DIDN'T ADD UP: Lowered property tax sounded good, but bonds will eat up income.
PALMER -- A proposal to put a 2 percent sales tax to voters in October failed, 4-2, to win support Tuesday from the Matanuska-Susitna Borough Assembly.
"Much ado about nothing," Mat-Su Assemblyman Jim Colver said of the hour-long Assembly tax deliberations Tuesday evening.
Only Assembly members Lynne Woods and Jody Simpson voted in favor. The vote came after the Assembly had held a work session, a public hearing and a special meeting, spread over several weeks, to discuss the ordinance.
Members Colver, Talis Colberg, Bill Allen and Betty Vehrs voted against. Assemblywoman Mary Kvalheim, who expressed a split opinion on the tax prior to Tuesday, was absent.
The proposal went through several transformations before the Assembly vote. Two amendments were added Tuesday to satisfy borough residents who believe the tax would only increase the size of borough government.
Simpson proposed, and the Assembly approved, language to the ballot measure defining the sales-tax revenue as a substitute for property taxes.
Colberg said the wording was unclear and provided no real guarantee that the new money would really offset property taxes.
"Unless we say we'll substitute dollar for dollar of property tax, it doesn't mean much here because we're not capping property assessments," he said.
Property tax assessments, Colberg said, could continue to escalate, and property owners would see no relief, even if their mill rate stays the same. Property tax assessments rose an estimated 15 percent this year.
Vehrs proposed, and again the Assembly approved, a 9-mill cap on property taxes if the sales tax passed. Any higher property-tax rate approved by the Assembly would eliminate the sales tax. The mill rate this fiscal year was set at 10.88 mills.
In Wasilla, a similar cap limits property taxes to 2 mills.
Borough finance director Tammy Clayton counseled against Vehrs' proposed cap. Clayton said capping property taxes could put the borough in a financial bind. She estimated that rising expenses and new debt from about $61 million in school, library and animal shelter construction bond packages being readied for the ballot this year would quickly outweigh income from any potential sales tax.
Even with about $10.7 million in added revenue from sales taxes the first year, the tax would only lower the mill rate to 9.63 mills next year, Clayton estimated. And within two years, according to Clayton, the mill rate would have jumped to 11.4 mills.
In other words, Colberg pointed out, the tax could be rescinded before it's even a year old because the mill rate couldn't be lowered far enough.
Mayor Tim Anderson pointed out that Clayton's sales-tax estimates were based on the only hard numbers available right now -- sales tax receipts from Palmer and Wasilla.
Outside the cities, Clayton said, it's hard to guess at revenues.
"That's our big unknown," she told the Assembly.
Anderson countered that anticipated revenue could be much higher than expected.
Woods said she was surprised when the ordinance failed. She thought it hit the marks people in her district had asked for when she went campaigning last year.
"Maybe I only heard from those who support it, but ... when I was campaigning for my district, education was important and taxes were important," Woods said. "Even the tobacco tax opposition said they supported a sales tax over the tobacco tax."
When the Assembly considered levying the tobacco tax, several who testified said a sales tax was fairer than a tobacco tax. It applied to every class, not just smokers, they told Assembly members in May.
Vehrs said she didn't feel the same support for a sales tax from people in her district. She proposed the property-tax cap because it made the sales tax more palatable. But she wanted to see a real guarantee, she said, that the sales tax revenue wouldn't serve only to expand the borough's income.
"It's not love, but it's not bad," Vehrs said, quoting from a 1973 Hank Cochran song. "But we're not there yet. And until we are there, I'm going to uphold the principal of not fooling any of the people any of the time."
Daily News reporter Rindi White can be reached at rwhite@adn.com or 1-907-352-6709.
