The Cordova City Council held a work session on Oct. 4 ahead of their regular meeting to discuss a sales tax and property tax code rewrite. At the regular meeting later that evening the council viewed a presentation of the 2022 city audit by Newhouse & Vogler, CPA.
The council work session outlined current tax exemptions in the city as well as a review of draft state Senate Bill 77. City attorneys Holly Wells and Jessica Spuhler were invited to attend, and provided a memo outlining various exemptions currently offered by City and prompts for clarification where needed. The memo and work session did not address the City’s current sales tax rate of 6% nor the surtax levied by the City on the sale prices, charges for services, and rent collected in Cordova.
The City currently provides substantial sales tax exemptions, some of which expand on the Alaska State Constitution and federal law. Some exemptions on sales and property taxes include medical services, cemetery plots, schools and education-based services, and child care services, as well as exemptions for wholesale and resale services. In the memo provided by City attorneys, it is noted that the “nicknames” used commonly to refer to these exemptions “… in no way reflect the full breadth of the exemptions and should not be relied upon to indicate the true nature of the exemption.”
CMC 5.40.025 broadly exempts certain classes of buyers from sales tax including the State of Alaska, the United States government, and federally recognized tribal entities such as the Native Village of Eyak. This exemption is largely to prevent duplication of tax-levying jurisdictions and reflect the National Congress of American Indians recognition of tribes as governments and therefore exempt.
Other exemptions include garage sales and personal item sales, insurance, and a cap on construction wherein purchases above $3,000 for construction materials are tax exempt provided that purchaser has obtained a building permit from the City.
Exemptions that prompted discussion for the Council included the Fish Shipping Exemption and the Transportation Exemption. For fish shipping the City waives tax for “gross receipts or proceeds derived from servicing, freezing, storing, handling, or wharfing of fisheries commodities awaiting shipment or in the process of being shipped.”
The Council notes that while the policy goal of this exemption may be obvious for a commercial fishing port, the applications may be less clear in practice. Currently the exemption “… implies that gross receipts derived from servicing, freezing, storing, handling or wharfing fisheries commodities for buyers in the City are subject to taxation but those leaving the City are not.” The wording in the transportation exemption was also discussed to clarify types of transportation and their categories such as cargo for the purpose of commerce.
Cordova also exempts “proceeds from air transportation including that portion of any chartered fishing or hunting expedition which covers the cost of air transportation.”
Finally, the Council reviewed information about Alaska Senate Bill 77 (SB77). SB77 was introduced in the spring of this year by Sen. Forrest Dunbar (D-Anchorage) who says the goal of the bill is to support economic development and address Alaska’s housing crisis.
The bill, which was advanced in April, would fully exempt property taxes for new developments as well as impose a tax on “blighted buildings” provided that building is not a person’s place of primary residence.
Dunbar introduced the bill to support new properties and developments while also addressing the growing number of dilapidated buildings that are not only an “eye-sore” for communities, but may present public safety concerns as well.
In relation to this bill, Council discussed supporting an Economic Development tax exemption. This exemption continues a follow-up discussion of the Sept. 20 work session on potential revisions to the Cordova tax code. The discussion was encouraged by the City’s desire to find ways to take advantage of the newly expanded economic development exemption in Alaska state statute, “… to encourage and incentivize housing, redevelopment of underutilized and vacant properties, and ‘Main Street’ revitalization focused on the half-mile surrounding the City Center.”
