MEMORANDUM

TO: Pete Sprague, Assembly President

Members of the Kenai Peninsula Borough Assembly

THRU: Dale Bagley, Mayor

FROM: Scott Holt, Finance Director

DATE: April 22, 2004

SUBJECT: Ordinance 2004-13 amending KPB 5.18.430 Sales Tax Computation - Maximum Tax

KPB Chapter 5.18 provides authority for sales tax collection and remittance of sales tax on all retail sales, rents, and services made or rendered within the Kenai Peninsula Borough.

KPB 5.18.430 provides authority for the maximum sales tax computation on the first $500.00 of each separate sale, rent, or service transaction. From inception of the Borough's Sales Tax Code, Ordinance No. 9 effective July 1, 1965, the Borough Assembly has not changed the maximum sales tax computation. Based on the consumer price index for Anchorage and the attached memo from Jeanne Camp, KPB Economic Analyst, $500 in 1965 is now worth $1,801.70.

By increasing the maximum sales tax computation per transaction from the current $500.00 to $1,000.00, it is estimated that an additional $1.9 million could be generated. These funds could be used to minimize future property tax increases that may result from decreasing revenue streams. Additionally, the cities within the borough would experience an estimated $1 million increase in revenues. The following table illustrates the estimated revenues from such an increase to the borough and the cities: (1)

Calendar year 2003
Revenues

 Revenue Change
with Proposal
Implemented		 Percent
Increase		 Municipality
Portion		 Borough
Portion
Homer

$7,203,393

 $444,381

6.2%

 $282,786 $161,595
Kenai

$6,057,761

 $458,768

7.6%

 $275,261 $183,507
Seldovia (1&4)

$51,020

 $2,464

4.8%

 $1,232 $1,232
Seldovia (2&3)

$136,224

 $10,467

7.7%

 $7,246 $3,220
Seward

$4,580,420

 $272,480

5.9%

 $181,744 $90,736
Soldotna

$9,501,576

 $420,305

4.4%

 $252,183 $168,122
Borough

$14,601,682

 $1,351,521

9.3%

$1,351,521
Total

$42,132,075

 $2,960,386

7.0%

 $1,000,452 $1,959,933

Should the Ordinance pass, an effective date of January 1, 2005 is requested in order for the borough administration to properly notify the public, publish the changes, and develop the necessary documents to properly administer this modification. Additionally, this effective date would ease the transition as it coincides with all filing schedules, including businesses that file annually, and will give the public time to make billing and other adjustments that may be necessary.

Two public hearings are requested, including one on shortened time, in order to follow the same schedule as the budget ordinance and allow additional opportunity for public comment on this ordinance as it is expected to have a significant effect within the entire borough.

1.

1 This assumes that the home rule cities of Kenai and Seward follow this change.