August 9, 2012 | Vol. 39, No. 32

City discusses funding options for Reid property purchase

The Petersburg City Council discussed five funding options for the acquisition of the Reid Marine Property in Scow Bay.

Option one includes raising the sales tax rate from six to seven percent. This option will raise approximately $462,000. Passing a resolution giving the Harbor Enterprise Fund all of the fish tax the City receives annually is also a part of this alternative.

Option two includes increasing the sales tax cap from $1,200 to $1,700; eliminating the sales tax exemption for seniors outside the City; moving to a point of sale system where sales tax is charged on all sales by vendors located within the City limits and a resolution to give the Harbor all of the fish tax the City receives annually.

Option three will use $250,000 of the Property Development Fund, $200,000 of the Economic Fund, $200,000 of the General Fund and raise harbor rates to finance the remainder of the purchase.

Option four includes combining the Reid Marine Property with the North Harbor shortfall, and issue general obligation bonds for $3.6 million ($1.4 plus $2.2 million). This would cost the city approximately $95,000 to $100,000 annually for the next 20 years.

Option five suggests postponing the purchase and adding this acquisition to the capital projects request for the legislature.

Members of the business community weighed in with their opinions and suggestions regarding the purchase of this property.

“I have lived in Petersburg for over 30 years and am directly involved in the fishing industry,” Mike Bangs said. “I have observed the need to continue to grow and this property is a key component of the further development of our fleet.”

Bangs also explained that this is the last deep water access in the area and it is a key part of the fishing industry being able to grow. “I know we can figure out a way to pay for this,” he stated.

Mike Luhr of Piston and Rudder Services stated, “Purchase of this property will have long-term effects on the community and I hope the council will support our endeavors of bringing meaningful employment to this town.”

The Petersburg Finance Committee Chair and City Council Member, Susan Flint explained that none of the funding options can go through without being brought before the council or going to a vote of the people.

“These sales tax changes really need a lot of thought, time and education,” Flint said.

She also stated that there is not enough time to put Option one in effect. “We could vote on it next year and we would get the money in another year or two after that.”

“But I am really nervous about Option three,” Flint said. “I'm not comfortable committing all of our funds to buy this piece of property when we have the $2.2 million shortage on the North Harbor, which is our top priority.”

Flint explained that Option five would make the most sense in her opinion. “I think this would be a great thing for Petersburg,” she said. “Feedback from fishermen and the Harbor Board is that this is a golden opportunity and I know we don't want to lose it.”

City Councilman Rick Braun was in favor of Options two and three. “I like option three because it spreads the pain around,” he said. “Everyone gets hurt a little bit, because I believe the town, as a whole, will benefit from this project but I also think everyone needs to pay some.”

Taking option three into consideration $250,000 from the Property Development Fund, $200,000 from the Economic Fund and $200,000 from the General Fund still leaves a deficit of up to $750,000 depending upon the agreed price of the property.

“The remainder would have to be financed in some fashion,” Petersburg City Manager Stephen Giesbrecht stated. “A 15 year bond would cost approximately $65,000 per year, but increasing the sales tax cap will probably be the easiest to sell to the public.”

Giesbrecht explained that the challenge is that the City does not collect detailed sales tax data so the scenarios proposed by the sales tax cap increase are just guesses and it still may not be enough money to cover the costs.

Scenarios for this increase range from $530,000 for a high estimate to $48,000 for the low, in additional revenues to the City. “There is a very big spread in those numbers,” Giesbrecht said. “We aren't guaranteed that this increase will be enough to cover the bond payment.”

“I am in favor of increasing the sales tax cap,” City Councilman Don Koenigs said. “But I would rather see it increase to $2,400 instead of $1,700.”

Koenigs also said he would rather take option three of spreading the costs around through the different funds.

“I would much rather take a little more from each fund and bring that $750,000 down to around $300,000,” he said. “What we are talking about is economic development and I think it is very important to support this endeavor and acquire this property but I do not want to put this on the capital projects request list. We do not need to put our hand out to the state again, we need to pay our own way.”

A special City Council meeting was called for 3 p.m. Friday, Aug. 10 in order to discuss these options further along with a second reading of Ordinance #967 increasing the sales tax cap from $1,200 to $1,700.

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