Daily Sitka Sentinel

Charter’s Tax Limit Is High Bar to Clear

By TOM HESSE

Sentinel Staff Writer

The last time Sitka voters said they would consider a property tax hike was Oct. 2, 1990. To place that in time, it was about one year before Tim Berners-Lee would unveil the World Wide Web.

In that election, Sitkans voted 3-1 in favor of adding a section to the city charter limiting the property tax to a maximum of 7 mills. (One mill is one tenth of one percent.) 

Putting the property tax limit in the charter was a new concept for Sitka. The issue was placed on the ballot by a citizens petition in reaction to the property tax increases voted by the Assembly the previous four years, when the rate went from 3 to 6 mills.

The drafters of the petition gave the Assembly some leeway in setting a tax limit 1 mill higher than the rate in effect at the time, but they took an extra step to nail down voter control over any raise over that limit. The proposition said that any raise over the 7-mill limit would require the approval of 60 percent of the voters in an election.

Sitka’s city attorney at the time pointed out that the 60 percent requirement was meaningless – the tax cap could be raised by a simple majority in an election approving another charter amendment.

A Sept. 28, 1990, story in the Sentinel reported the background of the proposition.

“Joe Garrison, an operator at Associated Sand and Gravel and long-time Sitka resident, was instrumental in formulating the proposition and seeing the signatures were collected and certified. ‘In the past few years they’ve doubled our property tax without asking a word from us,’ Garrison told the Sentinel recently.”

In that same article, Garrison is quoted saying “once it goes up, it never goes back down.”

As it turned out, the Assembly never exercised its discretion to put the property tax at the 7-mill limit and it remained at 6 mills for a few years after the 1990 election.

Seven years later, in another populist revolt, the voters decided that the 7-mill option was too generous. They went to the polls and amended the charter again, lowering the tax cap to the 6-mill rate in effect at the time.

The 6-mill cap on the 1997 ballot passed by a margin of 64 to 36 percent, 1,571 to 879.

The requirement that voters must approve any property tax higher than 6 mills has proved to be a high bar to increasing the property tax rate, even without the 60 percent rule, which was discarded along the way.

Since the 6-mill limit was imposed almost two decades ago, there have been three attempts to increase it. Voters rejected them all, by an average margin of almost 20 points.

This year’s Assembly is taking another whack at it. They have placed a question on the Oct. 4 city election ballot proposing a 2-mill hike in the property tax cap.

“It’s pretty impressive,” City Administrator Mark Gorman said of the voters’ resistance to a higher property tax over the years. “I think it’s a heavy lift to convince the voters to tax themselves and to increase the tax on themselves – in any environment that’s a tough hill to climb.”

    Past attempts to raise the cap were tied to hospital funding, road reconstruction and purchase of the Hames Center, and they all failed at the ballot box.

An effort to dedicate a property tax increase to hospital funding failed on a special election ballot in 2004. The proposition would have specifically allocated the extra mill to Sitka Community Hospital, with a clause that said the tax would sunset when the hospital had $10 million in reserves.

    At the end of 2014, Sitka Community Hospital didn’t have enough cash on hand to meet its short term expenses and needed a $1 million line of credit from the city. After the fiscal crisis was discovered, Rob Allen came on as the hospital’s CEO and has been working toward making the hospital more sustainable. Given the recent fiscal struggles of the hospital, Allen said the idea of $10 million in reserves “would be awesome, but it doesn’t seem realistic.” A tax hike that ended after the hospital had $10 million in reserves would “probably take a long time to sunset,” he added. 

    Gorman said that proposition got as close as any tax hike has in recent years and may have been a sign of things to come for Sitka Community Hospital.

    “That got close. I think, again, it was kind of the canary in the coal mine. The political leadership saw that we had problems ahead and we needed to do something,” Gorman said.

    A 2011 vote on raising the property tax rate was also aimed at funding the hospital along with Sitka’s road systems. It failed by an even wider margin of 24 percentage points, and a 2010 proposal aimed at city operation of the Hames center failed by 26 points.

    Another effort to fund the hospital through sales tax failed in 2005 and efforts to raise taxes to fund road reconstruction failed in 2006 and 2009. City staff has been raising alarms about impending road needs for years and the tens of millions of dollars needed in repairs.

Some sales taxes have been approved by Sitka voters. In 1999 voters approved an increase in the base sales tax from four to five percent and the seasonal sales tax to pay for school bonds was reauthorized most recently in 2013. 

Gorman said one difference between those failed efforts and this one is that the proposition coming before voters this October is aimed at retaining city services, not expanding them.

    “Prior ballot initiatives have been to expand services or increase services. This is not what this one is doing. This is trying to keep our nose above water. Will it pass? I think we have to engage the public on this subject over the next six weeks. What I’ve seen is that over the last few years it’s really hard to engage every part of Sitka,” Gorman said.