Sales tax scheme is one fine mess

Just the other day I was headed over to the local bagel store to get some goodies for the folks at city hall and I ran to my old friend Shucky Jiveino.

Shuck and I met at the old Ya’ Shur Club in Homer in ’76 when his act was called Shuck N Jive. He still makes his living performing a little two-step dance while singing scat music with lots of improvisation. At times he works with a duet or with a whole chorus, depending on the venue. Shucky asked me how things were going and I told him pretty fair, except for this borough sales tax thing.

Shucky whistled through his teeth and said, “Man I sure am pure flummoxed by this here deal.”

I told Shucky that maybe I can put a handle on it for him or at least try. He said, “Go ahead, brother.”

Well, Shucky, the Wasilla City Council recently passed a resolution opposing the borough sales tax. Wasilla relies heavily, since there is no city property tax, on the monthly cash flow from its sales tax for its day-to-day operations. Because we rely nearly solely on that sales tax we are going to be totally dependent on the borough to remit back our share of the collected tax from our city retailers in order to pay invoices, bond payments and make a payroll.

Shucky, ask yourself, how many people would keep working — policemen, roads, water and sewer maintenance folks, the library staff and all the rest — if we got behind in payroll? Also, just like you and me, if you don’t pay your bills on time, what happens to your credit rating? Well, the city is no different.

During the hearings on this with the borough, its administration and legal department claimed that they could make a deal with the cities to collect the tax and remit the money to them. Not so. By state law, if the borough is imposing a sales tax it has to collect and then account for the money and send it back to the cities. As pointed out by Wasilla Councilwoman Nancy Hall during the borough’s hearing and again at the city debate on the resolution against the tax, she stated that she had remitted to the borough a proper request for a refund for her organization. She did this in April and twice the borough lost the paper work. She submitted again and only recently got the payment.

It took her four months to get her dough. Also, if they don’t pay the cities on time, the only remedy we have is to write a letter to the borough’s finance department. They can answer us or not and we have to let 15 days go by before we can then write yet another letter to the borough manager, John Duffy, to ask where the money is. He’s got 15 days to answer us. So, does this mean because they answer it becomes a further stalemate? We have to wait this time before the borough assembly will even address it.

Shucky, that could take two or three months, what with meeting schedules and whatever.

Shucky rolled his eyes as I continued. In Wasilla, the retailers are going to have to make some accounting moves like charging 5.5 cents on the first $500 of sales and then 3 cents to the borough up to the first $1,000. In Palmer, it’s 6 cents and 5 cents in Houston on the first $1,000 of sale.

There is a real concern that this will drive sales out of the cities and into Anchorage. Thousands commute daily and if you could save, say, $60 buying outside of the Valley cities on a $1,000 purchase, why not go to Anchor Town, especially if you are there already to buy?

Next, if you give exemptions such as lowering the now-imposed property mill rate you have to make it up somewhere. According to Cheyenne Heindel, the borough financial analyst, during an address to the Home Builders Association, there is $765 million of commercial property taxed by the borough in Wasilla, $183 million in Palmer and in Houston $115 million, and in the rest of the borough $215 million more.

Under this scheme, they lower the mill rate calling it property tax relief for you and me, but the commercial property gets the same deal as well as all the summer homes at Big Lake and recreation property and other absentee landholders around the borough.

Shucky said, “How much has to be made up man?”

Shucky, just in round figures under the current property tax on those folks, it’s about $12.5 million a year in revenue to the borough. Under this new scheme with the sales tax they want, it drops to about $9.3 million, so we have to make up about $3.2 million in sales tax out of yours, mine and grandma’s pocket. That’s just the start. The borough claims that anything collected over $23 million in sales tax will go to further property reduction. Say they collect $10 million more than the $23 million, which isn’t far fetched, they could maybe drop the property tax perhaps another mill.

But, during budget time, every department and outfit with a personal peccadillo raise the overall budget. That eats it up. Now maybe the overage will only cover about a one-tenth in mill rate, a further drop. Shucky, that’s the nature of government. It’s in there competing for your money, the difference is it’s done by law.

And while we’re on it, I told Shucky, I got the borough’s ordinance on my desk and a copy of a release done by Patty Sullivan, who is the spokesperson for the borough. The down shot here is the mill rate will be capped until 2014, but that doesn’t mean that the service areas for fire, roads and other things is capped, nor does it mean that the assessments on your property won’t rise. Oh, and one more thing Shuck, the base mill rate can only rise during this time under two conditions: one by the voters to approve bond measures and the other to pay for legal judgments against the borough. What it doesn’t say is they have to ask the voters to raise the mill rate to pay off people who have sued the borough for some legal entanglement they got us all into.

Shucky’s eyes bulged and his mouth dropped open. Finally he said, “Man that reminds me of those old Laurel and Hardy movies where the fat guy would say to the skinny one, ‘Well, this is another fine mess that you have gotten me into.’”

I reached into my bag and gave Shucky a bagel. As he munched on it he said, “Where is this borough place? If they can get all this extra money, maybe I can talk them into letting me perform for them.” I pointed east and said, that way my man, that way.

Verne Rupright is mayor of Wasilla.