The Kodiak City Council on Monday will meet in a special work session to address potential solutions for the city’s $2.3 million budget gap, including changes to the senior sales tax exemption, an increase in the sales tax cap and elimination of a discount for on-time filing.
Over the course of fiscal year 2017, city staff made a series of presentations outlining options for revenue generation for city coffers. However, the council had not approved new revenue generation measures in time for the start of the current fiscal year.
At their August work session, council decided to schedule a special meeting in September to decide on a plan to address the budget deficit.
The agenda for the meeting is heavy with proposals for revenue enhancement.
Most options under consideration would change components of the city sales tax.
Over half of the city’s revenue was derived from the sales tax in 2016.
The sales tax levies and exemptions have not been modified since the rate was increased from 6 to 7 percent in 2013, according to information from Kelly Mayes, the city’s finance director.
Councilors will review both an elimination of the sales tax cap and an increase of the cap to $3,000. Currently, consumers pay a 7 percent sales tax on the first $750 of a transaction for a maximum of $52.50 per transaction.
An elimination of the cap would mean consumers pay 7 percent on the total cost of a transaction regardless of how much is spent. Increasing the cap to $3,000 would increase the maximum sales tax collected in a transaction to $210.
Mayes has estimated that increasing the cap to $3,000 would generate approximately $5.9 million in a fiscal year.
However, another ordinance up for discussion on the agenda would exclude residential and commercial rentals from the sales tax cap increase. Some councilors have voiced support for keeping the sales tax cap at $750 for these rentals in order to avoid exacerbating already high rental costs, particularly for residential housing rentals.
Another option to be considered would be a restructuring of the senior sales tax exemption.
Currently, anyone aged 65 or older who has resided in the Kodiak Island Borough at least 30 contiguous days may receive a sales tax exemption certificate from city.
Under the proposal, the up-front exemption would be eliminated, but seniors would receive a sales tax rebate each year. The proposal to be discussed on Monday would provide a $400 rebate per person annually.
This would equate to a rebate on sales tax for approximately $5,714 in spending within the city.
Another proposal under consideration would eliminate a 2 percent discount for businesses that file sales taxes on time.
In addition to revenue generators, councilors will also review the prioritized capital projects list.
The special budget work session will be at 6 p.m. on Monday in the Kodiak Public Library’s multipurpose room. There will be time for public comment at the beginning of the work session.
Snoderly can be reached at (907) 512-2624. Follow her on Twitter, @KDMjoann