By SHANNON HAUGLAND
Sentinel Staff Writer
For years Sitka allowed local residents 65 and over an exemption from paying sales tax on their local purchases.
But last April, the Assembly, citing the steadily increasing loss of city revenue from the exemption, voted to replace it with a once-a-year needs-based rebate to eligible seniors.
The reaction by opponents of the new system was to circulate an initiative petition to repeal the rebate ordinance and go back to the blanket exemption. The repeal proposition will be on the city election ballot Tuesday.
Ballot Prop. 1 asks:
“Shall Ordinance 2018-14, approved by the Assembly of the City and Borough of Sitka on April 24, 2018, which amended the Sitka General Code by deleting the senior sales tax exemption and replacing it with a senior sales tax rebate program, be repealed, thereby, reinstating the senior sales tax exemption? Yes or No.”
On April 24 the Assembly approved the rebate program on a 4-3 vote at a five-hour meeting that drew testimony on both sides from 45 people.
Under the new system taxpayers 65 and older are eligible for a rebate if they qualify for any of a number of state and federal assistance programs. Individuals will receive $350 and households $450.
City Administrator Keith Brady said the change is projected to increase sales tax revenues $480,000 to $500,000 in its first year, with increases projected every year after that, based on projections about Sitka’s demographics. By 2025, about a quarter of Sitka residents are expected to be age 65 or older, the Sitka Comprehensive Plan says.
The calculation of the rebate amounts was an estimate of what an individual or couple pays in sales tax for food and utilities for a year, city staff said.
Supports Prop. 1
Downtown business owner Shirley Robards led the campaign for the elderly exemption when it was first passed in the 1970s, and she was a leader in the drive to put it on the ballot in this year’s election. She said she proposed the exemption after a neighbor began having a hard time making ends meet and complained about the sales tax on food.
“I went to the council and they said no,” Robards said.
She collected more information about how senior tax exemptions were working in Juneau and Ketchikan and went back to the Assembly and had more success. There were some changes over the years, but the basic exemption was in effect until July 1 this year.
“All it said originally was when you turn 65 and you are a resident you can have it, you can have no tax,” Robards said. “For a few years it went OK.”
At one time the city tried to limit the exemption to seniors who were not employed, but the exemption once again was available to seniors regardless of need or income.
Robards said the proof of need in the new program is not a good test of whether someone needs help or not.
“You don’t know how much money they have, how much they’re paying on a building they own (and other expenses),” she said. “I just feel if you want to say no to the tax exemption, then pay it, and there are a few people who do that.”
She added that the paperwork for a rebate is onerous and that the program will create more work and costs at city hall.
Also, Robards said, “I really think that the people who’ve lived here all their lives have paid. I think we’ve paid our dues.”
Another proponent for keeping the exemption, Alene Henning, said not paying the sales tax is preferable to the rebate.
“As a senior, as a single, all I have is Social Security,” she said. “It’s very helpful to have a little bit of what I can get.”
She added that she is lucky to have the help of her children with some of her bills.
“I’m a blessed mama,” Henning said.
Opposes Prop. 2
Opponents to the proposition said things have changed since the senior exemption was introduced more than 40 years ago, and Sitka can no longer afford it.
“The city is losing a ton of revenue in a time when we’re losing state revenue,” said Bob Potrzuski, one of the Assembly members who voted in favor of ending the exemption. “I was unable to find outside the state anywhere where seniors were not having to pay sales tax. Seniors here are getting a tremendous discount.”
Those voting in favor at the Assembly table said the decision was made in light of the city’s present and future financial needs. Alaska seniors already receive a break on property tax assessments.
“As we look to the future to try to keep young people here, it didn’t seem fair to burden them with the responsibility of funding government,” Potrzuski said this week.
He said it was not an easy decision to make, facing many people he’s known over the past three decades, but he believes he made the right choice.
“It just doesn’t make sense to allow people to have no responsibility for funding government, when they use the services,” Potrzuski said. “It’s amazing how little they’re asked to contribute when they don’t pay sales tax.”
“It’s about sustainability for me,” commented Assembly member Kevin Knox today. “With the growth in the number of eligible seniors, that exemption was not sustainable to maintain.”
Elias Erickson, who graduated from high school this year, said he will be voting against the proposition also, citing the rapidly growing senior population and the need for a sustainable tax base. He spoke in favor of replacing the exemption with the rebate program at the Assembly meeting in April, and said he believes the reasons for the change are sound.
He added that Sitka is among a handful of communities that have a senior exemption, and the rebate that replaced it should help those who need help, he said.
