Shoppers could see their weekly grocery bills go up $7.44 a week if the Homer City Council passes at its next meeting an ordinance it moved forward Monday night.
The council introduced on first reading Ordinance 12-53, proposed by council member Bryan Zak, that would end the seasonal sales tax exemptions for nonprepared food items. It also introduced Ordinance 12-54, proposed by council member David Lewis, that would change how nonprepared food items are defined, putting foods like sugary drinks, ice cream and frozen dinners into the taxable class of prepared foods.
According to the latest Cooperative Extension Service survey, a family of two adults and two children in Homer pays $165.30 a week for groceries -- tax free. If Zak's ordinance passes, added to that would be 4.5 percent in local sales taxes, or $7.44 more. Currently, the tax applies only in the summer from June 1 to Aug. 31; otherwise nonprepared foods are not taxed.
The ordinances were introduced on first reading, and go up for a second reading, public hearing and final action at the Dec. 10 council meeting.
Introduction of the ordinances does not necessarily mean they will pass, a point made by council member Barbara Howard, who opposes Zak's ordinance. She said she voted yes on introducing it only to allow the public hearing process to continue.
Although the formal public hearing is in December, several people spoke during the "public comments upon matters on the agenda" portion at the start of the meeting. Opinions were mixed.
"The city needs the money to maintain its quality of life," said Doug Stark, a former city council member, in supporting repealing the seasonal tax exemption. He noted about half the tax collected would come from nonresidents.
"It seems we're always coming up with shortfalls to community programs," said Megan Murphy in support of Zak's ordinance. "It seems like a common sense, forward-thinking thing to do."
Ray Kranich, a former planning commissioner and a lifelong Homer resident, opposed Zak's and Lewis' ordinances.
"Even though I know the city can use the money, the city can always use the money," he said. "The people have spoken twice: they don't want that tax on foods."
A Kenai Peninsula Borough vote on a citizen initiative created the seasonal sales tax exemption for nonprepared foods. The city of Homer could opt out of the exemption by council action, as did other peninsula towns, but Homer put the vote to the people in 2009, who upheld the exemption.
Wes Head also opposed the ordinances.
"Food tax is the most regressive tax there is. It hits people at the lower levels more," Head said. "You guys need to listen to the voters and not reinstate the tax."
One Kachemak City resident, Kelly Cooper, spoke in favor of reinstating the tax. "I live outside the city. I take advantage of services offered in the city," Cooper said. "I also advocate for services offered in the city, and I am willing to pay my share as I can."
At the Committee of the Whole meeting, the council also discussed Lewis' proposal to change how nonprepared foods are defined. The borough and city now classify nonprepared foods as those foods allowable under the federal Food Stamp program.
Lewis said register and inventory systems could be changed to his proposed ordinance's new definitions. "I don't want to create a huge problem for the three businesses that deal with it," he said. "You can do a lot of things with a couple of key strokes."
Wrede said he didn't know if it would be possible to have one definition of nonprepared foods for the city and another for the borough. Wrede said he would check on that point. The borough collects all sales taxes from merchants on behalf of cities and sends them a check for its share.
Council member Beau Burgess put out a call to local merchants to speak on Lewis' ordinance.
"I'd really like to hear from the retailers directly as far as what the impact would be on them," he said.
If Zak's ordinance passes and the seasonal sales tax exemption goes away, the city would earn about $1 million more in revenues. Zak introduced an amendment to the budget on Monday reflecting that increase and showing how it would be spent. His amendment included a new police dispatcher, a library tech, doubling the council stipend from $50 to $100 a month, paying city workers a 2-percent cost of living wage increase and contributing $50,000 more to the Homer Chamber of Commerce and Visitor Center and $50,000 to the Homer Senior Center. In the draft budget, the senior center didn't get a contribution and the chamber got $25,000.
Mayor Beth Wythe explained that under the budget process, amendments were to be introduced Monday so the public and council isn't reviewing budget changes at the last minute in December. Thus, even though Zak's ordinance to repeal the sales tax exemption may not pass and hasn't yet passed, the council put on the table Zak's amendments in the event it does pass. It made these changes:
- On a 5-1, vote, reduce Zak's proposed contribution to the Homer Senior Center to $20,000 and
- Change the contribution to the Homer Chamber of Commerce to $19,000. With $25,000 already in the draft budget, the total support to the chamber would be $44,000.
In that vote, a tie, Wythe voted yes and broke the tie.
Lewis tried to cut Zak's proposed council and mayor stipend increase from $100 to $50 -- what they get now -- but it failed on a 4-2 vote, with Howard and Lewis voting yes.
An attempt to keep at $50 the council stipend in Zak's amendments failed. The council also added an amendment that the total package of budget changes was contingent on Zak's ordinance passing.
"I'm frustrated," Howard said. "If someone was just listening to this, they'd think we had this pile of extra money and were just doling it out, but we don't have this extra money."
In another set of amendments not contingent on sales tax revisions, the council also passed budget amendments suggested by City Manager Walt Wrede. Those amendments are:
- Creating a full-time jail officer position to replace two or three part-time positions. Part-time officers have been working so much the city either has to pay retirement benefits or fill in with police officers working overtime. The full-time position yields an estimated $4,400 in savings;
- Purchasing $60,000 in equipment to replace other monitoring systems at wastewater lift stations. The equipment would standardize all wastewater monitoring and provide better information for things like calculating water and sewer use. The equipment would be paid for from the sewer reserve fund.