Council still chewing on food tax

BY MICHAEL ARMSTRONG

STAFF WRITER

The Homer City Council on Monday introduced an ordinance that would ask voters again if they want to repeal a seasonal exemption on sales taxes for nonprepared foods. 

The question has a new twist, though: It also would ask voters if they want to dedicate .25 percent of sales taxes to fund a parks and recreation department, and potentially pay for a recreation building. The city sales tax rate of 4.5 percent would not be raised, but the seasonal exemption would go away.

While that ordinance moved forward to a second reading and public hearing, the council stopped in its tracks another ordinance introduced by council member David Lewis that would have repealed the seasonal exemption by council action alone. 

Council member Beau Burgess introduced the parks and rec version of the seasonal sales tax repeal. The council voted 4-2, with council members Bryan Zak and Gus VanDyke voting no, to introduce that ordinance, 14-03. It now advances to a public hearing and second reading on Jan. 27.

Lewis’ ordinance would have repealed the seasonal sales tax exemption from Sept. 1 to May 31 for nonprepared foods. An opinion from City Attorney Thomas Klinkner reiterated that the council had the authority to repeal the seasonal exemption on its own without a citizen vote. That ordinance would have done that. 

The vote to introduce Lewis’ ordinance failed 4-2, with Lewis and council member Barbara Howard voting yes. Howard said she voted yes just to advance the ordinance to a public hearing.

Burgess, who attended Monday’s meeting telephonically from Santa Barbara, Calif., said he introduced his ordinance because citizens sometimes give mixed messages when the council considers tight budgets and says it has to cut some services.

“We basically said to the voters, you can have ice cream or you can go see a movie. Those are your options,” he said. 

“And the voters said, ‘I want ice cream and I want to go see a movie.’”

That idea is what psychologists call “cognitive dissonance,” the ability to hold two contradictory opinions at the same time.

By specifying what some of the sales tax revenue could go for, Burgess argued, citizens might better understand the effect of their vote. If they want to increase funding for parks and recreation, they can vote to repeal the exemption, he said.

A .25-percent dedication from sales taxes would raise about $400,000 in annual revenues, enough to make bond payments on a recreational building, City Manager Walt Wrede said.

In arguing for his ordinance, Lewis said the city needs to recoup the lost sales-tax revenue to pay for programs like recreation. He noted the city added positions like emergency medical technicians and a full-time children’s librarian and kept funding for the Pratt Museum and the Homer Foundation.

“There are a number of things that need funding, and for that you need money,” Lewis said.

He also noted many programs are used by non-city residents who work and shop in the city and use city services like libraries and parks. Sales taxes are a way to get income from those residents.

In response to a comment from council member VanDyke that repealing a food sales tax exemption also affects city residents, Mayor Beth Wythe provided some historical context. When the city asked voters to increase sales taxes in 2006, the council also reduced the property tax mill rate to give residents some tax relief. The seasonal exemption came about after a borough citizen initiative that created it. In 2009, the council put the question to Homer citizens, and they voted overwhelmingly for the seasonal exemption.

Wythe also pointed out another issue: that in balancing its budget without raising taxes, the city has delayed funding depreciation for equipment and facilities.

In speaking against a repeal of the food tax exemption, Zak noted how food taxes affect the poor.

“I have a problem with that,” he said. “It puts this burden on an element of our community that also is struggling.”

In public comments on the ordinance, Anchor Point Natural Foods owner Tara Kain talked about how a repeal would affect her customers.

“I’ve met a lot of people having financial difficulties already,” she said, “If there’s a tax on food, there are going to be a lot of people who are worse off.”

Lewis said a food tax wouldn’t affect the poorest of the poor, those making SNAP, or Supplemental Nutrition Assistance Program, purchases using food stamps. Rob Lewis, Kenai Peninsula Borough sales tax supervisor, confirmed the borough does not assess sales taxes on food provided by federal programs.

If the vote to repeal passes, because the .25-percent dedication to parks and recreation came from repeal of an exemption and not raising taxes and dedicating that portion raised, a future council could take back that dedication, according to an opinion from Klinker.

The council also discussed the idea of separating the question of repealing the  food-tax exemption from dedicating .25 percent to parks and recreation, but did not make that move.

As to the idea of a recreation service area, Kate Crowley, a member of Recreate Rec, a citizen group supporting community recreation, said she has been talking to borough attorneys about creating a recreation service area that would include and tax southern Kenai Peninsula residents outside the city of Homer. Recreate Rec has been discussing Burgess’ ordinance as well as a borough recreation service area, she told the council.

“We’re still exploring it,” she said of the service area. “They’ve been very supportive of it at the borough, but we don’t know yet if we would put it to a vote in October.”

If Burgess’ ordinance passes, it would go on the municipal ballot in October for voter consideration.

A public hearing on his ordinance is at the next council meeting starting at 6 p.m. Jan. 27 at the Cowles Council Chambers.

Michael Armstrong can be reached at michael.armstrong@homernews.com.

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