Petersburg officials are discussing a possible sales tax increase or using some the community’s economic fund to purchase waterfront industrial land in Scow Bay. Local voters may decide a ballot question on funding for the purchase this October, if the city council can agree on funding sources this summer.

For iFriendly audio, click here:
The city is negotiating to buy the land, over five acres of uplands and tidelands, owned by the Reid family. The asking price is $1.4 million. City manager Steve Giesbrecht told the council he has made an initial offer for an undisclosed amount, presumably less than one point four million. Giesbrecht said the Reids did not accept the city’s initial price and have not come back with a counter offer.

“The family’s concerned in the sense the city doesn’t have a method for paying for it,” Giesbrecht said. “So therefore they’re a little concerned, are they being, are we dragging this out, being strung out a little bit. The city kind of needs to make a decision, do we want it, how are we gonna pay for it, or not?”

During Thursday’s work session, the council discussed a range of possible funding alternatives – bonding, moorage rate hikes, a legislative grant, increase in sales tax or some other new tax or buying the property outright with general fund reserves.

Councilor Sue Flint was more interested in a low interest loan from the city’s economic fund. “I think this is economic development in its truest form and that’s what those funds were given to this community for,” Flint said. “And sure they’re gonna lose out that first year, they’re gonna lose out some interest they might make in the stock market.”

The economic fund was established with a six million dollar federal payment designed to help Southeast Alaska towns with the decline of the timber industry. It stands at about four point three million dollars this year – and pays for the economic development council as well as an annual subsidy to the local water utility.

The council may look at an increase in local sales taxes to help pay back a loan from the economic fund. Part of Thursday’s work session focused on the sales tax cap of 1,200 dollars, and whether raising that amount would bring in money to pay for the purchase. John Murgas was a member of a city sales tax ordinance review committee that met in 2000 and 2001. Local voters then approved an increase in the sales tax cap from 1,000 to 1,200 dollars. He cautioned that it is a fine line between raising more sales tax and driving customers to shop elsewhere. “Back in the year 2000 it was simply too easy to place a telephone call to Wrangell, Seattle and with the good freight logistics that we have with Alaska Marine Lines where we felt if we raised it any higher that business would just be chased out of town,” Murgas said. “Now it’s twice as easy. Get on the internet and a few keystrokes and that stuff’s right here.”
Councilors talked about reviewing the city’s sales tax exemptions with the possibility of ending some of those exemptions, including the senior citizen exemption. They discussed reforming the sales tax ordinance review committee or asking the council’s finance committee to review those exemptions.

A former city councilor, Barry Bracken raised questions about the purchase of the Reid property, and urged the council to plan for use of the downtown waterfront. “It was already mentioned, the Scow Bay turnaround from the state was already specifically set aside for marine development in fact we went to the state and requested that property for that purpose,” Bracken said. “We requested the hardening of the roads underneath that so we could have a crossing at that point. And it was going to be a public private partnership with a lot of storage area over there and I guess I would just caution or at least think about whether or not this is in exchange for that or in addition to or whatever as part of that planning process.” Bracken also questioned the financial return on the city’s investment.

Harbormaster Glorianne Wollen noted that other city facilities don’t pay back their costs. “We again have been talking for a long time that the Reid’s is a portion of the harbor offerings,” Wollen said. “I mean you’re to take those 20 foot stalls and you’re gonna negate them down to what those are bringing to the party, I can sell those 20 foot stalls for two and a half months a year. They cost millions and millions to build. And you know if we’re trying to, you know a business plan on 20 foot stalls or the 15 skiffs that are at the poor man’s float. You know it’s part of what the waterfront has to offer.”

If it comes down to a tax increase or use of the economic fund, it’ll be up to local voters to vote the funding up or down. Council members acknowledged it could be difficult to pass another tax increase. Councilor Rick Braun was interested in a combination of funding. “I can see the public accepting an increase in sales tax by increasing the limit if they feel that the fishermen are also getting a little pain as well,” Braun said. “If the pain is spread out, people can take it. But if it seems like everybody else is getting the pain and some people are not, then I think it’s going to be hard to sell.”

The city may be facing future tax increases anyway, if federal funding from the Secure Rural Schools Act is reduced or eliminated. City staff prepared a spreadsheet of possible increases in property tax to deal with that possibility – and to show impacts of giving more of the raw fish tax revenue to the harbor department.

Councilor Don Koenigs did not sound interested in property tax increases. “What we’re saying is to run government you’re asking for more millage. The perception from what I’m seeing is tax and spend. I tell you, hearing the public, the people I talk to, no, enough’s enough. Try to start figuring how to cut back,” Koenigs said. He suggested leasing the property with option to purchase. Koenigs also wondered about the possibility of exchanging other city land for the Reid property. For payment options he mentioned a personal income tax for everyone in town.

City manager Giesbrecht noted the council voted to pursue the purchase and he urged the council to come up with a decision on funding. “From the action of the council we owe them an answer on are we gonna buy this parcel or not and do we have at least a proposal for how we’re gonna pay for it that we can legitimately put in front of voters and has a legitimate chance of passing.”

The council is running out of time to make a decision for the October ballot. City clerk Kathy O’Rear says she needs proposed ballot wording approved by council by its second meeting in August.