On October 7, frustrated voters passed two ballot propositions aimed at making Juneau more affordable and decisively defeated an Assembly-sponsored sales tax increase. The message seemed clear.
Leading up to the Juneau Assembly’s annual retreat December 6, there was an expectation from voters that city officials would consider a shift in priorities and offer more transparency in their decision-making. There was hope that leaders would examine the extraordinary amount of past funding for projects and programs that voters have rejected, few have asked for, or did not serve the basic core functions of government.
Another message delivered on Election Day was a call for accountability of our community grants and from our grant-funded “partners.” The annual cost of these grants has more than doubled in size and totals $91 million over the past 12 years.
Prior to the Assembly retreat, the Assembly Finance Committee met several times and was briefed extensively on the fiscal impacts of the two ballot measures.
The first ballot measure amending the city charter to limit the property tax millage rate to 9 mills will potentially reduce tax revenues by $1 million in FY2027. This seems unlikely, however, since a rather minor increase in borough assessed property values would offset this.
The second ballot measure exempting food and utilities from sales taxes is expected to reduce FY26 municipal annual tax revenue by $6.4 million and an additional $4.6 million in FY27.
In response to these projected reductions, the Assembly is looking at a host of possible options including across-the-board cuts, line-item cuts, hiring freezes, and service reductions. Revenue “enhancements” could also be considered (fee increases and possible tax exemption modifications, for example).
There is some amount of “forgone” revenue tied to 47 different sales tax exemptions, some having been in existence for years and may no longer be aligned with the city’s budget priorities.
Angie Flick, CBJ Finance Director, recently briefed Assembly members on these exemptions but has not provided an estimate of “lost revenue” each year.
One of the most striking exemptions is one exempting sales to or from certain non-profit entities. Sealaska Heritage, Discovery Southeast Glacier Gift Shop, Juneau Arts and Humanities Council, and DIPAC, for example, are non-profit sellers that are not required to collect sales taxes on their retail sales of art, books, jewelry, souvenirs, tours and other tourism related activities. Why? They are competing with private sector businesses that must both pay sales tax to the city and collect sales tax from their customers.
It’s also evident that more realistic budget assumptions would be useful. For many years, city staff has consistently underestimated revenue and overestimated expenses. For example, in FY25 Personnel Services, $63,500,000 was budgeted and $58,300,000 was actually spent, a $5,200,000 swing.
Overly conservative budgets distort projections, over-fund reserves, and promote unnecessary tax increases.
A significant topic ignored thus far is the Assembly’s misplaced priority on two large projects, the Capital Civic Center ($45 million+) and new city offices (around $20 million). Both projects were turned down by voters in past years, yet the Assembly continues to provide millions of dollars in funding.
During the retreat, some Assembly members seemed more inclined to reduce municipal services to balance the budget rather than consider cuts or suspension of discretionary projects and programs that have accrued large unspent appropriations in the past and/or are currently being funded through CIP programs, sales taxes, and excess city fund balances.
While you cannot offset recurring revenue reductions by curtailing or canceling capital projects, once complete, projects incur operating expenses (and often substantial subsidies) that will have a lasting impact on future operating budgets.
A community’s prosperity and affordability won’t be revitalized by budget actions alone. Surgical cuts are necessary but, ultimately, community leaders must commit to reasonable economic growth. Government’s role in fostering economic growth is to keep taxes low, cut bureaucracy, and allow the private sector to develop businesses that expand our tax base.
Over the next several months, right-sizing the budget and optimizing municipal government operations will be essential in paving the way toward a more affordable community.
Between now and when the budget is finalized in June, voters will be watching,
