MEMORANDUM
TO: Pete Sprague, Assembly President
Members of the Kenai Peninsula Borough Assembly
THRU: Dale Bagley, Mayor
FROM: Scott Holt, Finance Director
DATE: September 30, 2004
SUBJECT: Ordinance 2004-36 amending KPB 5.18.430 Sales Tax Computation - Maximum Tax
In 1965 the Kenai Peninsula voters approved the imposition of a sales tax in the borough. This authority is currently implemented in KPB Chapter 5.18, which 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 |
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.
This ordinance is the same as Ordinance 2004-13, previously considered but not adopted by the assembly. It is presented again for your consideration in light of the anticipated significant reduction in the borough general fund following final state budgetary actions and adoption of the borough budget.
Two public hearings are requested, including one on shortened time, in order to allow additional opportunity for public comment on this ordinance as it is expected to have a significant effect within the entire borough.
1 This assumes that the home rule cities of Kenai and Seward follow this change.