Referendum to Repeal Ordinance 2005-09

a Sales Tax Increase

A copy of the ordinance to be repealed is shown below:

ORDINANCE 2005-09

AN ORDINANCE AMENDING THE BOROUGH CODE TO PROVIDE FOR INCREASED REVENUE ENHANCEMENT MEASURES INCLUDING INCREASING THE BOROUGH SALES TAX RATE TO 3 PERCENT, AMENDING KPB 5.18 TO PROVIDE THAT TAXES ON RECREATIONAL PACKAGE SALES SHALL BE CALCULATED ON A PER-PERSON PER-DAY BASIS, APPROPRIATION OF A PORTION OF FUND BALANCE FROM THE LAND TRUST FUND TO THE GENERAL FUND  

WHEREAS, KPB 5.04.020 requires the borough mayor to present to the assembly a budget proposal for the fiscal year 2006 during or before the second week in May 2005 and that the proposed expenditures in the budget proposal not exceed revenues of the borough; and

WHEREAS, the borough mayor and administration are working diligently to reduce expenditures in developing the proposed budget; and

WHEREAS, despite such efforts, the Kenai Peninsula Borough currently faces a shortfall of approximately $5.8 million due to the elimination of municipal revenue sharing by the state, increased Public Employee Retirement System obligations and insurance costs, and other increased expenses; and

WHEREAS, relying solely on a property tax mill rate increase to fund the expected budgetary shortfall would place a significant burden on property owners within the borough; and

WHEREAS, it is anticipated that increasing the borough sales tax rate from 2 percent to 3 percent would generate revenues of approximately $5.4 million; and

WHEREAS, in the general borough election of October 6, 1964, Proposition No. 1, the voters authorized the Kenai Peninsula Borough Assembly to levy a borough-wide sales and use tax "not exceeding three per cent (3%) of the price of all retail sales, all rents and all services rendered within the borough, the proceeds of the tax so levied to be used exclusively for borough school purposes"; and

WHEREAS, additional voter approval to increase the levy to 3 percent is therefore not required; and

WHEREAS, amending the sales tax code to provide for taxing recreational sales on a per-person per-day basis will eliminate the current disparate taxation of recreational sales that occurs where sales to large groups can be taxed as a single sale while smaller operators who sell to individuals charge a separate tax for each person booked resulting in a significant disparity in the amount of sales taxes collected for the provision of the same services for the same number of people; and

WHEREAS, appropriation of a portion of fund balance from the land trust fund to the general fund will enable funds derived from the ongoing sale of property to finance general government functions, which was one of the original intents of the land grant program through which the borough acquired the majority of its land holdings; and

WHEREAS, all of these measures are intended to help fund the expected revenue shortfall while spreading the burden among both residents and visiting nonresidents;

NOW, THEREFORE, BE IT ORDAINED BY THE ASSEMBLY OF THE KENAI PENINSULA BOROUGH:

SECTION 1. That KPB 5.18.100(A) is hereby amended as follows:

A. There is levied by the borough a consumer's sales tax of [2%] 3 percent on all retail sales, on all rents, and on all services made or rendered within the borough, measured by the gross sales price of the seller.

SECTION 2. That KPB 5.18.430 is hereby amended as follows:

5.18.430. Computation--Maximum tax.

The tax shall be applied only to the first $500.00 of each separate sale, rent or service transaction, except as otherwise provided in this section.

A. Except as provided below for long-term vehicle leases, the payment of rent, whether for real or personal property, in excess of $500.00 and for more than one month, shall be treated as several separate transactions covering the rental/lease for one month each.

B. Services provided on account and billed to the customer on a periodic basis are subject to application of the tax on a maximum of $500.00 of each billing, per account. For purposes of this section, any advance payment for services other than to a trust or escrow account is considered to be paid pursuant to a "billing."

C. Each night's rental of each individual room shall be considered a separate transaction and therefore the maximum tax computation shall be calculated on a per room per night basis.

D. Long-term vehicle leases shall be treated as one transaction per year, and per fractional year, of the lease term. The tax paid for any fraction of a year shall equal the tax paid for a whole year. The sales tax for the entire long-term vehicle lease shall be due and collected at the time of the first payment. Tax shall be calculated at the sales tax rate in effect on the day the lease is signed. There shall be no refund of such taxes should the lease terminate earlier than on its terms. Any extension of the initial lease term shall be treated as a new long-term vehicle lease.

E. Recreational sales shall be treated on a per person per day basis and therefore the maximum tax computation shall be calculated on a per person per day basis. For purposes of this subsection, the term "person" means an individual human being.

SECTION 3. That KPB 5.18.900 is hereby amended by adding subsection Q after the existing subsection P:

Q. "Recreational sales" means sales where the seller provides recreational services and rentals, except automobile rentals, to the buyer, either separately or in a combination, at an aggregate price, including, but not limited to guiding, charters, sightseeing tours, outfitting or equipment rentals, and temporary lodging included with such sales.

SECTION 4. That KPB 5.20.080 is hereby amended as follows:

5.20.080. Land trust fund.

A.  The land trust fund is established to receive, disburse, and account for all moneys accruing to the borough in lieu of lands or from the use or sale of lands.  Disbursement from said fund shall be for the acquisition of property and expenses related to the borough land management operations, or such other purposes as the assembly may authorize.

B.  Fifty percent of any amount in excess of the highest previous fund balance may be available for appropriation to the general fund.  Fund balances prior to 2005 shall not be considered when determining the highest fund balance.  For purposes of computing revenues that may be available for appropriation to the general fund, on March 1 of each year that balance of the budget not yet spent for land management administration for that fiscal year will be subtracted from the land trust fund balance.  Also, revenues expected to be received after March 1 and before July 1 of that year may be added to the land trust fund balance.  

SECTION 5. This is a non-code provision.  For fiscal year 2006 only, the provisions in KPB 5.20.080(B) shall not apply.  Instead, fund balance in the land trust fund in excess of $2,500,000 shall be made available for appropriation to the general fund.

SECTION 6. That Section 1 of this ordinance shall take effect October 1, 2005 and Sections 4 and 5 of this ordinance shall take effect July 1, 2006. Sections 2 and 3 of this ordinance shall take effect January 1, 2006.

ENACTED BY THE ASSEMBLY OF THE KENAI PENINSULA BOROUGH THIS 7TH DAY OF JUNE,  2005.

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