Hold the line on spending
By Rodney Dial
January 26, 2017
I’ve been on the Ketchikan Borough Assembly for four months now. The following is my opinion of the state of the borough for your consideration. My views do not necessarily reflect the views of the other assembly members.
If you have read the paper lately, you are aware that the borough has a 1 million dollar deficit this year, growing substantially in future years. There are several reasons for the deficit; most are not within the control of the Assembly. Issues currently impacting the budget include: reduced State and Federal Aid, depletion of some funds and increasing health care/employee costs. Further complicating the budget is the SOA “nickel and diming” the community in ways such as charging us a tax liability for the shipyard which is owned by the State (AIDEA).
I’ve spent the last few months going through the borough budget in order to find efficiencies and have made more than a dozen recommendations that could save significant amounts per year. Those recommendations include:
Scheduling and policy changes for one department to reduce overtime, changes to transit, public notice changes, department dues and publication spending, travel/training reductions, ending various perks, ending the sales tax holiday, code compliance fee changes, and others.
Also, I have reviewed non-essential spending and currently looking into ways to find efficiencies in other borough programs.
For me, increased borough taxes are not an option to address the deficit for the following reasons:
There are 321 communities in Alaska. One hundred and seven municipalities, one-third, levy a general sales tax. Ketchikan residents currently pay the second highest rate in the state, and are only ½ of one percent from having the highest rate. This is a burden on our citizens and makes our businesses less viable.
Of the 321 municipalities/boroughs in Alaska that levy a property tax, only 20 have a higher property tax rate than Ketchikan city residents. Of those 20, fifteen have standard residential property tax exemptions; in addition to senior and disabled exemptions, that makes their effective property tax rates lower. (KGB residents have no standard residential property tax exemption),
Based upon average home values, this means Ketchikan city residents pay a higher effective property tax rate than all but five other Alaskan municipalities. Of the five municipalities with a higher effective property tax rate, all but two have either no sales tax or lower sales tax. Combined, this makes Ketchikan one of the highest taxed municipalities in the state.
In addition, island residents recently voted to extend the “temporary” sales tax addition for education and imposed a new tobacco tax increase. Water and wastewater rates have also increased by over 30% in the last few years and the City recently increased electrical rates.
If that doesn’t concern you keep in mind that even with the recent State take of $667 million from reducing everyone’s PFD, the state still has a deficit of billions. In fact, just to balance the state budget now would require thousands in additional taxes from every man, woman and child in the Alaska. New state taxes are coming.
It is also likely, if not all but certain that the state will continue to cut our community assistance, to include cuts to education that we will undoubtedly be asked to compensate for. We also face the possibility of an increased required local contribution for schools, could see the state pass on additional Public Employee /Teacher Retirement (PERS/TRS) costs, and could face significant borough liability from the ACA “Cadillac Tax” (for more on this click here )
Even if the State did not pass on any additional expenses, or further reduce funds to our community, we would still need a 14.2% property tax increase, just to maintain the status quo this year! If we fail to take steps to right-size local government, the increase needed to balance the budget is estimated to rise to 24.8% next year. It is also worth noting that these increases will be on top of anticipated assessment increases. This is just on the borough side and the City has its own budgetary and debt issues and will face pressure to raise taxes as well in the coming years.
Our community cost of living now averages 20% higher than the US, with local health care costs 40% higher.
There are many plausible scenarios in which our local taxes could double…or more… in the next few years if we “rest on our laurels” and fail to adjust local government spending to a sustainable level.
Raising local taxes now, after the tax increases mentioned above and PFD cut (millions removed from our economy) on top of what is sure to be massive State tax increases to follow, would be devastating to our community.
Last year I wrote a Sitnews letter asking everyone to look back and consider all the businesses we have lost over the last decade. If that was not concerning to you, consider the business we have lost in just the last few months. Additionally, 147 Ketchikan businesses are now behind on their sales tax payments to the borough (canary in the coal mine).
Recent state economists have reported that regardless of what happens in the legislature this year, the state will likely experience a recession for years to come. A state recession would be extremely damaging for our island due in part to our very high debt load. Millions per year are spent by the City and Borough, servicing our debt, and if our population contracts the debt liability per person increases.
Since my election I have heard from many citizens living paycheck to paycheck and from many businesses that are unable to afford any tax increases and still remain competitive. Young people and retirees constantly tell me they are unlikely to stay because they can’t afford to live here anymore. Realizing that the state is going to further increase the cost of living for our citizens, I believe we must hold the line on local governmental spending to the greatest extent possible and fight to keep our citizens and the businesses we have left.
Over the next few months as the Assembly works on the budget, many groups/non-profits will demand higher taxes to maintain their funding levels. I believe we can find ways to continue to provide some funding to these groups, but there must be shared sacrifice. I believe that as a community, we are at the point of diminishing returns with tax increases, and base that belief on flat borough sales taxes and declining City sales tax revenue.
If you agree that we need to hold the line on spending, then you need to speak up. Alaska and Ketchikan are in for some lean years and we can’t pile on local tax increases on top of PFD reductions and the new State taxes to come and somehow expect that it won’t cause damage to our community. Please consider writing letters and show up and speak to the assembly and council.
“An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation.”— John Marshall
Received January 25, 2017 - Published January 26, 2017
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