The surge in independent travel in the last two quarters of 2021, combined with a rebound in cruise visitors in the first two quarters of 2022, contributed an additional $3 million in sales taxes to the City of Sitka over 2019. (KCAW/Kimmell)

The numbers are looking fairly good for Sitka, as sales tax figures are coming in for the last two summers – but expenses and inflation have taken a bite out of that windfall.

Municipal administrator John Leach walked through the Annual Report to the Community, during a meeting of the Sitka Chamber of Commerce on Wednesday. His remarks – and the accompanying slide show – touched on the workings of every department in the city, and what local government was doing to both develop much-needed projects, and to preserve and maintain existing ones.

Here’s an excerpt of Leach’s discussion of upcoming capital projects. He warned the audience: There are a lot.

“We have an airport expansion and remodel. We have the haulout that was approved by a vote of the citizens that’s starting down at the industrial park. Marine service center bulkhead and seawall – we won a RAISE grant for $8.3 million, that is a federal grant that we received we’re starting on that. The heat pump emergency Blatchley, we just wrapped that up, about a $600,000 project. Transfer station compactor, an upgrade. You guys might remember the issue we had with shipping municipal solid waste and open top containers and now we’ve got a compactor coming in and we resolved that issue but got to start construction there. The Crescent harbor high load, the net shed over here (by Harrigan Centennial Hall). Senior Center fire system and plumbing, police station HVAC,  Thompson lift station, Lakehurst-Monastery-Kincaid sewer reconstruction. Crescent Harbor multiple sewer lift stations, a seaplane base, Lincoln Street remodel, Crescent harbor restrooms, City Hall HVAC, the Seawalk phase two, Wachusetts fish passage culvert, Kimsham drainage, GPIP landfill, biosolids landfill expansion, and a traffic study we’re working on for the community.”

Many of the capital projects Leach mentioned are paid for through some combination of state or federal grants, combined with local matching funds. The most variable source of cash for the city is the local sales tax, which began ticking upward in the second half of the summer of 2021, through the first two quarters of 2022. The city brought in over $3 million more in 2022 than it did in 2019, but Leach explained that it was not a pure cash windfall, since the city was forced to defer a number of expenses during the 2020 pandemic.

“In ‘22 we finally saw a strong rebound of our most significant source of revenue, which is our sales tax. We went from $13.3 million In 2019, to $16.4 million in FY ‘22, this was attributable to a strong independent travel season in July through September of ‘21, continued increases in tax revenue on remote sales – it was zero in ‘19 when we kicked off that program, and it’s $1.2 million in ‘22 now. And a rebound in cruise tourism in April through June of ‘22. However, important to note is that CBS continued growth at a pre-pandemic rate of growth. Our FY ‘22 revenue is still less than what would have been expected by this point if let’s pretend COVID didn’t happen. But part of that is inflation, things are getting more expensive, that drives up the sales tax revenue too. So while adding the revenue, it also impacts us on the expense side. This revenue is really what’s needed to support deferred maintenance, which was further deferred to the pandemic.”

Leach went on to say that the positive revenue from sales tax contributed to the transfer of $9 million dollars into the municipal infrastructure sinking fund over the past two years, to allow the city to catch up on maintenance deferred during the pandemic.