SitNews - Stories in the News - Ketchikan, Alaska


The future of Ketchikan
By Rodney Dial


November 24, 2008
Monday PM

The country is going through the worst economic disaster since the great depression, with most thinking that it will get worse before it gets better. During times like these consumer spending on non essential items all but stops. This presents the real likelihood that Ketchikan will take a severe economic hit next tourist season.

We can already see some of the effects of the poor economy and high fuel prices; businesses are closing, our population is decreasing and school enrollment is down.

Any reputable economists would tell our local governments to be prepared for what lies ahead by reducing, or at the very least maintaining spending and tax rates. The goal being to keep as many citizens as possible from leaving the tax roles and becoming dependant upon government services.

In spite of what should be good financial planning, our local governments seem to be engaging in a spending spree of epic proportions. I would ask that you consider for a moment the many projects we have recently funded, or will put the community on-the-hook for in the near future.

Port Bonds
Birth III -$38.5 Million
Birth IV - Contract with Survey Point Holdings. 30 year lease with options for two ten year extensions varies from $1.8 to $3.39 million, with an average amount of $2.94 Million per year, plus annual operating costs and $153k yearly maintenance costs. Total will exceed $100 million.

Schoenbar School, original estimated cost $9 million, final cost over $20 million.

White Cliff Borough Offices. Lease and increased utility costs will add nearly 1 million per year to the borough budget. To purchase the building will cost approximately $9 million more.

New pool estimated at $23.5 million, plus increased operating costs.

New library estimated at $13.3 million, plus operating costs (excluding personnel) will increase from $58k to over $200k per year.

Schoenbar Kitchen remodel $1.03 million

Pedestrian way finding project 100k

Public transportation 1 million or more per year and increasing.

New Downtown Fire Station (millions) -hopefully the State will pick up the tab on this.

And on, and on.

It's important to remember that we are a community of just over 13 thousand. To put these numbers in perspective lets consider just the pool project as an example.

Assuming that the pool can be built on budget with no cost overruns, $23.5 million equals:
Approximately $137,896.62 per month for 30 years.
With interest, the total cost is $49,642,783.99.
Or about $3600 in new debt for every man, woman and child on the island, or $14708.97 per family of 4 (pool only).
The bonded amount does not cover yearly maintenance costs, or the increased operating expenses due to a larger pool.

This is just the cost for the pool. Add the library, a future request to purchase the White Cliff building, the possibility that the State won't pay for a new Fire Station, a new or renovated school or two, and other projects, and it's easy to see that we are getting way over our head.

Our local governments realize that it is not possible to fund these programs with the current level of taxes and will be asking you to pay more. For the Pool, it will require a 1/2 % dedicated sales tax, plus additional funds from the general operating budget to pay for increased operational expenses. If a new pool was not built with local funds the sales tax rate could be reduced to 5.5% once the recreational center is paid off in 2009. For the library, your property taxes are expected to increase by .43 mills. Keep in mind that local businesses will pass on their tax increases to you, so your yearly family share is far more.

Detractors of the past 1/2% recreational sales tax increase claimed that it would drive business out of Ketchikan by making locally purchased items more expensive than mail order ones. My question to Ketchikan is how many year around businesses are open today in the downtown / Newtown area? Is it less or more than when our sales tax rate was 5.5%? We get no tax revenue and create no local jobs when people purchase items on-line because they are too expensive to obtain locally. Finally, keep in mind that fuel, rent and food are subject to sales tax. At current tax rates how much tax is added to fuel a vendor sells for $4 a gallon?

Now I realize that at this point in my letter, supporters of the library and pool are forming a posse to come get me and lynch me at high noon. Their fingers are already warming up to write a response. For the record, I agree with most of your reasons in support of your projects. You are good people, wanting to do good things- drive on. My only concern is with funding, and the priorities our community sets. Anytime a specific group wants funding for their project it seems like they use the same play book to justify it. Let's discuss the likely arguments supporters will make for why we should raise taxes to fund a new and bigger library and pool (among others):

It's all about the kids. This argument is used for everything and is impossible to argue without looking like a scrooge. We all care about the kids and this is why we have doubled local school funding in recent years. If we take this argument to the extreme we might as well install a waterslide down Deer Mountain so they have something to do in the summer. Let's be reasonable about this, our kids have a pretty good life on this island compared to almost everywhere else.
You don't mind paying more taxes for project X..honestly, no one cares if you want to pay more, go ahead and pay all you want. However, what you are really asking for is that everyone else pay more as well. Per the playbook when justification #2 falls on deaf ears go to #3
Make people think our taxes are low and therefore they should pay more. The truth is that State taxes are low, but our local taxes are extremely high. Assuming that our local governments have no control over state taxes, it seems ridiculous to argue that we should further inflate our local taxes to compensate.

As a point of fact most of us pay state taxes every day; they are just hidden in a number of ways. The difference between what an average Alaskan will pay in STATE taxes in 2008, and what an individual pays in the median taxed state (Kentucky) is $768.00

However the real difference lies is in local taxes. For 2007 (latest data available) Alaska had the 12th highest average property tax on owner occupied housing in the country, with an average of $2452. By comparison, Alabama's was at $352, and the median nationwide average was Nevada at $1655 (ref see ) Property taxes tend to be a double edged sword in that you not only pay them on your home or through your rent, but they are also passed on by your local businesses in the form of higher prices for goods and services.

We also know the cost of living is far higher in Ketchikan, than in the lower 48. Any savings we realize through lower STATE taxes, are offset many times over through a significantly higher cost of living. Different resources list our local cost of living difference at 20-57% higher than the national average. How much more do you pay for gas here? To have UPS deliver an item? Food? This is why so many Alaskans retire out of State.

The next most common argument when the previous three fail to gain public support is GUILT. Make the person feel guilty for receiving a PFD, e.g. the State gives you money therefore you should support my cause by paying higher taxes. First, the PFD is considered income and you already pay taxes on it; the IRS says so. Second, as mentioned above, the extra cost of living far outweighs the PFD. No one is getting rich off the PFD and it is critical to helping Alaskan's afford to live here. As a side note the PFD is likely to go way down in the coming years as the fund has lost billions this year alone.
The final argument is that the local government / group X is raising funds to help offset the costs. The friends of the library have been very good at this, and I realize that the Rasmussen foundation may help as well. Unfortunately, even if highly successful, fundraising will only cover a small part of the construction costs, and nothing of the increased operating, or maintenance costs.

If we spend as if there is no tomorrow and raise taxes, we will drive people and businesses from our community. With each family and business that departs, tax revenue will decline, but the debt and liability will remain. Add a slowdown in our prime industry (Tourism) and we could face a perfect storm that will cause significant damage to our community.

We can still make these projects happen; we just need to be smart about it. I would suggest the following to our leaders:

Seek State funding first. Make the Library and the Pool top legislative funding requests. You need to keep in mind that when you seek state funding for low priority, non essential items such as batting cages, you damage your creditability with legislators when it comes to asking for more pressing needs like a new library (no disrespect to the ball players intended).
Repair the pool, do not replace it. Our population is decreasing; we can get by with the same sized pool. Repairing the pool will cost only 1/2 as much, and will cost no more to operate.
As nice as it would be, we do not need to quadruple the size of the library. The existing size has suited 99% of us just fine, and as mentioned before our population is decreasing. It is predicted that within the next few decades (well within the useful life of a new building) that nearly all books ever written will be available electronically and library patrons can download them to a pad for reading.
Do not raise taxes, you will only hurt local businesses and tax revenue at the expense of special interest. If you must, raise user fees to pay for these projects.

Had we made smart decisions in years past we might now be in a situation like many other communities and not need to tax food, rent, fuel, etc. I would also point out to our seniors that uncontrolled local spending is the greatest threat to the continuation of the senior sales tax exemption. As I stated in previous letters local governments see this exemption and the property tax exemption as unfunded liabilities that are growing. When times get tough this always comes up for consideration to reduce or eliminate.

Elected officials, please stop making emotional decisions and start managing this islands financial affairs as if our taxes are high enough already. Thank you.

Rodney Dial
Ketchikan, AK

Received November 19, 2008 - Published November 24, 2008


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