Proposition 1, a controversial ballot initiative to remove from some cities the right to tax groceries year-round, passed in a landslide Tuesday night, with overwhelming support in Homer.
Proposition 1 is the continuation of a 2008 citizens’ initiative to repeal the winter tax on nonprepared foods in the Kenai Peninsula Borough’s general law cities. Groceries are exempted from borough sales tax from Sept. 1-May 31.
Once enacted, the proposition will repeal a 2008 borough ordinance that allows general law cities to levy their own sales taxes at their discretion, the same way home-rule cities like Seward and Kenai do. Soldotna was the only city that opted to levy the 3 percent tax year round. Seldovia and Homer have followed the same tax schedule as the borough. The Kenai Peninsula Borough Assembly passed the ordinance exempting general law cities shortly before the election in which voters passed the borough seasonal food sales tax.
Most precincts in the borough voted for Proposition 1. Only Soldotna, Kalifornsky Beach and Kenai No. 3 voted against it —
Soldotna with a nearly 27 percent margin, Kalifornsky Beach with a less than 1 percent margin and Kenai No. 3 with an approximately 5 percent margin. Mackey Lake tied.
In the city of Homer, Proposition 1 passed with an even wider margin than borough-wide, with yes votes taking 63.79 percent compared to 34.63 who voted no. After the seasonal sales tax passed in the borough in 2008, Homer voters on an advisory vote elected to keep the city seasonal sales tax holiday on nonprepared foods. Council member David Lewis had attempted several times to repeal the seasonal sales tax exemption, saying that when citizens wanted city support for some expanded programs, he felt they should have an option for doing so.
“I know Dave has brought it up repeatedly, but it just hasn’t gotten traction,” said Homer Mayor Beth Wythe. “I think it’s important we pay attention to what the voters are voting for and not what we think they are voting for.”
Anchor Point resident Tara Kain of Alaskans for Grocery Tax Relief Now helped lead the campaign to pass Proposition 1. Despite aggressive campaigning by the city of Soldotna, Kain said she was not surprised by the wide margin of victory.
“We are pleased with the results,” Kain said. “We do believe it’s a big win for the voters who have decided to uphold the 2008 grocery tax exemption, and the other half of it, getting rid of the cities’ grocery tax portion on it. It was brought to the voters to decide again, and it looks like they have made their decision on that.”
Kain noted that two previous votes on the seasonal sales tax were in years with a borough mayor’s race and higher turnout. With lower turnout this year, voters still upheld the seasonal sales tax, she said. The 2015 results were close to the 2008 vote, Kain said.
Homer has been balancing its budget without food tax revenues since 2008. This month, the council will consider its budget. At town hall meetings on revenue options and the budget, taxing food year-round had been an option, but not one officials seriously considered. The city of Soldotna, which had been taxing nonprepared foods year round, mounted an aggressive campaign against Prop 1.
Kain said the city’s use of public funds angered some voters. “They definitely did launch a pretty big campaign against us,” she said. “One of the issues we had with that was it was taxpayer money. A lot of people were not happy they used taxpayer money to fight this.”
Soldotna city officials have vocally opposed the ballot initiative. Soldotna Mayor Nels Anderson, who will leave office and be replaced by Pete Sprague, said in a radio ad that the initiative would cause Soldotna to lose $1.2 million in revenue, potentially raising property taxes. However, many have said removing the tax in the winter would help families in the borough financially, especially because many shop for groceries in Soldotna.
Because Seldovia and Homer did not tax food year-round, the proposition only takes away a theoretical right to tax food year-round.
Sprague said the city will have to focus on the issue once he enters office to find a way to quickly recover the lost revenue. He said he was unsure what effect the cut would have on the Soldotna city budget, but he was pleased that Soldotna did not support it.
“That’s something we’ll have to address immediately,” Sprague said. “Our budget has already been approved for this year.”
Voters were divided over the proposition. Mark Craig, a Soldotna resident, said he voted for the proposition because the cost of groceries is already a burden on many.
“Taxing groceries in the summer is fine because the city should gather income from tourists, but residents shouldn’t be taxed year-round,” he said.
However, others took the other side. “I said I don’t want it repealed,” Nikiski resident Le Ann McGahan said. “I listened to what Nels Anderson said, and again that had to do with raising property taxes versus what people pay in the store for taxes, and there was a big difference.”