Nearly two decades ago (2005) Sitka voters approved a tax on cigarettes and tobacco products to fund Sitka Community Hospital. The Southeast Alaska Regional Health Consortium purchased the city-owned hospital in 2019, but the hospital fund still exists today. At the Sitka Assembly meeting on July 9, Finance director Melissa Haley said that money is still covering some outstanding retirement liabilities from the hospital, leaving the fund in the red every year, but she expects that will soon change.
“Of course, our existing liabilities are always going to come first. Right now that fund is still in the red. Each year, it gets marginally healthier,” Haley said. “I don’t have a crystal ball…But in the next few years, four years, five years, there will probably be a surplus of funding in that fund after we meet our annual purchase commitment.”
When that happens, the city will have no way to spend that money, because the tax and fund is tied to the Sitka Community Hospital in the city’s charter. Haley recommended the assembly approve the ballot proposition asking voters whether to remove the requirement from the charter, and suggested they figure out where they’d like to direct that tax money in the future and draft an ordinance, for voter consideration.
During public comment, Austin Cranford said that the tax was meant to fund the hospital, that’s why the voters approved it. If the hospital does not exist, the tax should go away.
“I’m not arguing against this ballot, I think it should go on the ballot only for the voters to go and vote it down and kill it,” Cranford said. “Because the tax should be used to pay off the liabilities, and then the tax should be sunsetted.”
Assembly member Thor Christianson said the ballot proposition gave him “heartburn” when he saw it on the agenda.
“This went before the voters specifically for the hospital, you know, to try and save the hospital. It didn’t work. But it was a nice try,” Christianson said. “One of the things that people accuse us of…anybody in government–once a tax get started, you always want to keep it. And they wouldn’t be right this time,” he added. “This should go away.”
Mayor Steven Eisenbeisz said they had a couple of paths forward to a public vote on the future of the tobacco tax, with pros and cons to either approach.
“I think I’ll vote yes, tonight on this, because this is one of the two methods that’s in front of us. But I think it deserves some consideration of the method that goes forward,” Eisenbeisz said. “The nice thing for me tonight is that sounds as if we have four to five years before the liabilities will be extinguished, so we do have a slight bit of time on this one if this isn’t the direction that the assembly feels that the voters would like to to consider.”
But assembly member Tim Pike said they were having the conversation too soon, and should revisit it in a few years, once the hospital fund is closer to being in the black. Then they could put the question out to voters about whether the tobacco tax should support another cause or go away.
“I can see this is going to be a much bigger conversation about where this funding needs to go, I think anyone who’s listening was probably already plotting and planning about how to repurpose the tobacco tax right now,” Pike said. “Leave it alone for now, and when the problem arrives, then let’s deal with it.”
Ultimately, the assembly rejected the proposal 1-6, with Mayor Eisenbeisz the lone vote in favor.
Two ballot propositions relating to the city’s charter passed unanimously. The first would remove a requirement for an accounting system for the former Sitka Community Hospital. The second would update city code on recalling elected officials to align with state law. If the two propositions are approved on final reading at the July 23 meeting, they’ll be up for voter consideration on October 1.
