FIFTH OPENING – The Sitka seine boats Hukilau and Rose Lee pump herring aboard this afternoon at the end of Deep Inlet during the fifth opening in the Sitka Sound sac roe herring fishery. The opening was being held in two locations beginning at 11 a.m. (Sentinel Photo by James Poulson) 

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Daily Sitka Sentinel

Higher Sales Tax Cap Approved by Assembly

By SHANNON HAUGLAND

Sentinel Staff Writer

The Assembly Tuesday changed the sales tax cap from $3,000 to $12,000 on final reading, effective Oct. 1.

The vote was 6-1, with Aaron Bean voting against. The ordinance received no public comment at the meeting. 

The topics in the nearly four-hour meeting ran the gamut, with the Assembly taking about two hours to get through the consent agenda alone.

Extra time was given for discussion of an electric rate increase, a seasonal electric rate, raising the age for tobacco purchases, defending the Affordable Care Act, adding a tax on sugar-sweetened beverages, and – finally – whether to invite President Trump to Sitka for the sesquicentennial celebration. 

Sales Tax Cap

The ordinance will increase the amount of a single purchase subject to sales tax. Presently it’s $3,000, and the maximum sales tax on purchases over that amount is $150 at the winter 5 percent rate, and $180 at the summertime 6 percent rate. With sales up to $12,000 subject to the tax, the maximums would be $600 and $720. 

The ordinance is expected to increase city tax revenue by $1.2 million to $1.4 million annually, and narrow the budget gap anticipated for fiscal year 2018.

The new cap will affect services, such as charter boat trips, delivered after Oct. 1, 2017, regardless of when the sale took place.

Assembly member Aaron Bean, a charter boat skipper, pointed out that some operators have already sold charters for the 2018 season or taken deposits based on the $3,000 cap, and now face the choice of charging more or paying the difference themselves.

Bean said he has already set up trips for eight customers for the 2018 season with the fees taxed at the old rate.

“I’m sure there’s other companies bigger than me (who have done the same),” he said. 

Bob Potrzuski said this is the same point raised when the cap went up from $1,500 to $3,000 two years ago. He said the Assembly tried to make an accommodation to charter skippers by implementing the new cap on Oct. 1, after the season ended. Trying to address all types of sales above $3,000 would be a mistake, he said.

“I think we’ll create more problems trying to fit every category in,” he said.

Bean proposed an amendment that would have applied the $3,000 cap to sales made before Oct. 1, regardless of when the service would be delivered.

City Administrator Mark Gorman brought up the potential for “unintended consequences” if the Assembly chose to make amendments from the floor.

“You don’t want to have to amend it again,” he said.

Other Assembly members said it was a bad idea to try to fix the ordinance at the table. They said they would be willing to look at amendments, but wanted a vote on the ordinance at this meeting.

“We have till Oct. 1, when it goes into effect,” Tristan Guevin said. “It clarifies that it will be the policy of the City and Borough of Sitka.” 

Bean’s amendment failed 1-6, and the ordinance passed on final reading, 6-1.

Gorman said today the city estimates a $2.2 million shortfall in the 2018 budget. City staff has identified $1 million in reductions, including a $240,000 reduction in the school contribution, reducing the deficit to $1.2 million. The ordinance is expected to raise $800,000 in new revenues for 2018, leaving the gap at $400,000.

 “This would have a significant impact on what we would take out of reserves,” Gorman said Tuesday. “It wouldn’t deal with the chronic underfunding of programs but would put us on a more sustainable path.”

 

Electric Rates

The Assembly agreed to look at possibilities for closing another budget gap, this one in the electric fund.

The fund is short $589,000 this year, so action is needed as early as April 1 to limit losses in the fund. A $2.2 million shortfall is expected in the fund for FY 2018. (At the beginning of the year, the Assembly agreed to subsidize the fund by $1.65 million from general tax revenue, but that still leaves the fund short of the amount needed to meet the requirements of the bond agreements.) 

The Assembly has stated it would like the fund to support itself, instead of subsidizing it with the general fund. But that would mean a 15 percent rate increase to all users, from 14 to 16 cents per kwh on average.

“We know that would be problematic to much of the community,” Gorman said.

Chief Finance and Administrative Officer Jay Sweeney said the rate was expected to be 15.8 cents per kwh when the community agreed to build the dam, close to the 16 cent rate up for discussion.

“There has been transparency all along,” he said. “We knew all along it would be an expensive proposition.”

Assembly members said they would like to look at an ordinance with a fluctuating rate between summer and winter, with rates going as low as 11 cents in winter and as high as 21 cents in the summer. Electric Utility Director Bryan Bertacchi said today he plans to fine tune those figures.

“I think that’s a good way to go,” Aaron Swanson said Tuesday. 

Bertacchi talked about exempting some of the larger commercial users from the higher summer rate. He noted that the fish processors contribute over $2 million to the electric fund, out of the $15 million collected in revenues.

The Assembly also suggested taking away the tiers, where the rates fluctuate based on consumption.

Steven Eisenbeisz said he would like to see a new rate that would make it unnecessary to keep revisiting rates.  

“The public is getting heartache revisiting this every six months to a year,” he said.

Sweeney said, “I couldn’t guarantee one rate increase would fix it forever but we could get closer to it with that.”

Potrzuski said he was surprised to see another rate increase come before the Assembly so quickly, but liked the idea of the break for wintertime users.

“It gives something back to the citizens with that rate,” he said.

Guevin added that he’s still looking for a break for low-income residents.

Bertacchi said today the key variable is load: “If the load goes up, then we can lower the rates,” Bertacchi said. “As the loads go down, the rates go up.”

 

Trump Invitation

At the suggestion of Eisenbeisz, the Assembly took no action on a proposal to invite Trump to the Alaska Sesquicentennial celebration.

Gorman agreed that if the Assembly was leaning toward not inviting the president, “No action is probably the best action. Voting it down would be politically awkward.”

Assembly members leaning toward extending the invitation were Potrzuski, Swanson and Mayor Matthew Hunter; Bean, Guevin and Kevin Knox were against, as was Eisenbeisz.

The reasons for and against were varied, with a few saying they felt Trump’s presence would disrupt the event, or enhance it by drawing tourists to Sitka. A few voting against felt it would be divisive. Bean said he felt the hundreds who took part in the protest march the day after the inauguration let their feelings be known.

“The answer is no, in my opinion,” he said.

Wendy Alderson, from the public, asked the Assembly not to invite Trump.

“The community is divided right now,” she said. Although Trump won the election, she added, a majority of Sitkans didn’t vote for him. “I feel it would set us back as a community. ... It could potentially cause a lot of harm.”

Assembly members noted the large number of emails and calls they had received.

 

Health Priorities

The Assembly narrowly approved the health priorities proposed by the Health Needs and Human Services Commission, calling for a raise in the age for tobacco purchases to 21, and a tax on sugar-sweetened beverages.

The vote was 4-3, with Guevin, Knox, Hunter and Potrzuski in favor; Bean, Swanson and Eisenbeisz against.

Those voting in favor were not committing to supporting those initiatives if they came forward as proposed ordinances, but felt they wanted to support the commission’s work.

“One of the charges we gave them is to look at local public health needs,” Guevin said. “They voted unanimously to put these forward. We’re not rubber stamping them.”

Those who voted against said they felt the top priorities were not good ideas, and more a question of personal choice and responsibility. Eisenbeisz and Bean said they didn’t want the commission putting more time into something that would in the end not be well received.

“I don’t see the sense in getting in the way of people’s personal choices,” Bean said. “I’ll be voting no on this one.”

Guevin said he would like to see the Assembly approve the commission’s initiatives, and encourage public discussion of them.

“Hopefully it evolves and improves,” he said. “There are seven commission members willing to go above and beyond to stimulate this discussion.”

 

Other Business

In other business, the Assembly:

– heard a presentation about the Sitka permanent fund manager, Alaska Permanent Capital Management.

– passed a resolution to the state Congressional delegation stating the importance of the Affordable Care Act in the finances of Sitka Community Hospital, and urging their support in preserving that funding.

Potrzuski said in the future he would appreciate some acknowledgement of the downside of the issue.

“I’m for the ACA but we need to give a nod to the fact that while the ACA is benefitting a lot of people, it’s hurting a lot of people. Acknowledge the whole picture,” he said.

Eisenbeisz voted against. He said he didn’t believe the city should be weighing in on national issues. 

“I hope we continue to realize we are a local body and stay out of national politics,” he said.

Others said some national issues have an effect on local issues, so it was important to take a position. 

Guevin said the ACA has led to a decrease in the cost of charity care at the Sitka hospital, which went from $500,000 a year to the current years’s  estimated $30,000.

“ACA is one of the things that’s keeping our hospital afloat,” he said.

– approved sending a city official to the Seatrade Cruise Global event in Fort Lauderdale, Fla. Chris McGraw, director of Halibut Point Marine Services, attends, and said he believes it is beneficial for cruise representatives to meet a city official, not just himself.

Since the city started sending a delegate to the trade show the number of cruise visitors to Sitka doubled, from 80,000 to 160,000, McGraw said.

“Every port is competing for these cruise ships,” he said. “We have to stand out from Haines, Wrangell, Petersburg.” He said it helps to have an elected official or staff member promoting Sitka. Eisenbeisz said he has done some research about the trade fair and would be willing to be the city representative. The Assembly voted 7-0 to send him as the city’s representative.

– appointed Nicole Filipek to the library commission and Charles Horan to the Gary Paxton Industrial Park Board.

– adjusted the budget for the Crescent Harbor playground pass-though grant and the equipment lease for Sitka Community Hospital.

 

– heard a report from hospital board President Bryan Bertacchi about the discussions between SEARHC and SCH and some of the challenges of a joint venture between the two hospitals. The board and top SCH officials at a meeting Jan. 26 said talks between the two entities were drawing to a close with no shared vision for what a joint operation would look like.

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20 YEARS AGO

March 2004

Matthew C. Hunter of Sitka recently returned from Cuba as part of a St. Olaf College International and Off-Campus Studies program. Hunter, a junior physics major at St. Olaf College, is the son of Robert and Kim Hunter of Sitka.


50 YEARS AGO

March 1974

Eighth graders have returned from a visit to Juneau to see the Legislature. They had worked for it since Christmas vacation ... Clarice Johnson’s idea of a “White Elephant” sales was chosen as the best money-maker; Joe Roth won the political cartoon assignment; highest government test scorers were Ken Armstrong, Joanna Hearn, Linda Montgomery, Lisa Henry, Calvin Taylor and David Licari .....

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