Ketchikan City Council defers seasonal sales tax proposal to consider other options

Ketchikan’s City Council is pumping the brakes on a proposal to hike sales taxes by one percentage point during the summer months.

 

Councilmembers proposed the April-to-September tax increase to fund cost-of-living raises for city workers. The hike would bring the city’s sales tax to 5% and yield an estimated $1.9 million for the city coffers every year. Because Ketchikan’s borough also charges sales tax, the proposed hike would increase the overall sales tax rate inside city limits to 7.5% for half the year.

But on Thursday, the council voted to set aside the tax change for now as members brainstormed other ideas to raise revenue. Councilmember Lallette Kistler suggested raising the city’s sales tax cap. Under current code, sales taxes are only charged on the first $2,000 of most transactions, and Kistler pitched the idea as a way to avoid raising revenue on the backs of low-income residents.

“We don’t know how much that is going to make. That’s been made clear. But it would bring in more money into the coffers, and wouldn’t affect the people down lower on the totem pole that have a harder time dealing with increases in the things that they purchase,” Kistler said.

That idea ran into opposition from Councilmember Jai Mahtani. He says Ketchikan’s relatively low sales tax cap gives local businesses a competitive advantage over those in other communities.

“You will put a lot of people out of business if you raise the sales tax cap right now,” he said. “We’ve got to be very careful how we tread those waters. We need people to spend in town. We need to keep the revenue. But if you raise the cap, that revenue is going to go to Juneau, Skagway and Sitka.”

Councilmember Abby Bradberry pitched a different idea — hiking the current 4% sales tax by two points during the summer and cutting it in the winter.

“I’m wondering if we can change up the percentages a little bit more and do 6% in the summer, and maybe give a little bit of a discount to the locals during the winter time,” she said.

Acting City Manager Lacey Simpson said the city’s finance department had calculated that a 6% summer sales tax and 3% winter rate would yield about $1 million a year more than the 5% summer rate.

“So it is possible to do that. It actually gets us further ahead in our revenues. But then you are, of course, asking a lot of locals during the summer months when they’re still making purchases,” she said.

Councilmember Riley Gass suggested going over the options at a future meeting.

“I think we need to maybe all go home, put some more thought into it, have some more discussions, contact with staff and come up with a solid plan, because we seem to kind of be leaning both directions and saying both might be the better approach,” he said.

The council voted 5-1 to defer the question to their next meeting. Councilmember Janalee Gage was the lone vote against — she said she favored the 1% summer tax hike.

But Simpon cautioned the council against kicking the can down the road much further. She said the council had already failed to pay for wage hikes approved in 2019. The council has repeatedly voted down property tax increases that it approved during budget negotiations to pay for the 2019 raises.

“We have brought that funding mechanism before the council three times, and it has failed three times. We are funding those wage improvements out of reserves. We have not created any type of revenue system to fund that,” she said. “We cannot afford to do that again with these wage improvements.”

Ketchikan’s City Council is set to consider its options for more revenue again on August 4.

Disclosure: Jai Mahtani also serves on KRBD’s nonprofit board of directors, which does not direct news coverage.