PALMER -- A 3 percent sales tax proposal emerged this week from the Matanuska-Susitna Borough Assembly that backers say provides more relief for borough property owners than a 5 percent version.
The Assembly at a work session Tuesday directed administrators to craft a sales tax measure that differs significantly from any of the five that Mat-Su voters have rejected since 1991.
Both measures would also reduce the borough property tax rate.
Borough Manager John Duffy on Thursday said he would present the Assembly a measure by June 19 that includes a 3 percent sales tax, caps the borough property tax rate, exempts from taxation the first $10,000 in assessed property value and expires after three years unless voters opt to extend it.
The Assembly proposal counters a plan Allen unveiled May 15. Allen's proposed tax complements individual city sales taxes, not to exceed 5 percent total.
His plan caps the property tax rate at 8.2 mills ($820 in tax for every $100,000 in assessed value), exempts the first $20,000 of assessed value from taxation and imposes the three-year sunset clause.
The Assembly must hammer out a final version. The sales tax is primarily intended to reduce the tax burden on borough property owners.
"In the Mat-Su we're not in a position to be dependent on a single source of revenue. If the real estate market crashes like it did in the 1980s ... we're gonna have some very serious problems," Allen said Thursday.
Assembly members split on the 5 percent plan but agreed that a $20,000 exemption might be too generous. Borough finance director Tammy Clayton projected that the 2010 borough budget would be in the red by $586,000 under Allen's plan.
Allen said he understands Clayton's concerns, but believes she too conservatively estimated sales tax revenues. He said he expects 8 percent to 10 percent growth each year.
Clayton estimated 5.7 percent growth. But Allen said Thursday he could abide by the $10,000 exemption, with the possibility that the exemption could be increased to $20,000 if sales tax revenue comes in higher than estimated.
"From a financial point of view, it's always best to have a little reserve in your tank," Allen said.
At the end of the discussion Tuesday, Assembly members said they preferred a 3 percent sales tax plan, which Clayton estimated would bring in about $2.5 million more than Allen's borough-wide 5 percent tax.
Allen's plan would collect less for the borough from sales within the cities than a 3 percent tax would collect.
"I'm going to continue to argue for the 5 percent, just because of the convenience to the merchants and secondly, so the consumers understand that if they go to the Valley they're going to be paying a 5 percent sales tax," Allen said.
Assemblywoman Michelle Church said she didn't think businesses or shoppers would have a problem figuring out the different tax rates.
"I just don't think it's that complicated an issue," Church said.
Assemblywoman Cindy Bettine asked Duffy and Clayton to engineer a plan that caps the mill rate at 7.8 instead of Allen's 8.2 mill cap.
Adding a sales tax on top of an 8.2 mill rate did not lessen the overall tax burden on borough property owners, she said.
"If people do the simple math at home, I don't think that is going to motivate them," Bettine said of Allen's proposal. "It's got to be really lucrative to get those people who would be on the fence. And quite frankly, I would be on the fence."
Bettine said she thinks a lower cap on the mill rate coupled with added revenue from the 3 percent sales tax might achieve the balance she's seeking.
"The idea for me is not to generate a lot of money, it's diversification," Bettine said. "We're still working on it."
Daily News reporter Rindi White can be reached at rwhite@adn.com or 352-6709.
What the two versions of proposed sales tax would mean
Two versions of a sales tax proposal for the Matanuska-Susitna Borough have emerged from the Assembly. Assemblyman Bill Allen proposed a 5 percent version; his Assembly colleagues together fashioned a 3 percent version. Each takes into account the sales taxes already imposed within borough municipalities. If the Assembly approves, borough voters would have their say on a sales tax measure in October.
5 PERCENT
Sales tax flat at 5 percent, amount varies within cities
In Palmer, 3 percent to the city, 2 percent to the borough
In Wasilla, 2.5 percent city, 2.5 percent borough
In Houston, 2 percent city, 3 percent borough
Outside city boundaries, 5 percent sales tax
Property-tax mill rate capped at 8.2 mills
$20,000 residential property tax exemption
Three-year sunset clause
Sales tax expected to net $17.3 million
3 PERCENT
Sales tax set at flat 3 percent
In Palmer, 3 percent city, 3 percent borough, 6 percent total
In Wasilla, 2.5 percent city, 3 percent borough, 5.5 percent total
In Houston, 2 percent city, 3 percent borough, 5 percent total
Outside city boundaries 3 percent sales tax
Property-tax mill rate capped at 7.8 mills
$10,000 residential property tax exemption
Three-year sunset clause
Sales tax revenue expected to net $19.8 million.
