Council nixes new split sales tax ordinance

4 cent fuel excise tax, $7,500 single sales tax cap, discontinuation of compensatory collection discount to businesses pass first readings

Councilman David Allison and Cordova mayor Clay Koplin during a June city council meeting. Cordova Times file photo

The Cordova city council has voted to approve a motion for a four cent per gallon fuel excise tax.

The vote during the council’s Oct. 18 meeting at the Cordova Center came on the ordinance’s first reading. If the ordinance passes a second reading and public hearing prior to the end of the year, it is estimated the fuel tax would raise approximately $176,000 in additional revenue for the city. If approved, the ordinance would go into effect Jan. 1.

The next city council meeting is scheduled for 7 p.m. Nov. 1 at the Cordova Center.

“This ordinance allows us to capture revenue from outside the community,” said councilor David Allison, who said he was in favor of the fuel tax.

The city’s FY 2018 draft operating budget is currently $367,000 in the red, according to city manager Alan Lanning, and other revenue streams are needed to keep the city afloat.

Ordinance 1159, which increases the single sales/sales tax cap from $3,000 to $7,500, passed its first reading during the meeting. Should this ordinance pass a second reading and go into effect, it is projected to raise $125,000 in city revenue.

Allison said he supports the change and spoke in favor of the higher sales tax cap.

“I know it does create challenges, but I hope we can work through it. The $7,500 cap will improve some of our revenues,” he said.

But councilor Ken Jones said he was not in favor of raising the single sales tax cap to $7,500.

“I’m really worried about the cap,” Jones said. “I think it will incentivize people to shop outside (Cordova). There are plenty of transactions that happen in this town that this will affect. I think this ordinance will drive people out of town (for large purchases).”

The city has to find new sources of revenue to become a self-sustaining city, said Councilor Jeff Guard.

“We have got a budget we have pared back quite a bit,” he said. “We don’t have money in the budget for maintenance. We don’t have money for contingencies in case something happens, and something always happens, and we end up drawing out of the permanent fund.

“We’re not going to have this permanent fund forever. If we keep doing business living on the edge and thinking whatever happens, we’ll just take another million out of the permanent fund when it happens …  It’s lowering our taxes for now, but it’s not supporting the infrastructure and the community we have.”

When something happens in the future, for example having to replace the city’s harbor or city water system, the city won’t have the money to do it, he said.

“The money isn’t coming out of the general fund anymore,” Guard said. “What we’re trying to do is figure out how to adequately fund whatever we want for services, realistically, with replacement dollars, as time goes by. We’re not going to get there if we just cut, cut, cut.”

Additionally, ordinance 4160, which discontinues the city’s compensatory collection discount to businesses for their collection, timely filing and payments of city sales tax, also passed its first reading. The discontinuation of the discount is expected to raise $30,000 to add to city coffers.

Ordinance 1158, which would have set Cordova up for an 8/4 summer/winter sales tax split, failed on its first reading with no support from any councilors.

Jones voted no on all four of the new ordinances’ readings during the meeting.

“I am not in favor of raising taxes,” he said.

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Cinthia Gibbens-Stimson is a staff writer and photographer for The Cordova Times. She has been writing in one form or another for 30-plus years and has had a longstanding relationship with The Cordova Times starting in 1989. She's been an Alaskan since 1976 and first moved to Cordova in 1978. She's lived in various West Texas towns; in Denver, Colorado; in McGrath, Cordova, Galena, Kodiak, Wasilla, Anchorage and Fairbanks, Alaska and in Bangalore, India. She has two children and three grandchildren. She can be reached at cgibbens-stimson@thecordovatimes.com or follow her on Instagram @alaskatoindia.