Sitkans may get to weigh in on two new tax proposals in this fall’s municipal election– a tax on motor fuels, and a marijuana retail tax. When the Sitka Assembly meets tonight (6-22-21) it will consider the proposals on first reading. If approved, both could end up on the ballot in October.

It’s a discussion often held by Sitka’s Assembly during budget season — the city’s harbors and roads are aging, and in recent years, projects to repair infrastructure have been delayed due to cost.

“A lot of our infrastructure was built with support from the state and from the federal government. And things seemed new and shiny at the time,” says Assembly Member Rebecca Himschoot.

“The funding coming from the state is decreasing in all areas. And so with the increasing burden on the city,” she says, “What we’ve been able to do in the past is not what we’re able to do now. Because we don’t have the same revenues coming from the state that would have helped us do the things we did in the past. So we’re going to have to get creative.”

How so? Himschoot and fellow Assembly Member Kevin Knox are proposing one possible solution– a fuel excise tax, which could end up going before voters this fall. 

The ballot proposition that’s up for review is 20 pages long, but from the consumer end it’s pretty straightforward. Overall it amounts to an extra 3 cents a gallon on marine and motor fuels to be paid at the pump. 

Read the full proposal here

Knox says the idea was originally introduced by the Port and Harbors Commission. 

“They really wanted to be able to raise additional revenues outside of the traditional fee structure that the harbor enterprise fund charges for,” he says.

Moorage rates are expected to increase exponentially over the next decade (around 5-6 % each year) to cover the costs of aging harbor infrastructure, including the planned replacement of Eliason Harbor. Knox says that steep of an increase is unsustainable. He says the excise tax on marine fuel is a way for all of the maritime community to share the load. 

“Whether you have a boat in the harbor or not, everybody benefits from our harbor system,” he says. “All these boats that come in from out of town that aren’t in the City and Borough of Sitka, they’re benefiting from our harbor system and our harbor infrastructure, whether they’re just, you know, bringing in a small skiff to tie up for their errands in town, when they’re anchored out, or if they’re coming in to sell fish.”

Knox and Himschoot say a new tax would help flatten harbor rate increases, but it would not eliminate the need for them entirely.

Motorists who fill up at the pump would also pay an extra 3 cents a gallon. That money will go toward Sitka’s road maintenance. The tax would not apply to aircraft or heating fuel.

Anchorage introduced a gas and diesel tax in 2018. At a steeper rate of 10 cents a gallon, it was estimated to generate around $14 million in annual revenue for the city. Knox says they’re not sure how much revenue their proposal could raise for Sitka.

“It’s a really hard number to come up with. Because the vendors in town are reluctant to share the number of gallons that they sell,” he says. “We can make really rough guesses, but they’re really rough guesses. So we’re not really sure what our revenue is going to look like. Not until we start to have this conversation at a public level.”

KCAW reached out to assembly members to learn where they stand on the proposed ballot props. Member Thor Christianson says he’s coming to the conversation with a neutral stance ready to listen to public testimony, as is member Valorie Nelson. But Nelson says it’s not the direction she’d go to tackle Sitka’s infrastructure problem. 

“It seems like we just keep looking for ways to squeeze the public, you know, squeeze the turnip a little bit harder,” she says. “Maybe you can make it bleed more, maybe you can get more money.”

Nelson says she wants the assembly to prioritize cost cutting over new taxes, but says she may vote yes on the proposal since it’s ultimately up to the voters to decide. 

Knox and Himschoot know that new tax proposals will meet some resistance from the public, and Himschoot says she gets that. 

“I can get behind that myself, I don’t really want to pay more. At the same time, independent Alaskans, you know, I still can’t build my own roads to drive on. I still need that to be done by the city,” she says. “That’s one of the functions of government is to provide infrastructure. And so I feel it’s fair to go ahead and pay my fair share to use the roads.”

The assembly will review the ballot props on two readings but that’s not the end of the line. If they pass they’ll be on the municipal election ballot on October 5, and the voters will decide.

5% consumer’s sales tax on marijuana

Fuel isn’t the only good the Assembly will consider a new tax for when it meets on Tuesday. It will also consider a 5% marijuana retail tax.

If approved by voters, the tax would raise an estimated $200,000 a year. The extra money would go directly to the Sitka School District’s “Student Activities Fund.” 

Read the full proposal here

Assembly member Rebecca Himschoot, who is also an elementary school teacher in the district, sponsored the ballot question proposals along with Assembly Member Kevin Knox. She says she hopes it will offset both the cost and the fundraising energy students and their families dedicate to after-school activities. 

“So if we can, in our effort to provide a free public education, if we can support kids to be in activities at the school level that don’t cost them extra. You should be able to play basketball no matter what your family’s income is. Drama and debate is important for a kid, no matter how much their family makes,” she says.

Like the proposed fuel excise tax, Himschoot says she knows the marijuana consumer’s sales tax will see some community pushback. Perhaps most strongly from people connected to the cannabis industry. Michelle Cleaver owns Weed Dudes, a retail marijuana shop, and says she plans to speak out against the pot tax. She says cannabis is already taxed too much: she pays a state 20% tax when she buys marijuana wholesale, and then there are the complications that come from running a business that’s still not legal under federal law.

“I am not allowed to deduct simple business expenses like rent and utilities and insurance because the act of selling marijuana is still illegal so I cannot deduct any labor costs because that’s illegal,” she says. “I can’t deduct any rent costs because the house that I sell my marijuana is still considered illegal by the feds. The only thing I can deduct is my cost of goods sold. Everything else is taxed.”

Cleaver says if she has to increase her prices she’ll be unable to compete with cannabis that’s sold on the black market. 

“I wish there was a better way to deal with this other than just taxation,” she says. “I know the city is having a hard time making all their bills made. But aren’t we all having that same problem?”

Himschoot says she voted yes on the 2014 statewide ballot measure to legalize marijuana. And she says she did so hoping it would generate a local revenue stream. An assembly committee considered a marijuana excise tax in 2016, but it never progressed to a full vote.

The assembly will review the marijuana retail and fuel excise tax when it meets Tuesday/tonight at 6 p.m. Raven News will broadcast the meeting live following Alaska News Nightly.

View the full assembly agenda here