Judge says Kenai Peninsula Borough can up taxes

KENAI - A Superior Court judge has ruled that the Kenai Peninsula Borough has the authority to increase the sales tax to 3 percent without a vote of the public.

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Kenai Judge Carl Bauman denied motions filed by the Alliance of Concerned Taxpayers seeking an injunction against the tax increase that went into effect Tuesday.

Bauman issued his summary judgment Monday. In it, he ruled in favor of the borough, finding that voter authority for a sales tax of up to 3 percent granted in 1964 still applied. He also said a majority of voters had again approved the tax increase from 2 percent during the October 2006 election.

"This was an overwhelming reaffirmation by the courts that solidifies the borough's position," Borough Mayor John Williams said. "On virtually every point, the judge ruled in the borough's favor. The borough will now go ahead and proceed to continue doing business in a more balanced basis without concern for the issue. Our whole intent is to streamline government and make it more efficient."

An attorney for the taxpayers group, Ken Jacobus of Anchorage, filed a lawsuit late in 2006 challenging the assembly's contention that it had the right to raise the sales tax up to 3 percent without a public vote.

In his judgment, Bauman noted a state law that appears to require a public vote did not apply in this case, because nothing in its language restricted the time within which an assembly could increase the tax after being so authorized.

Borough taxpayers paid a 3-percent sales tax until 1975 when it was cut to 2 percent. The borough's authority to raise it up to 3 percent never was repealed.

In 2005, the borough attempted to increase the tax rate to 3 percent, contained in an omnibus budget measure.

ACT challenged that increase successfully that fall with an initiative drive and ballot measure to set the sales tax at 2 percent. Voters also said future increases would require a 60-percent supermajority of voters to approve.

The following year, however, another ACT-backed ballot measure designed to roll back all parts of omnibus measure failed. Under applicable election rules, all parts of it were on the table, including the tax increase taxpayers had rejected the year before.

Failure of the referendum on the omnibus measure meant the tax increase was again valid, at least as far as the borough was concerned.

ACT disagreed with that interpretation and filed the lawsuit.