor Bryan Zak, said they would not be in favor of drawing down on the city’s fund balance. Rachel Lord, however, said she would be willing to go that route in order to reduce the amount the city has to go out to bond for.
“I would be … somewhat in favor of potentially dipping a little bit into the fund balance to … put towards lowering that bond,” she said.
Lord also said she’d be in favor of the seasonal sales tax, as it would take the burden of paying for the station off of local residents slightly and spread the responsibility among visitors to Homer as well. Member Tom Stroozas said he also favors a seasonal sales tax, but only if it includes a sunset clause.
“I think that would bode very well with the citizens of Homer, knowing that we’re not going to continue to keep a tax on,” he said. “… This is for a bona fide purpose.”
Others, including Lord and member Heath Smith, said a sunset clause could complicate things in terms of paying back the bond and keeping up with ongoing maintenance once the building is constructed.
“I’m on the same page with Tom and Shelly as far as a sunset, but there’s probably a portion of that that probably should not sunset, because it is a portion that’s going to have to be kept for operation and maintenance of the facility,” Smith said.
“I do think that if we are going to sunset the entire thing, that that makes me much more concerned about dipping into any balance — the fund balance or reserve balances — because we are going to have a longterm maintenance introduced,” Lord added.
Other details the council members discussed were whether a seasonal tax should be half a percent or a full percent, and how long to implement it for each year. Some suggested six months, while member Shelly Erickson said that a four-month seasonal tax would line up better with the existing seasonal food tax and make it less complicated for business owners to transition.
If the council wants to put the option of paying for the station with a seasonal tax before Homer voters on the October election ballot, it needs to make a final decision by its last meeting in July.
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