A Taxing Issue

Sales-tax revenue has been a big-ticket item for Wasilla for more than 11 years. With a projection of $9,868,750 for the next fiscal year (2004-2005), the tax revenue offsets costs of everything from the Wasilla Police Department to the new Multi-Use Sports Complex. But streamlining the system hasn't been a piece of cake.

"There was a very big learning process on the collection side," explained Ted Leonard, director of finance and administrative services for the city of Wasilla.

The 2-percent sales tax that Wasilla residents and visitors pay on goods and services first went into effect Jan. 1, 1993, after a 53-percent "yes" vote for the tax on the Oct. 6, 1992, ballot. In the first six months, completing the 1993 fiscal year, the city collected $1,123,000 in sales-tax revenue. In the following 12-month period, the city collected $3,219,602. Cut that second number in half, Leonard said, and it was an increase of $486,000 in one year.

"That increase wasn't just based on the growth of the economy," Leonard said. "[The city] learned a lot about collections during that year."

The constant increase in sales tax revenue, which Leonard estimates averages 7 percent each year, is tied to both population and business growth.

"It's growing at a remarkable rate," Leonard said.

At the end of calendar year 2003, Wasilla had 1,637 current business licenses. That's a 41 percent increase from the end of calendar year 1999, with 1,160 business licenses. In 1992, the city had 785 licenses.

One of the stipulations for the tax is that the Wasilla mill rate can not climb over two mills.

"If we went over two mills, the sales tax would go away," Leonard said.

Along with voting yes or no for a sales tax, Wasilla residents were asked to vote on whether the tax should support a city police force. Voters approved the policing issue, and 27 percent of the tax revenue went toward the force in 1994.

"The tax was never meant for just a police force. Any remaining tax, by ordinance, goes into the budget process," Leonard said.

This upcoming budget year, it's estimated that 28 percent of the tax will be used to fund the police department.

"It's always been fairly level," Leonard said.

When Leonard came on board in 1998, the city began working toward streamlining its taxing process. The city made a huge adjustment in 2000, due in part to the "Y2K" scare.

"We purchased the HTE software in the middle of 1999, preparing for Y2K," Leonard said. "We switched over in 2000."

The software automated the tax process, printing and sending the sales-tax return slips each month, automatically, to business owners in the city. This helped tremendously when the city began looking at ways to pay for a bond to build a sports complex.

The city held a special election on March 5, 2002, asking voters to approve a half-percent increase in tax that would be dedicated to paying for the city's Multi-Use Sports Complex. Voters passed the ballot issue, with 52 percent voting for the tax, which went into effect July 1, 2002.

"This is a half-percent tax that is effective from July 2002 to July 2012, or when the bond retires," Leonard said. "This half percent goes away."

Shortly after the sales-tax increase, the city got a big break upgrading the automated system.

"We got lucky, we paid around $65,000 ($120,000 total, with training and fees) for the package, but since we started with the accounting light package, HTE let us use the larger package for things like payroll and licensing. [When accounting light was terminated] they gave us the full accounting package for free," Leonard said. "When Fairbanks was looking at the full package, they were estimating it costing a couple hundred thousand dollars; we got quite a good deal for the upgrade."

"Accounting light" is a package that is used for sales-tax collection, while the full package takes care of other accounting functions.

The city began using the full accounting system in July 2003, streamlining the tax-paying process even more. Leonard said the city has other plans to make it even easier for businesses to pay their taxes within city limits, such as switching from monthly to quarterly payments for small businesses, but the changes came to an abrupt halt once the city learned that the Mat-Su Borough Assembly may be asking voters to approve a 1-percent boroughwide sales tax in the October municipal election.

Part of the assembly's plan may be to centralize all tax collecting at the borough.

If this occurs, the city will no longer be responsible for collecting its own sales tax.

"It gives a level of uncertainty of the whole process of continuing improvements that we strive for," Leonard said.

Contact Jen Ransom at jen.ransom@frontiersman.com.