The taxable limit for retail sales in Sitka will be going up this fall — and a hike in electric rates could come much sooner.
The Sitka assembly advanced a pair of measures to close the city’s budget gap, during its regular meeting Tuesday night (2-14-17).
The taxable limit for retail sales — often called the “sales tax cap” — has long been considered an untapped source of revenue for Sitka. In fact, it was only two years ago, in May 2015, that the assembly raised the cap to $3,000 from it’s long-time plateau of $1,500.
This time the proposal was to raise the taxable limit to $12,000, and the assembly felt it was on solid footing. Member Bob Potrzuski sponsored the ordinance with Mayor Matt Hunter.
Potrzuski suggested that the ordinance was more conservative than it could have been.
“This doesn’t exist anywhere else, except in Juneau, which is where I stole the $12,000 idea from. In Ketchikan they’re not having this discussion. There is no cap. They’re paying full freight.”
Member Aaron Bean proposed lifting the cap completely when the ordinance was first introduced in January. Other members thought that it would harm the housing industry, and his motion died for lack of a second.
But while Bean supported lifting the limit to $12,000 on this second reading, he also wanted to build in an exemption for charter fishermen like himself who have taken deposits now for excursions that will occur in 2018 — after the higher tax limit is in effect. He proposed an amendment tweaking the ordinance language.
“This ordinance shall become effective October 1, 2017. All sales made prior to October 1, 2017, are subject to the $3,000 tax cap, even if services are rendered after October 1, 2017.”
Steven Eisenbeisz, who owns a downtown retail store, wanted to know how the amendment would affect other sectors besides the charter fleet. He thought the language might open a loophole.
“If this passes, I’m calling my landlords tomorrow morning and renegotiating a 10-year lease at this lower sales tax, because it would save me a bunch of money.”
Bean’s amendment failed, and the main motion passed as written 6-1 with Bean opposed. The new taxable sales limit goes into effect October 1.
The municipal administration hopes that raising the cap could generate over $1 million in revenue, and significantly reduce the anticipated deficit in the General Fund next year.
But the city is also looking to Sitkans to close a $2.2-million dollar shortfall in the Electric Fund — by paying higher rates for electricity.
Utility director Bryan Bertacchi outlined a proposal for raising overall electric rates in Sitka by 15 percent — from $.14 per kilowatt hour to $.16.
Although it sounds like a couple of pennies, Bertacchi didn’t try to conceal the impact on individuals and households. The demographics tell their own story.
“8,929 total citizens, in 4,566 total households. And that results in that number. Overall as a community we need to raise $209 per citizen, to pay that $2.2 million; per household $410, and that includes fish processing paying $300,000 more than they’re already paying.”
Bertacchi noted that Sitka’s three fish processing plants combined pay $2 million of Sitka’s entire $15 million electric bill.
Almost as a side note, Bertacchi said that Sitka could try a seasonally-adjusted rate: Instead of paying $.16 year round, residential customers would pay $.21 in summer, and only $.11 in winter, when most residential consumption increases.
This caught the attention of member Aaron Swanson, who often is silent during policy debates.
“I think that the seasonal rates would be a good way to go. The reason why is that I think you’d get a good idea on $.11 a kilowatt hour — how many kilowatt hours you could sell at a lower rate than you do at a higher rate.”
The assembly last raised electric rates only last October — then by 7-percent. Member Bob Potrzuski was frustrated to be coming back with another hike in February.
“But one thing you brought forward that really piques my interest — and even got Aaron Swanson to say something — was the seasonal rates. You know, a light went off in my head and said, Is this a possible way out?”
Administrator Mark Gorman asked the assembly for time to work on an ordinance that contained language for either a straight rate hike to $.16, or a possible seasonal structure. Finance director Jay Sweeney reminded the assembly that $.16 was the rate target when Sitka signed the contract for the Blue Lake Dam expansion. Bryan Bertacchi confirmed that the new rate — except for inflationary adjustments — would not have to be revisited.
“$.16 is the number,” Bertacchi said.
The city administration hopes to have an ordinance drafted and approved by April 1.