Assembly considers making sales tax permanent, talks marijuana tax

Since 1983 Juneau voters have been approving a “temporary” sales tax to pay for city government operations with a ballot question every three years. City officials think that the next time the public votes on the sales tax — likely to be this October — should be the last. In a work session Monday night, the Assembly decided to let the voters decide.

“It is a significant piece of our financial infrastructure, and it’s our recommendation that we give serious consideration to a longer term, or perhaps a permanent term, sales tax,” City Manager Rorie Watt told the Assembly.

About one quarter of the city’s general government and capital improvement project funding comes from sales tax. The city’s finance department predicts that the tax will collect $26.4 million annually. Of the money collected, $8.8 million goes to road and infrastructure repair. Another $8.8 million goes into youth activities and the budget reserve. And the rest funds general government operations.

But the city’s temporary 3 percent sales tax — last approved by voters in October 2011 — is set to expire next summer. In order to continue to collect the tax without interruption, the Assembly will have to ask voters for the authority to extend the tax. It will do so, as it has for 33 years, using a ballot question, but it won’t be asking exclusively for the permanent sales tax that the city manager and finance director recommended.

Instead, the Assembly will be asking voters whether they want to extend the 3 percent city sales tax for five years or forever. Voters would also be able to vote against the sales tax altogether.

“There’s lots of value to be had by having secure predictable revenue streams, but I’m a little hesitant to say right now is the time to put this in the hands of voters because of all of the uncertainty at the state level,” Assembly member Kate Troll said, speaking in favor of the five-year increase.

Assembly members Debbie White and Jerry Nankervis agreed with Troll. White pointed out that the city’s “abysmal” voter turnout would mean that relatively few people might be affecting a permanent policy shift. Nankervis said that he likes the fact that voters get to weigh in on the tax every few years because “it keeps us honest.”

Mayor Ken Koelsch moved that the city staff draft a ballot question — which will be back before the Assembly for approval on Monday — asking voters to choose whether to extend the sales tax five years, indefinitely or not at all.

White, Nankervis and Assembly member Jamie Bursell opposed the motion. The other five members present voted in support. Assembly member Mary Becker was absent Monday night.

Extending the sales tax wasn’t the only tax-related item before Assembly members Monday. They also discussed whether to lower the 5 percent sales tax on groceries by 1 percent.

“I’m trying to reduce the cost of feeding a family that’s not making the same amount that I’m making every year,” Assembly member Jesse Kiehl said, speaking in favor of lowering the tax.

Kiehl, the chair of the Assembly Committee of the Whole, put the item on the agenda, but it didn’t go anywhere Monday. Several Assembly members raised questions about what changing the tax would mean for businesses in town and for the city’s seniors, whose sales tax exemption was restricted by the Assembly last fall.

[City restricts senior sales tax exemption.]

“Frankly, that we tax groceries at all, my Yiddish grandmother would’ve called it a shanda; it is for shame,” Kiehl said.

Lowering the sales tax on groceries by 1 percent would result in a loss of about $1 million annually.

The Assembly ultimately directed staff to look into other “revenue neutral” options for lowering the food sales tax.

The Assembly also voted to have city staff write an ordinance raising the sales tax on the sale of marijuana from 5 to 8 percent. The city’s finance department estimates that the city could raise anywhere between $170,000 and $455,000 on the sale of marijuana with an 8 percent sales tax.

• Contact reporter Sam DeGrave at 523-2279 or at sam.degrave@juneauempire.com.