Retail stores line the Front Street Extension in Ketchikan in 2020. (Eric Stone/KRBD)
City leaders in Ketchikan are moving forward with a plan to raise sales taxes in the summer and cut them in the winter. It’s part of an effort to fund pay raises for city employees. Ketchikan’s City Council greenlit the measure on Thursday in the first of two votes.
The seasonal plan would raise the city’s sales tax from 4% to 5.5% from April through September in an effort to take advantage of Southeast Alaska’s busy summer tourism season. Combined with the borough’s 2.5% sales tax, consumers within Ketchikan city limits would end up paying a total rate of 8% on all manner of goods and services, from rent and groceries to wildlife tours and fishing charters. During the winter, the city’s sales tax would fall to 3%, and the total sales tax rate would be 5.5%.
It’s not clear exactly how much the increased summer tax would bring in. The 5.5% is slightly lower than the initial proposal, which was forecast to raise nearly $3 million per year. The city’s finance department estimated that would be enough to cover recent raises for electrical workers and non-union employees and fund new contracts with police officers and firefighters.
City Council member Jai Mahtani said the timing was less than ideal, given a slower-than-expected recovery in Ketchikan’s tourism economy. But he said the city needed to raise wages or risk losing more staff in a strong labor market.
“We are at the fringes of a recession. I know it’s going to be tough on our local population in the winter. However, we are already seeing well trained employees being poached by the borough, banks and everybody else,” he said.
City Council member Abby Bradberry said raising city funds with a higher sales tax was preferable to pulling in more from landowners.
“It’s not property tax, which nobody has a say in that — everybody has to pay it — versus this one, people can choose if they want to go buy a product or not and pay that sales tax,” Bradberry said. “So it kind of leaves it up to the people to choose how they want to spend their money.”
The tax proposal passed 6-1 with City Council member Riley Gass in opposition. He said he’d rather cut spending during budget negotiations later this year to avoid future tax increases. The seasonal sales tax proposal is due back for a final vote at the council’s next meeting on August 18.
Disclosure: Jai Mahtani is also a member of KRBD’s nonprofit board of directors, which does not direct the newsroom.
