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Copyright vEsti24
May 09 2012
Sales Tax Increase Discussion Continues PDF Print E-mail
Wednesday, 09 May 2012


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Kodiak City Council work session. Jennifer Canfield photo  

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            At last night's Kodiak City Council work session, City Manager Aimee Kniaziowski gave an extensive report highlighting the proposed 2013 budget. In it she addressed many of the concerns that were voiced at a meeting two weeks ago during which the council introduced an ordinance that would increase the sales tax from six percent to seven percent. 

            The city is struggling to cut just over $2 million from its FY 2013 budget to avoid drawing from the fund balance. The council is currently debating an ordinance that would increase the sales tax to seven percent and increase the tax cap from $750 to $3500. It's estimated this would bring in an additional $2.7 million.

            The city manager offered a few other scenarios that would help the city close the funding gap. Reducing the sales tax to five percent and eliminating the tax cap would bring an estimated $2 million. So would increasing the sales tax to seven percent but increasing the tax cap only to $1500.

            Aside from adjusting the sales tax scheme, eliminating the senior citizens sales tax exemption was also discussed. Cutting the senior exemption would bring in $640,000 to the city, or about one-third of the current budget shortfall.

            The city currently pays the healthcare premiums for its employees. It's a huge expense that continues to skyrocket. Council member Terry Haines said that balancing the budget might mean taking extreme steps such as cutting employee benefits. 


"At some point we're going to have to realize that the writing on the wall is there and we may have to make some painful decisions like removing a large part of our healthcare benefits for our public employees. Those kinds of costs are things that we can't predict year after year, we know they're going to rise and we know from past experience that the benefits that we are getting are remaining static and the costs continue to rise up and up. I think that's exactly the kind of thing we need to look at across the board."


            City Mayor Pat Branson agreed that cuts to non-essential services would need to be considered, but that employee healthcare wasn't one of them.


"I'd like to have a little time to look at this and analyze and ask some more specific questions as to non-essential services, like Mr. Haines was saying, maybe the benefit outweighs the cost. Healthcare, I'm not so sure about. That's a different arena as far as I'm concerned. You can't keep employees without offering healthcare of some sort."


            The council- while motivated to find a solution to its budget shortfall- decided to postpone a vote on the ordinance. Council member Gabriel Saravia emphasized that this is a problem that needs to be addressed soon.


"We need to take action as soon as possible.  Five years ago we had the problem and we have the same people that oppose it. I don't want to pay taxes either myself, or for the city council to fall apart and we don't do something. I want to do something, I don't know what. I want to do something to fix the problem and not pass it to my kids or your kids five years from now and by that time we're bankrupt and have to close the entire city. People like it or not, we have to come to an agreement to do whatever has to be done."


            Council member John Whiddon said that making sustainable changes to the budget over time might be the best solution to align spending with revenues.


"It could well be that we don't solve it all in 2012. It could be that it takes us two to three years to get to a point where we have a sustainable budget that doesn't draw down on the fund balance. I don't think we should necessarily fix everything in the first year. I think it might be it takes a couple of years to get where we need to go, but also knowing that the fund balance will be gone in two or three years. That's another consideration, too, that we don't try to catch up to that $2 million in one year. Maybe we should do it in a way that moves us to that goal but in a very, very precise way."


            A public hearing on the proposed sales tax increase is scheduled during the council's next regular meeting which is this Thursday at 7:30 p.m. in the Borough Assembly chambers. The meeting will be broadcast live on KMXT. 

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