Wasilla voters may be asked to decide sales tax increase

WASILLA — It’s been more than a decade since city voters have been asked to approve a sales tax increase. That streak would come to an end this year if Wasilla City Council approves a proposal that could increase the city’s sales tax from 2 percent to 3 percent.

The council got its first look at a proposed ordinance last week that would ask voters to approve the sales tax bump, with half the increase earmarked for a new municipal library and future capital projects. The other half of the hike would bolster the city’s general fund.

Initial discussion among council members and audience participants seemed to support funding a library facility, but questioned the other half percent for the general fund.

“I think an increase in sales tax asking for (a 50 percent) increase is something that is significant,” Councilwoman Colleen Sullivan-Leonard said. “I really think it needs to be discussed prior to moving it forward.”

The council has until Aug. 10 to put any question on the Oct. 2 general election ballot, and in the end decided to hold a series of work sessions — Mondays through the rest of July — devoted to working on any potential ballot question that may result.

If a question to raise the city’s sales tax moves forward, it would be the first time Wasilla voters will be asked to hike the rate since March 2002. That’s when voters by a margin of 306 to 268 approved a half-cent sales tax to fund construction of the Curtis D. Menard Memorial Sports Center. That increase had a 10-year sunset, and the tax was actually discontinued a year early in July 2010 after raising enough money to pay off the project.

A similar option to pay for a new Wasilla Public Library is what resident Anne Kilkenny said she would prefer, suggesting the city ask voters for a half cent tax increase dedicated solely to the library project.

“I want to speak in support for the half-cent for the library, but I’m going to speak against the half-cent increase for general fund purposes,” Kilkenny said. “I can think of and name a half a dozen things that I think are frills that are being funded through the city’s budget. … Before there’s any tax increase on the residents, we need to re-establish the tax on those who don’t pay any taxes to us at all, and I’m talking about the multi-national corporations.”

Councilwoman Dianne Woodruff said she also has mixed reviews of the proposed increase.

“There are two things I really like about this,” she said. “One has to do with the library, and the other has to do with putting money aside up front. The rest of it I really hate, and I can’t move it forward in this current format.”

She also questioned whether the public has enough information about the planned new library.

“Right now, we’re asking them to buy something sight unseen for an amount unknown,” Woodruff said.

The new library will be located on a six-acre parcel of land at the corner of Crusey Street and Swanson Avenue behind Wasilla Middle School. Preliminary talks have envisioned a $14 million, 24,000-square-foot facility that may also include space the city could lease to help offset operating costs. Half of the money is expected to come from the state.

With sales tax being the city’s main source of revenue, income from those collections is not increasing enough to keep up with the cost of running the city, according to information from the Wasilla Finance Department. In fiscal year 2011, Wasilla collected about $11.6 million in sales taxes and is on pace to collect about the same for fiscal year 2012.

Mayor Verne Rupright said the two-tiered approach to raising the city’s sales tax rate is necessary for two reasons.

First, the city needs to continue to plan for a revenue stream to pay for capital improvement projects. Second, with sales tax revenues being flat over the past several years and the cost of city business climbing by about 3.5 percent to 4 percent a year, the general fund needs the boost.

He said the economy and high gas prices hit the city’s coffers because people are watching their retail spending more.

“It’s people spending less, I guess,” Rupright said. “If I have an extra $40 or $50 just to put into the gas tank, that’s got to come from somewhere.”

Add that payroll costs are climbing faster than sales tax revenues, and the city is approaching a financial squeeze, Rupright said. The city recently negotiated contracts with two of the three unions that represent city workers. Those contracts include a 3.5 percent raise.

“If things keep going the way the are, because you have to keep up with that cost of living pace, and our revenues have been flat, that means cutting services, cutting jobs, which also means services suffer,” he said.

As some at last week’s council meeting balked at the idea of raising the sales tax, Mat-Su Borough resident Marci Hawkins said that while she doesn’t live in Wasilla, she uses the city’s amenities and doesn’t object to helping pay to maintain those services.

“As a borough resident, I don’t mind paying an extra cent when I go to Wal-Mart or Carrs in order to get the new library built and to maintain costs,” she said. “I don’t want to see city residents pay property taxes for this.”

If a sales tax were to appear on the ballot, “Come October, I guess I will be standing on a corner with a big sign saying ‘please vote for this,” Hawkins said.

Before supporting a half percent more for the city’s general fund, Woodruff said she wants to make sure Wasilla is doing all it can to trim costs.

“I know there is fat in our current budget, and I can’t ask senior citizens who are struggling, families who are struggling, disabled folks who are struggling to come up with more money until I know we have seriously looked at everything in our city budget and we have cut out every bit of fat,” she said.

Contact reporter Greg Johnson at greg.johnson@frontiersman.com or 352-2269.

• The city of Wasilla collected $11.6 million in sales taxes in fiscal year 2011 and is on pace to match that for fiscal year 2012.

• A 1 percent sales tax increase would add about $5.8 million, based on those collections. Broken down, that’s $2.9 million for each half percent.

• At a half-percent collected at the current level, the city would glean the estimated $7 million needed to match Wasilla’s half of costs for a $14 million library project in less than 2.5 years.

• A new Wasilla Library is expected to include 24,000 square feet of space.

• The current library has 8,000 square feet of space.

• More than 97,000 visits were made to the library last year, an average of a little more than 320 per day.