Gary Paxton, Robin Sherman, Marjorie Parmelee, and John Stein join KCAW’s Emily Kwong to talk about the pros and cons of Proposition 1, which would raise the cap on property taxes from 6 to 8 mills. (Emily Russell/KCAW photo)
Last Thursday (09-22-16), Raven Radio hosted a live, call-in show devoted to Proposition 1. That’s the ballot question asking Sitkans if the city should amend the charter to raise the cap on the mill rate from 6 mills to 8 mills.
We invited four Sitkans – Gary Paxton, Robin Sherman, John Stein, and Marjorie Parmelee – to talk about how they’ll be voting and their perspective on Sitka’s financial pressures, including property values, electric rates, the Blue Lake Dam, and the cost of living.
Proposition 1 Forum (Full Audio – 90 minutes)
Raven Radio has also broken up forum audio by section, so you can weigh the pros and cons of the ballot question yourself. Election Day is Tuesday, October 4th.
Background on Proposition 1: What is it?
The question on Tuesday’s ballot.
If passed, the local limit on property taxes (i.e.”the cap”) would increase from 6 mills to 8 mills. That means that if the Assembly decided to levy an 8 mill tax this year, instead of paying $6 for every $1000 a property is valued, property owners would pay $8. To determine how tax would change for an individual property, use this calculator on the city’s website.
If the ballot question passes, the Assembly will dedicate one mill of property tax revenue (that’s roughly $1 million) to the electric fund. Their goal is to use this money to stabilize the fund and keep this year’s electric rate increase at 5%. This spring, a Citizens’ Task Force recommended raising property taxes as well.
If the ballot question does not pass, electric rates will go up by 11-20%. The electric department is in crisis because customers are using less – and thereby paying less – for the city’s hydropower. The electric fund is $2-$3 million short of where it needs to be to keep up with bond payments on the Blue Lake Dam and address maintenance needs.
How the Panelists Will be Voting
Robin Sherman and John Stein are voting “Yes.” Gary Paxton and Marjorie Parmelee are voting “No.” Here are their reasons why.
Sales Tax: Is that a better alternative for Sitka?
Gary Paxton proposes extending the sales tax to 6% year-round, which would require a citizen vote. This would generate $667,000 for the city. Robin Sherman argues against raising the sales tax.
Property Taxes: Is it time to raise the cap? And how do Sitka’s property values compare to other municipalities in Alaska?
Of the twelve boroughs in the state of Alaska that have a property tax cap, Sitka’s is the one of the lowest: 6 mills. The cap was set in 1990, meaning property taxes haven’t raised in Sitka in over 25 years.
A breakdown of how Sitka’s taxes compared to other communities. Sitka has low property taxes, but a somewhat high sales tax. (Data from CBS Assessing Department)
Electric Rates: How High is Too High for Sitka?
The Assembly will be raising the electric rates this year. If the ballot question passes, the rate increase will likely be 5% – from 12 cents/kwhr to 14 cents/kwhr. But it may continue to increase if the electric fund does not generate more revenue by way of new customers and increased load.
To help the electric fund, the Assembly agreed to another 5% increase this year. That would bring rates to 14.03 kwhr/month (on average). This would make utilities in Sitka more expensive than Juneau and Ketchikan. (Graph from CBS Utility Department)
City Government: Is Sitka’s government too big, too small, or just right?
For its population and location, Sitka’s government is moderate in size. This year, the Assembly reduced city government by $1 million – which cut 4.5 positions (some through attrition) from various departments, including the police and fire departments, and saw closure of the library on Sundays. How much further should Sitka reduce city government? And what impact would have have to quality of life?
For its population and location, Sitka’s government is moderate in size. But could it be smaller, in services or personnel? The forum participants considered the options. (Table by Emily Kwong/KCAW)
Blue Lake Dam: How do you want the city to address the bond debt for the Blue Lake Dam?
A significant proportion of the city’s budget deficit is due to the Blue Lake Dam. The bond covenant requires Sitka to generate 125% of operating costs and pay only interest on the bonds until 2030. But, the city is struggling to keep up with those bond payments because electric usage has dropped significantly. For more information about the Blue Lake Dam shortfall, click here.
In the four years since the dam was approved, usage has declined to 104 million kwhr/year. With customers using less, the city is short several million dollars to keep up with bond payments. (Graph from CBS Utility Department)
If the ballot question does not pass, what other sources of revenue should the City and Borough of Sitka pursue?
As one caller points out, property taxes are not the only tool for fixing Sitka’s FY18 budget deficit, which the city projects will be $3.5 million ($2.5 million for the general fund and $1.5 million for the electric fund)
The Assembly could reduce the size of government, levy other kinds of taxes, tap other funds and reserves, and pursue ventures that would generate revenue. The panelists shared their thoughts on where else Sitka should look for the money it needs.
Affordability Challenges and Final Thoughts
Gary Paxton, Robin Sherman, John Stein, and Marjorie Parmelee, along with listeners, offer their final thoughts on Proposition 1. A landlord calls in to say he’ll be voting “Yes” and does not plan to pass along any increase in property tax to his tenant. Another caller says the city has been wasteful with its spending.
Election day is Tuesday, October 4th. Precinct 1 voters will cast ballots at Grace Harbor Church on Halibut Point Road across from SeaMart. Precinct 2 voters at St. Gregory’s on Lincoln Street. Polls will be open on Tuesday, October 4th from 7 a.m. to 8 p.m.
