The future of Ketchikan
By Rodney Dial
November 24, 2008
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
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.
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
New library estimated at $13.3 million, plus operating costs
(excluding personnel) will increase from $58k to over $200k per
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 http://www.taxfoundation.org/publications/show/1913.html
) 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
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.
Received November 19, 2008
- Published November 24, 2008
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