Sitka voters may see a question on the ballot this fall. The Assembly wants to raise bed taxes to 12%, but also exempt visitors from paying sales tax on their hotel room. This wouldn’t improve the city’s bottom line, but could pave the way for a future Assembly to raise taxes on alcohol.
I have a question for you: have any of your relatives come to visit this summer? Maybe you put them up at a hotel in Sitka, in which case, they paid what’s known as the transient lodging tax — 6% of whatever their room cost. The money goes towards the city’s Visitor Activities Enhancement Fund.
The Assembly wants to raise that rate to 12%, but it takes voter approval. If such a question appears on this year’s October ballot and passes, then the Assembly will exempt those paying a transient lodging from the local sales tax. On Wednesday (7-11-18), Assembly amended Ord 2018-34 to raise bed taxes to 12%, instead of 14% as originally proposed.
Taken together, these ordinances (Motion and Ord 2018-33, Motion and Ord 2018-34) neutralize each other and make no significant positive impact to the city’s bottom line. So why do this?
Mayor Matthew Hunter explained this ordinance pair would qualify Sitka to raise taxes on something else entirely — alcohol. The reasons are a bit complicated, but has to do with the fact that Sitka can only tax liquor as much as their highest sales tax.
In 2002, the Alaska legislature approved the biggest alcohol tax in state history. The beverage industry lobbied the state and cities without a liquor tax (such as Sitka) were prohibited from creating one. “[Sitka] cannot tax alcohol as much as some other communities do. We can only charge as much as any sales tax that we have,” Hunter explained. “So, if the bed tax were raised, that would open up another opportunity for the Assembly to mitigate the cost of alcoholism and alcohol in our community. I know the police department deals heavily with alcoholism in this town.”
This was a baffling pivot for many on the Assembly, as the proposed ballot question makes no mention of how raising bed taxes creates a gateway for a future Assembly to raise alcohol taxes. “I’m so darn confused with what we’re trying to do here, that I believe the electorate is going to be extremely confused as well,” said Steven Eisenbeisz.
Leaders in the tourism sector spoke against targeted taxes in their industry. After all, passing this measure would give Sitka the highest bed taxes in the state. Sherry Aitken of Visit Sitka noted that owners of local restaurants and bars with liquor licenses were not present at the Assembly meeting to weigh in.
“I feel like it would be unfair of us not to let the alcohol distributors in town have the opportunity to speak to you and make their case on why they may or may not think it’s important. They make think it’s fine. I’m guessing probably not because most people don’t like taxes,” Aitken said.
People don’t like taxes, and they don’t like confusion. That’s ultimately why Assembly members Richard Wein, Aaron Bean, and Steven Eisenbeisz voted down this idea. But it takes four Assembly members to kill an ordinance. Bob Potrzuski was absent, so both ordinances passed. That means the Assembly will revisit this notion of a transient lodging tax overhaul at their next meeting on July 24th.
Towards the end of the meeting, Hunter said his intent with these proposals was to create solutions, “small ways to increase modest amounts of revenue for our city government.” Speaking to Wein, Hunter then said, “I can’t wait for you to bring some solutions to the table in the future.” Wein responded, “It will take a lot more meetings and a lot more head banging.”
Another pair of ordinances did not gain traction at the Assembly table. One to eliminate the sales tax on groceries and utilities, pending voter approval to raise property taxes, failed 2-4. Only Hunter and Knox voted in favor. The ordinance to put that property tax question on the ballot was postponed.
This meeting is one of the last for the current Assembly. Hunter is stepping down from the Mayoral position. The filing period for his seat and two others (currently held by Bob Potrzuski and Ben Miyasato) will open on July 23rd. Elections are October 2nd. See the City Website for more information.
