Gravel industry speaks out against proposed tax

PALMER — The last time the Mat-Su Borough Assembly took up the issue of a gravel tax, dozens who work in gravel and related industries showed up to voice their concerns.

That night in December, the major theme of their objection to 16-128, introduced by assembly member Dan Mayfield to address a $38 million shortfall in the borough’s road service, was that road damage was not to be blamed on gravel trucks, but on shoddy planning for population growth and studded tires. They also warned that such a penalty incurred for “natural resource severed and removed from property within the Matanuska-Susitna Borough and providing for penalties by failure to pay taxes due…” would mean price increases passed on to customers, of which the borough is one.

That night, assembly member Jim Sykes recommended discussion be pushed back to Feb. 21, and at Tuesday night’s much-anticipated meeting, the gravel community was represented in full force. This time the speakers took a more pragmatic approach, asking assembly members: How much money would the borough really make on such a tax, anyway?

Citing the state of Alaska’s recent abandoning of its sand and gravel tax, the 10 who took their three minutes each in public comments pounded away against 16-128 with a common narrative.

“The Department of Revenue agreed that it was a ‘nuisance tax,’” said Ryan Zins, comptroller of Anchorage Sand and Gravel. “Forty to 60 percent of the gravel was used for state projects, so it was stealing from your left pocket to put in your right pocket.”

Ben Mohr, a former director for the Alaska Miners Association, said that in five years, the state gravel tax only netted between $250,000-$325,000 in revenue. And furthermore, Mohr noted, how would this tax be enforced, and how would fines be collected?

“It would cost more to collect than you would get in collections,” Zins predicted.

When public comments closed and it was the assembly’s turn to respond and debate the measure, Mayfield expressed his appreciation for those voicing their concerns, but reminded everyone that borough roads are in dire need of maintenance and repair.

“The RSA has $38 million of unfunded projects to improve our roads,” Mayfield said. “Obviously, with the current financial situation the borough is in, we don’t have $38 million without a bond package… We need to look for new revenue.”

Mayfield said gravel was a sensible place to start that search.

“It’s high time we take advantage of the natural resources we have here,” Mayfield said. “This (ordinance) is a way of giving producers the opportunity to contribute to all the road projects and infrastructure projects we need.”

Mayfield also doubted the paltriness of the revenue critics predicted, saying that the estimates he’s looked at predict $2.3 million possibly collected.

Prior to Tuesday’s meeting, Sykes introduced an amendment to 16-128 that would apply the revenue to the borough’s general fund, and not earmarked for RSA exclusively.

Mayfield contended that Sykes’ amendment completely defeated the purpose of the tax to begin with.

“The design of the ordinance really was to help our roads,” Mayfield said. “We have $38 million in unfunded road projects and we sincerely have no way of catching up to that — not at our mill rate. And if we have it in the general fund, us well-meaning public servants might not spend it so wisely.”

Sykes countered that there was no reason the borough couldn’t create an area-wide RSA, and offered three more amendments of his own to tack on to the three Mayfield already attempted to add.

The last of the three amendments Mayfield offered, which would exempt from the tax the transporting of gravel from one lot to another, so long as the path was along contiguous ownership, was shot down by the assembly 4 to 2, with Mayfield and Sykes the lone supporting votes.

Sykes stated that he was opposed to the ordinance, but is interested in examining all revenue-generating ideas, hence his continuing amendments.

“With any new tax measure, we first have an obligation to look at cuts. We haven’t really taken the examination on this for efficiencies and cuts first, but we should keep the tax on the table,” Sykes said, adding that he felt the tax unfairly punished those in districts where gravel transport was more prevalent.

Sykes then proceeded to see Mayfield’s three amendments, to speak in poker terms, and raise them with more amendments of his own.

Sykes’ first amendment was to propose shifting the funding from the RSA to the general fund. This passed 4-2 with Mayfield and assembly member George McKee voting against.

Sykes offered a second amendment, which would increase the tax from the original 25 cents per cubic yard to 40 cents per cubic yard. His reasoning was that if those from the gravel industry who spoke in opposition during public comments believed that the borough would make no money on 25 cents, then what about 40 cents?

“I thought at 25 cents the industry would jump on board,” McKee said, in objection to Sykes’ amendment to increase the tax amount. “That was a little naïve, I guess.”

Called to question, Sykes’ second amendment went down 4-2 with he and assembly member Randall Kowalke voting in favor.

At that point, assembly member Barbara Doty proposed that the matter be postponed until the May 16 meeting, which was met with approval by the assembly.

Sykes agreed with the postponement saying it would give the assembly, as well as ‘stakeholders’ to work with Borough Manager John Moosey, who, along with Mayor Vern Halter was absent from Tuesday’s meeting, on an agreeable proposal.

Assembly member Matthew Beck, serving as acting mayor, called for a break to allow assembly member Steve Colligan, who had recused himself from the discussion on account of his personal work association with the gravel industry, to return to the panel for the rest of the evening’s business.

Borough Clerk Lori McKechnie told the assembly that when they do resume discussion in May, ordinance 16-128 will have to have a new number because a 2016 bill can only carry a 2016 label so long into the following year.

In the lobby during the break, gravel industry ‘stakeholders’ had already formed a semicircle around Sykes, presumably discussing more palatable options.