Petersburg Pilot -

A slice of the pie:

What is the raw fish tax and how has it been spent?

 

Borough officials didn't regularly transfer fish tax to the harbor until 2005. If a status quo does exist, it would be that the general fund retains the entirety of the fish tax or keep more than half of the revenues. It wasn't until recently that the harbor was allocated more money than the borough's general fund.

Some Petersburg officials and civic leaders are against using annual raw fish tax revenues to help pay back a potential loan that would help pay for a portion of the $9.9 million municipal and police building remodel project.

Petersburg Borough Finance Director Jody Tow helped come up with the funding plan that would borrow around $1.3 million from Power and Light's electric fund and would pay those funds back with a portion of the annual fish tax revenues.

Some think the bulk of those monies should stay in the harbor department to help pay for deferred maintenance, future projects and to build up its fund reserves.

Others say it puts an unfair tax burden on commercial fishermen to pay for the remodel project.

Borough Assembly member Kurt Wohlhueter is the assembly's representative on the Harbor Board and said during last week's Harbor Board meeting that when the potential loan is satisfied, he would like to see a policy set in place that puts tax revenues for the harbor back to the "status quo." But that would be difficult considering a "status quo" doesn't exist.

So what is the raw fish tax? Who pays it and how does it get sliced up?

The Fisheries Business Tax, or raw fish tax, taxes three percent of the value of pre-processed fish where the landing takes place.

The raw fish tax has been around since 1949 and those monies went straight to the state's coffers until 1962 when the state gave local governments 10 percent of the revenues. In 1981 the state started giving half of those tax revenues back to local municipalities, which is how it still works today.

According to state statute, a municipality "...shall use the (raw fish) tax allocation to help reduce the effect of fisheries business activities on the municipality, which may include the expenses of any municipal service."

The municipal government in Petersburg didn't regularly start providing the harbor with a portion of those revenues directly until 2005. Since then, the city and now borough has ratcheted down the revenues going into the general fund as it took over the harbor facilities from the state, and because harbor projects increased such as the dredging and construction of a new north harbor or the drive down dock. In 2012, for the first time, the borough assembly allocated more tax revenue to the harbor than it kept in its general fund.

This year, the borough's general fund retained only $250,000, the lowest amount of fish tax it has kept in the history of the tax and the harbor received $570,117, the third highest amount it's ever received.

There is no local ordinance or set of guidelines that spells out how much money goes where. Tow said she usually discusses the tax revenues with harbormaster Glo Wollen. The Petersburg Borough Assembly, following Tow's recommendation, allocates the monies each year.

"The reason why we tried to ratchet it down in the general fund is because the borough took over the harbors from the state and to start building up the harbor's reserves more," Tow said. "In 2012 we really started decreasing the amount to the general fund because we knew we were going to have to replace the north harbor. That's why the harbor started getting a lot more of the money."

Tow's current funding plan for the municipal remodel would limit the general fund's allocation of fish tax to the already record low amount of $250,000 plus an additional $174,000 to pay back the loan from the electric fund should the need arise.

The loan and the repayment is a "worst case scenario" plan, Tow said. $700,000 of overall estimated price for the municipal remodel is in contingency fees and so its possible the borough would need much less than the $1.3 million.

$5.3 million in funding for the remodel is coming from state and other grants. The rest comes from the borough's general fund, land sale proceeds and E911 surcharge funds.

"Maybe the bids will come in lower than we thought and we might not ask for a loan at all," Tow said. "We're actually not going to talk about a loan at all until the project's done."

Still, some harbor board members like Mike Bangs thinks the funding plan unfairly taxes commercial fishers.

"There's only 444 commercial permit holders in town that pay that raw fish tax so they're basically narrowing it down to a very small user group that has to end up using their tax dollars to pay that loan back," Bangs said. "It doesn't seem right in my mind."

Wohlhueter added he thinks commercial fishermen and women already contribute more tax revenues than the average resident.

"Most of the boat owners also pay property tax and also pay city sales tax that also goes into the general fund to pay for the infrastructure that everybody in the city gets a chance to use," Wohlhueter said. "I believe that the fishing fleet has probably contributed disproportionately into the general fund."

Harbor Board member Bob Martin initially reacted against the loan repayment plan but he's since softened his views after looking at the history of the local fish tax revenue allocation.

"After stepping back and reflecting on how much raw fish tax the borough has transferred to the harbor budget in the last ten years to aid in the completion of the north harbor and to begin building reserves back up from zero for south harbor replacement, I realized that the possibility of up to $174,000 a year diverted back to the general fund to complete another important capital project does not look unreasonable from that perspective," Martin wrote in an email.

Martin said he's still concerned about harbor rate increases after a recent rate study determined harbor rates will likely need to rise by 12 percent with an additional two percent increase per year over the next ten years to keep up with costs. He doesn't want any potential loss in fish tax revenue to increase those rates any more than the study indicates.

"Will Petersburg still be an attractive place to homeport?" Martin wrote. "Each boat is a small business. We need that economic activity."

The public will have a chance to comment on the entirety of the funding plan over the next several weeks as the Borough Assembly advances it in ordinance.

 

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