A group of Wrangell residents is trying to lower the city’s sales tax from 7 percent down to 5.5 percent. Ernie Christian is the primary sponsor of the proposed ballot measure. He said lowering the sales tax would put more money into residents’ pockets that they could then spread out further in the community.
“This would make us a lot more competitive. People could buy in town,” he said. “It would help the community of Wrangell better. It would lower the cost of goods and lower the cost of doing business in Wrangell.”
Wrangell’s sales tax is currently one of the highest in the state. The proposed ballot measure also includes a long-term provision. “Another big part of the ordinance is that the only way the sales tax can be lowered or increased is just like our property tax, it would have to go in front of the voters. So if this does pass, the next time the city wants to increase sales tax or decrease sales tax, it has to go in front of the voters.”
City Ordinance section 5-7 passed in 2003 already does this. It states that any new sales taxes or increases in sales tax rate passed by the council would not take effect until ratified by a majority of the voters during an election.
Using the city’s current sales tax revenue projections, the proposed 1.5 percent sales tax decrease would cut the city’s income by about half a million dollars. Christian said he does not think it would be a problem when looking at the proposed budget since the city still has $650,000 in sales tax reserves.
City Finance Director Jeff Jabusch explained that’s not actually how the sales tax fund works. The city does not receive all of the sales tax funds until after the fiscal year is over. The money in the fund that looks like reserves serves as a buffer until that final money is received. It’s also a pool of money that the city holds onto in order to save up for large streets projects, like the Front Street renovation.
However, 68 percent of the sales tax does go into the general fund, which has over $4 million in reserves. Christian argues that the city only needs to keep enough for six months of operational costs, much less than $4 million. Jabusch disagrees.
“We’ve already dug into a lot of our reserves for many of our capital projects that we’re doing here,” he said. “The general fund reserve basically is if something happens at the school or some problem at the hospital or some problem at the city. That is the city’s bank account. I would never propose dipping into the reserves…I think we need to cut instead.”
That means if a sales tax reduction passes, then the city would have to cut $500,000 out of the budget. Jabusch said the first things to be cut would be money to outside organizations, like the Chamber of Commerce, the Senior Center, and the radio station. Next they would reduce funds to the pool, Parks and Recreation, and the library. He said quality of life services would have to be reduced because some things in the budget cannot be cut.
“There’s so many things in our budget that you can’t cut. You know, you’ve got liability insurances, property insurance. You’ve got debt service payments for our school bond debts.”
Jabusch also said community members should note that while the sales tax is high, they don’t pay the same fees imposed by other cities, like fuel taxes or vehicle registration fees. “You don’t always want to just look at the face value of something. I think you want to understand the whole picture before you do something like this, but that’s not up to me.”
The petition was submitted to the city on Tuesday and sent to the city attorney to see if it is sufficient or not. The city has 14 days to reply to Christian. If it’s deemed sufficient, he will have 90 days to collect 94 signatures. Christian said that if his petition is approved, he aims to submit all of the signatures by the end of August to get the measure on the October ballot.
