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A Ketchikan councilman had it partly right when he proposed sales tax adjustments this week.
Matt Olsen, who felt the economic pain generated during the most recent city budget session, suggested that Ketchikan charge higher sales tax in the summer. The result would be that tourists would pay a higher amount to support city services. Of course, locals would be paying the higher tax then, too.
But, after the summer tourist season, the sales tax would be decreased in concern for those living and trying to make ends meet in Ketchikan.
This would mean a 4-percent tax in the summer and a 3-percent tax in the off season.
Business leaders expressed several concerns about the idea: 1. It would deter locals from spending in Ketchikan during the summer; 2. For those who operate seasonal businesses, such as in the commercial fishing industry, it would increase costs, and 3. It would put Ketchikan at a competitive disadvantage with other Southeast Alaska communities with lower sales tax. In other words, it would discourage purchases and drive business out of Ketchikan during the summer months.
The Council voted down the proposal, 2-5. Marty West, who seconded Olsen's motion and voted with him, and Council Member DeAnn Karlson pointed out that the proposal comes too close to the upcoming summer for implementation.
The topic likely isn't as dead as the vote might indicate. But it's unlikely to advance without the Council coming up with a plan that spreads the "pain."
Indeed, budget shortfalls are the premonition of the future, and moving funds around from one project to another in order to come up with a balanced budget is a short-sighted approach. Those funds also decrease under such a scenario.
As Council members undoubtedly are aware and expressed in recent economic times, not only tax increases, but budget cuts are likely.
In fact, the Council already increased the city property tax by a half mill for its 2013 budget.
But taxes cannot be raised beyond what the public can afford, and many in Ketchikan are confronted with increased property tax, plus increased health insurance premiums and higher deductibles, which translate into thousands of dollars paid out of pocket for medical care.
Also, higher water and wastewater disposal charges, higher fuel prices for homes and motor vehicles, higher federal withholdings for Social Security and any number of other increased costs of living are in evidence.
At the same time, contract negotiations with city employees will be coming up. Employees not only are paid by the city, but use the city services and will be confronted with increases as well.
The bottom line is that employees, non-government individuals, businesses and tourists likely all will have to be part of the solution to city budget challenges.
Increasing sales tax isn't the only a possible part of the solution, either.
The solution will include increases in revenue where the market can bear it; the city goes the way of the market, i.e. the local businesses. It depends on the businesses for revenue.
The solution also will involve cuts, probably in services held dear — library, fire, police, etc.
Councilman Olsen was right in bringing up the topic of how to balance upcoming city budgets and bringing it up early. It is a topic Ketchikan — not just the Council — should be figuring out between now and the next budgeting cycle.
Ketchikan has the expertise. Some of the experts spoke at this week's Council meetings. Other experts are running households and employed by the government.
All of this input will be necessary for Ketchikan to ride out the economic times with a balanced budget.