Chilkat Valley News - Serving Haines and Klukwan, Alaska since 1966

Should the Haines Borough have a seasonal sales tax? The assembly’s Commerce Committee considered the idea at a meeting Tuesday before unanimously recommending an ordinance placing the question on the October municipal ballot.

Members said the seasonal sales tax discussion was spurred by a desire to generate more revenue for Haines’ crumbling infrastructure, without placing the brunt of the burden on year-round residents.

“We can chip away at (major infrastructure projects) and we keep talking about them, but without this, without something like this tax proposal, I don’t know that we have a mechanism to allocate specific funds for that in a way that’s palatable for our community,” assembly member Cheryl Stickler said, listing Lutak Dock as an example of an infrastructure project beyond the borough’s current economic means.

The borough at present has three sales tax rates—5.5% in the townsite, 3.5% in Excursion Inlet and 4% in the rest of the borough. Sales tax generates roughly $850,000 in capital project funds annually under the borough’s current allocation formula, according to chief fiscal officer Jila Stuart.

The proposal discussed at Tuesday’s meeting would lower the tax rate between Oct. 1 and Mach 31 to 4% in the townsite, 2.5% in Excursion Inlet and 3% everywhere else, and raise the rate April 1 through Sept. 30 to 7% in the townsite, 4.5% in Excursion Inlet and 5% everywhere else.

Stuart estimates the proposal would more than double funding available for capital projects as it increases the allocation for these projects in the summer, which is when the borough brings in roughly two-thirds of its sales tax for the year.

Assembly members who favored the proposal said seasonal sales tax has the benefit of placing more of the financial burden on visitors and summer residents while taxing year-round residents less during the winter, a time when many are earning less.

A potential drawback is that businesses that operate primarily in the summer might have to charge customers higher prices, making them less competitive with similar businesses in Skagway, borough staff said.

In the past, responding to seasonal sales tax proposals, tour operators have said, “We can’t raise our prices, we’re going to have to eat this,” Stuart said.

Another question the assembly will need to address is how to allocate new sales tax revenue. The draft ordinance discussed Tuesday reduces capital project funding from 1.5% to 1% in the winter and increases funding for projects from 1.5% to 3% in the summer. It also reduces funding for the tourism and economic development fund from 1% to .5%, throughout the year.

Reduced tourism and economic development funding was a concern for some borough officials at Tuesday’s meeting.

“Historically, we’ve used more than half (the 1% sales tax dedicated to the fund), so if you cut it in half, you’re not going to have enough to fund what we’ve historically been doing,” Mayor Douglas Olerud said.

Another concern raised Tuesday was the complexity of having six different tax rates throughout the year.

“Instead of having three different tax rates, we would have six different tax rates, which would probably make us officially the most convoluted taxing jurisdiction in Alaska,” Stuart said.

The sales tax ordinance needs to be introduced at the July 27 assembly meeting in order to appear on the October ballot. Assembly members said more work will need to be done before they can lend it their support.

Other towns in Alaska with seasonal sales tax include Nome, Seldovia, Sitka, Skagway and Wasilla.