By Heidi Zemach for SCN
The Seward City Council has begun to talk about its upcoming budget needs in advance of more focused budget discussions that will begin in September. It has already had two preliminary work sessions. The first one focused on the Public Works Department’s plans and needs for Water and Sewer infrastructure projects. The second work session, held last week, focused on how to pay for the new library/museum bond in the coming years.
The bond debt is $3.4 million, payable over 25 years at 3.99% interest. The bond payments pay the interest only for all of next year, FY2014, at around $159,400, then payments increase to $244,400 per year as they pay off both the principal and interest. The remaining two-thirds of the library museum building project was funded through grants and donations.
The library is part of the city’s General Fund, with its capital and operating costs paid from tax and revenue sharing, not from user-generated revenues such as through the sale of goods and services.
The five options that the council discussed with staff and the public began with the idea of doing nothing and hoping that increased tax revenues would be enough to cover the new debt payments. This would require a 5.9 percent increase in taxable sales. Sales tax income has been steadily increasing in recent years. The second option was to reduce funding to other General Fund uses by about $250,000. The third option was to increase the sales tax from 4% to 4.25% based on 2013 projected sales, which would take some changes in business software, and trying to explain that to a public that voted against a sales tax increase in an advisory vote two years ago. Fourth, increasing property tax from 3.12 mills to 3.89 mills to generate additional $249,600, a 24% increase of the City rate, or a 9.5% increase of the aggregate City/KPB/SBCFSA rate, totaling 8.89 mills. Fifth and last, a combination of the above options.
The sales tax versus property tax idea was debated exhaustively during bi-annual budget debates two years ago under the city administration of then City Manager Phillip Oates. Property taxes weren’t viewed as fair by some because of the small number of city property owners relative to city residents of the area who used the library. Sales tax increases were rejected at the time by a majority of voters who said they felt squeezed by increases in city fees, and prices for goods generally. They also rejected Oates’ proposal for a seasonal summer sales tax increase and winter season decrease, although most of that increase would be borne by visitors to Seward. Local hoteliers said tourists frequently complained about our sales tax, and additional hotel head taxes, and would not want an additional burden. The borough said calculating the special tax would be cost-prohibitive, and that the city would have to reimburse them for their new software. A proposed “sin” tax on alcohol and tobacco also was defeated in a citizen’s advisory vote.
At the recent work session, Mayor David Seaward said he would support a property tax increase or a withdrawal from the general fund, such as from the motor pool fund to finance the library museum bond.
“People are extremely optimistic about the direction we’re headed (with increased business and thus sales taxes),” and would like to see the bond payment taken from the general fund, said Councilwoman Vanta Shafer.
“Which leads to the discussion of which fund?” said City Manager Jim Hunt.
Assistant Manager Ron Long said the increase in taxable sales that the city experienced in the last quarter had been spent by council to restore some programs that had been facing cuts, and also were used for discretionary spending such as trips and travel, and by the city paying resident bill payer’s credit-card fees.
“Ask the nonprofits to chip in, it’s about time they step up to the plate guys,” said Councilman Bob Valdatta.
Keith Campbell, who chairs the Seward Community Library Museum board, said he continues to believe that a sales tax increase would be the most fair for all, especially for elderly people like him, whose real property taxes are exempt. It also includes a broader population of those who live outside of the city limits, but who also use the library museum. The majority of voters who approved an earlier ballot measure asking whether the city should fund the building project with a General Obligation Bond, was good enough for the council to justify a sales tax increase to pay for it, he said.
Tom Tougas, a local businessman, encouraged a combination of doing nothing and reducing the general fund. “I expect the sales tax bill to go up significantly this year,” he said. The North Dock and hospital (original building) bonds will be paid off this year, he said. Meanwhile, the one-percent sales tax for hospitals will continue to provide funds toward future hospital improvements. Although he believed the sales tax versus property tax increase debate as a waste of time, he did favor the seasonal sales tax concept as some 65-75% of our sales tax is paid by visitors.
Library Director Patricia Linville said the council should not think they could fund the bond by instituting library fees for users, because revenues would be minimal, even if the city charged $25 for a library card like the Loussac Library in Anchorage does. Her review of library patron’s addresses found that there were 5,504 card holding households living in Seward, 175 in Moose Pass, and 300 in areas outside of town, she said. These would only bring in about $11,250 in revenues to the library, she said.
Seward can expect to receive ten times as much money from the museum as they do from the library, Tougas said. But the Seward Historic Society currently averages only about $20,000 in visitor-income per year. While visitor numbers are expected to increase with the museum’s new location, and the entrance fee has increased to $5, the hours that the museum is open may not be as high as previous years due to staffing limitations. The historic society does plan to staff the museum with volunteers on tourist-season Sundays, when the library is closed, as those are on large cruise ship/tourist days. Kerry Martin, of the historic society, warned not to count on the earthquake documentary fee to support the new building. It is dedicated to the library association for books and programs, he said.