Sales tax to sunset

WASILLA — Come the end of next week, goods and services will be ever-so-slightly less expensive in Wasilla.

The city’s sales tax is set to drop at the start of July from 2.5 percent to 2 percent. The city taxes up to $500 of a purchase, so the most anyone will save at any one time is $2.50 when the tax on a $500 purchase drops from $12.50 to $10.

Wasilla Mayor Verne Rupright said it was time to cut the half percent from the sales tax. City voters agreed to the tax increase in 2002 to pay off a $14.7-million bond for building the Curtis D. Menard Memorial Sports Center. The half-percent sales tax was due to end this year or upon payment of the bond.

“The half a percent was raised for the sports center and that was what the bond issue was, and that was the promise to the voters,” Rupright said. “Promise made, promise kept.”

So does that mean the city finally owns the sports center free and clear?

Not quite. The city still has 11 months of bond payments to make. Sales-tax revenue has performed better than expected lately and the city socked that money away, Rupright said.

“We’ve got the money banked up to do it,” he said.

The reason the city is lowering the sales tax now is to avoid overcollecting, he said. If the sales tax continued to perform well and the city ran the tax for the sports complex for the full term, Wasilla would wind up with more money than it was entitled to and with no way to return it.

“We would have to track down every customer,” Rupright said.

The city likely would have rolled that money into other parts of its budget, but Rupright said that didn’t seem fair. There has been some talk about bumping the tax back up to pay for some other large project. Most of that talk has come from a group that wants a new city library.

“They’ve got all kinds of issues to work out, [like] site selection, finding a place to buy,” the mayor said. That plan just isn’t ready yet.

Wasilla, unlike other municipalities in the state, charges on the lower end of the sales-tax range and hasn’t had to couple that, at least in recent years, to a property tax. The closest cities to Wasilla — Palmer and Houston — both have city property taxes — 3 percent in Palmer and 2 percent in Houston.

The highest sales tax levied in Alaska is the 7 percent levied in the Southeast communities of Meyers Chuck, Thoms Place and Wrangell, according to state records.

But Wasilla’s booming retail sector and the proliferation of box stores in the area has allowed it to meet its needs with a 2-percent sales tax, and it’s a situation Rupright doesn’t expect to last. As the city grows, so does the need for city services. If the economy remains stagnant, people will spend less at city stores.

Wasilla City Council has a few options, Rupright said. He thinks city code allows for a bump to at least 3 percent on the sales tax and that the council has the authority to implement a property tax of up to two mills.

Rupright would prefer the city keep funding itself through sales tax, however. The idea of paying property tax is distasteful to him.

“You pay off your very biggest investment, your home, and if you don’t pay your taxes, the government takes your home away,” Rupright said.

Whatever the city decides to do to keep its finances solid, it won’t do hastily.

“Rather than just doing that, we want to make sure that it would become absolutely necessary,” Rupright said, adding that the public will be given ample opportunity to have input.

Contact Andrew Wellner at andrew.wellner@frontiersman.com or 352-2270.