Borough voters will decide in the Oct. 7 municipal election whether or not to approve a proposition to allow adjustment to the sales tax cap in accordance with inflation, following the narrow passage of an ordinance by the Kenai Peninsula Borough Assembly last Tuesday.

According to assembly member Brent Johnson, who sponsored the ordinance, the current $500 sales tax cap — or the maximum amount of a sale subject to the 3% borough tax — was enacted by the KPB Assembly in 1965 and has since “never been adjusted for inflation.” Per the ordinance, if the cap had kept up with inflation, it would be set to more than $5,000 in 2025.

Ordinance 2025-14, if approved by voters this fall, would go into effect April 1, 2026, and amend KPB Code Chapter 5.18.430 to adjust the cap every five years — the amount to be determined by the prior five years’ annual Anchorage Consumer Price Index published by the state. The amount would be calculated by adding each of the five separate years’ CPI adjustments together, the ordinance states, and rounding to the nearest hundred dollars.

Johnson said during the meeting that his intention behind the ordinance was to bring a better balance between sales tax and property taxes. Ordinance 2025-14 notes that the borough sales tax “is dedicated to schools but has never been sufficient to solely fund schools, therefore property taxes have always supplemented school funding.” In the ordinance, Johnson also called property taxes a “burden” for homeowners and wrote that they “contribute to the difficulty for young people to become homeowners.”

“In my mind, there is a balance between sales tax and the mill rate and property taxes, if you will,” he said last Tuesday. “And the fact that the cap has deteriorated … tells me that some of the shift has gone to property tax, away from sales tax.

“I think that this is not an increase, this is a holding-your-own. If we implement this, we’re not actually doing something that’s going to add revenue, it’s just going to make it so it quits deteriorating.”

The assembly heard comments from Homer city resident Heath Smith, during the ordinance’s public hearing, and assembly members during their own discussion on the ordinance that similar measures to increase the sales tax cap had previously been put before voters and failed.

“I have long supported an increase to the sales tax cap. Unfortunately, the voters have spoken and said that they didn’t want an increase at this time,” Assembly Vice President Kelly Cooper said. “I know it’s just doing the inflation-proofing … I would like to find a time when we would be successful in getting this done. But I don’t feel confident that this is the year.”

The assembly discussed a number of amendments to the ordinance — most of which passed — including the change to the cap adjustment from occurring annually to once every fifth year, and placing the question before qualified voters in the borough. An amendment put forth by assembly member Tyson Cox to keep the sales tax cap for rent for personal or real property, excepting long-term vehicle leases, at $500 also passed. Another amendment to remove the tax cap on temporary lodging was withdrawn by Cox and does not now appear in the ordinance.

The ordinance passed in a 5-4 vote, with Johnson, Willy Dunne, James Baisden, Cindy Ecklund and Assembly President Peter Ribbens voting in favor. Cooper, Cox, Ryan Tunseth and Leslie Morton voted against the ordinance.

Find Ordinance 2025-14 and the Aug. 5 meeting recording in full at kpb.legistar.com.