Sales tax rate and senior exemption under review
A sales tax ordinance review committee meeting turned into a larger discussion about the demographic status of the borough and its fiscal future.
The borough tasked the committee to review its sales tax ordinance, specifically looking at the senior exemption and tax rates.
Jody Tow, Borough Finance Director, outlined tax types, rates and revenues across Alaska’s communities. Petersburg’s sales tax is 6 percent—above the state average.
Tow also outlined the status of Petersburg’s Senior Exemptions. There are 462 active senior cards across the borough. Those using the cards cumulatively saved an estimated $250,000 in sales tax. From the borough’s perspective, that could look like a quarter of a million dollars in lost revenue. But Tow said people feel strongly about their exemptions and it would be a tough sell to the voters to eliminate it.
“When they (seniors) come in on their birthday they expect to get that card in their hands in five minutes,” Tow said.
“This senior tax thing, people feel like they own it but how did they earn that?” Borough assembly and committee member Sue Flint asked. “They got older. That’s all.”
Flint said part of the issue of the senior exemption is that it’s abused. She cited examples of seniors buying goods for commercial enterprises—merchandise that doesn’t fall under the senior exemption.
She also said the borough will likely need to find additional revenue now that Petersburg Medical Center is requesting financial assistance for capital projects.
Committee member Fran Jones said she would be more comfortable limiting the exemption to food and fuel rather than eliminating it altogether.
The discussion turned into the wants and needs of the community and what it can realistically handle in the future.
Committee member Lee Corrao referenced Petersburg’s perceived population decline.
“How do we maintain current services with a declining population which means there are fewer people to pay the taxes?” Corrao asked. There are many voices in the community who feel we have eyes too big for our stomachs sometimes.”
Borough Manager Steve Giesbrecht challenged that assumption citing the difficulties in finding housing as evidence that the population isn’t declining.
According to a labor study conducted by the State of Alaska in January 2013, “Low natural increase and an older population are typical of Southeast, which has more residents over age 65 than any other region of Alaska and a median age of 39.4 — significantly older than the statewide median of 33.8.”
Sixty-five is the age needed to receive a senior exemption card and with more seniors not paying sales tax, the less money the borough has in its coffers.
Other options up for recommendation are to lower sales tax or increase the sales tax cap.
Either way, Giesbrecht advised the committee to take a holistic approach when thinking about all scenarios.
“You can’t look at just one area in a vacuum,” Giesbrecht said. “If you’re going to protect revenue, meaning the senior exemption, then the only way to address that is to also offer something up. Would people in town vote for reducing the sales tax to 5.5 percent if you’re willing to get rid of the senior exemption?”
No recommendations have been made at this time and the committee will meet again September 24.