Come Tuesday, Juneau voters heading to the polls for this year’s city election will be tasked with answering several important sales-tax decisions.
The ballot includes three sales-tax propositions. If approved, the first would raise the sales tax on marijuana retail items from 5 to 8 percent. The second would extend the city’s temporary 3 percent sales tax for another five years. The third would make that 3 percent sales tax permanent.
Though voters will be given the option whether to support each of the sales-tax propositions, city officials warn that voting against Proposition 2 could carry serious consequences.
“Not renewing the temporary sales tax is not a realistic option,” City Manager Rorie Watt told the Empire.
The city relies on the roughly $25 million the 3 percent sales tax generates each year. One third of that goes to support capital improvement projects. The rest funds the city’s general government operations. The 3 percent sales tax accounts for roughly one quarter of the funding for the city’s general government operations.
In late June, gubernatorial vetoes cut into the city’s budget by nearly $5 million, throwing the city Assembly into budgetary crisis mode. A budget gap of more than five times as much could be crippling, Watt said.
“There is no way to reduce the budget that much without touching everything,” he said. “I don’t think the public is at all ready to lose that many government services.”
To cut its way out of such a deficit, the Assembly would have to reduce “every single city service,” according to Watt and city Finance Director Bob Bartholomew.
In addition to cutting things like the Parks and Recreation and Libraries departments, the city would also have to reduce funding to services such as road maintenance, police and fire safety.
Watt estimates that such heavy cuts could result in as many as 200 city jobs being eliminated.
“It would be too far, too fast,” Bartholomew said.
Cutting $25.5 million from the city’s budget isn’t the only solution at the Assembly’s disposal in the event that Proposition 2 fails, but the other possible course of action are about as bleak.
In order to make up for the lost revenue, the Assembly could also raise property taxes to the 12-mill cap. The mill rate is currently set at 10.66 mills. If it was raised to the cap, property taxes on a $300,000 home would increase by about $400. Property taxes on a $600,000 house would increase by about $800.
Realistically, the Assembly would likely have to raise property taxes and cut services in order to make up for the lost revenue, which Bartholomew said might be possible for one year but not beyond that. The Assembly could also call a special election to try again to extend the temporary sales tax before it expires in July 2017.
Watt said he hopes voters approve all of the sales-tax propositions, including Proposition 3, which would make the 3 percent sales tax permanent.
“The way the city is currently structured, sales tax is a permanent piece of our general government funding,” he said. “It’s not accurate to think of it as a temporary revenue source.”
• Contact reporter Sam DeGrave at 523-2279 or sam.degrave@juneauempire.com.
