The Kodiak Island Borough Assembly voted to amend the maximum allowable tax cap to keep property taxes capped, but allow other taxes to be raised.
The borough has rules limiting the amount of money it can collect in any given year.
Up until last week, if the borough decided to raise taxes in one area, such as the tobacco tax, it had to subtract that addition from somewhere else. There are some exceptions, including for inflation, new construction projects, paying bond debt and a few others.
Now, all the other tax areas besides property tax are no longer subject to the cap after the borough assembly changed the laws with the 4-3 vote.
The tax cap rules were put into place after a referendum in 2018, when voters approved a measure that limited the amount of money the borough could collect. The referendum on the cap passed by 55 votes, with 601 people voting for the proposition and 546 voting against it. The terms of the referendum were written so that the rules would go away after two years.
Instead of doing away with them entirely, the assembly chose to change them.
Now every tax besides property taxes — severance taxes, tobacco, marijuana, hotel and motor vehicle taxes — are no longer subject to the cap. They can be raised, and the extra revenue that they bring in doesn’t have to be taken out in another area.
This means that the borough’s primary revenue source is still somewhat constrained. In the current budget, personal and real property taxes bring in about $3.8 million to the borough, a little over half of all revenues. Those taxes will still be subject to the cap.
Backers of the change said it kept the spirit of the voter-approved measure in place while giving the assembly some more flexibility while sorting through a difficult budget season.
“I hope the public understands that we are leaving in place the area-wide limitations on the mill rate,” said Assembly Member Scott Arndt, who voted for the change.
“What this does is allow the borough some flexibility on service districts, which sometimes have to fluctuate their budget. … The other thing was that the borough assembly has raised the tax on motor vehicles, we raised the tax on tobacco products and the intent is to not have to lower the mill rate because the additional revenue is being used for debt. I’m in favor because it sticks to the original intent.”
“This proposal brought forward by the administration does maintain the spirit of the original tax limit that was adopted,” Assembly Member Duane Dvorak added.
But some opponents felt like the better move would have been to discuss getting rid of the cap.
“I really feel like it’s a method to avoid a really serious conversation about whether or not the maximum allowable tax cap should go away or not,” Assembly Member Julie Kavanugh said.
“I think that we are doing this so that we can raise all the other taxes to get the money that we need instead of having a serious conversation about how we got here.”
Borough Mayor Bill Roberts reiterated that he thought the borough should not have limits at all, a point he’d made several times in the past.
“I feel the assembly really needs the authority to set their budget and not be limited by a tax cap,” Roberts said.
“We need to have a serious discussion about how we’re going to do all this if we’re going to end up with a tax cap that can only go up so much percent at a time.”
In the end, Arndt, Dvorak, James Turner and Aimee Williams voted for the change. Kavanugh, Geoff Smith and Dennis Symmons voted against it.
The assembly has already voted to raise the tobacco tax and motor vehicle tax this year.