City Finance Director Bob Bartholomew Tuesday walked the Borough Assembly through city revenue and expense changes over the past five years, as well as explaining the city’s sales tax and revenue structure.
There were a few questions on the cash overview, but the Assembly dug into the subject of sales tax compliance — and what tools the city has to ensure compliance and collect back income owed by scofflaw merchants.
They heard that there is no mechanism except court judgments to force compliance with city ordinances, and seasonal businesses can simply reopen after skipping town without paying sales taxes. The city has to come after them in court, and it does.
Juneau’s expanding natural resources sector and successful seasonal tourism industry bring challenges to the four-person tax compliance office. Most businesses are in compliance, with just 2.4 percent of unlicensed firms winding up in a newspaper ad for delinquent taxes during 2012.
Last year 600 businesses were notified during one quarterly cycle and billed over three months. By the third month just 93 wound up on the delinquent list. Bartholomew cited recent high-profile cases of legal enforcement as a possible reason for the drop in numbers.
While the numbers of delinquent tax filers dropped, the report shows that delinquent taxes owed rose overall since fiscal year 2010 from $179,800 to $282,800 in Fiscal Year 2012.
“A new area for us to monitor are mining support services,” Bartholomew said. The city also keeps an eye on businesses operating Juneau International Airport.
Mayor Merrill Sanford wondered if the city has any means of seizing funds from scofflaw cashboxes, and heard that it takes a formal judgment to recover funds or garnish a PFD check.
Bartholomew mentioned one non-compliant business that was recently found to owe $400,000 in back sales taxes, prompting Assembly member Randy Wanamaker to ask which business that was. “This is a public matter,” Wanamaker said.
Sales Tax Administrator Joan Roomsburg told the Assembly the identity of the business wasn’t yet public information, and the matter of confidentiality was referred to the Department of Law at the request of the mayor.
Bartholomew said that business didn’t collect taxes, but “it wasn’t a situation where the merchant was collecting sales tax but did not remit it.”
Borough staff has gotten creative and hits the streets to interact with merchants, educating them and taking a special look at seasonal enterprises. The city has its own version of Google Earth, staffers taking photos downtown to track changes and make sure businesses have licenses and comply with sales tax.
While the Borough charges sales taxes, it does not require businesses to buy a borough business license in addition to the mandatory state license, although Bartholomew said after the meeting that topic is sometimes raised. Juneau will not do business with unlicensed businesses. The city also has the option of challenging state permits for things like liquor licenses if a business is in arrears for city taxes.
Taxes themselves were part of the larger presentation to the Finance Committee. Bartholomew said the city’s take from sales taxes comes from a big financial pool, and is moderated by tax exemptions.
The city imposes a 5 percent sales tax. The amount received in 2012 grew by 13 percent since 2008 to $42.3 million; alcohol taxes brought in 16 percent more — $855,000, and tobacco taxes a whopping 146 percent increase over five years from $830,000 to $1.4 million.
There are 35 exemptions to the sales tax, including the exemption for senior citizens. Bartholomew said that affects from the senior exemption are spread across many tax categories.
While local support from taxes and fees grew, and state support increased 44 percent since 2008 to $79.3 million, Assembly member Jesse Kiehl noted a reverse trend — federal grants and in lieu tax revenues dropped 29 percent since 2008 to $6.3 million.
Revenue from penalties and fines connected to property, sales and other tax penalties and ordinance violations dropped 31 percent since 2008 from $975,000 to $671,000.
The city’s overall revenues are $323.7 million, up 27 percent from 2008.