Dear Editor: As a financial professional and someone with historical knowledge of sales taxation in Sitka, I want to offer my perspective that an analysis of readily available hard historical data from the City and Borough of Sitka shows that, even with inflation factored in and construction sales factored out, a compelling argument can be made that the explosion in retail sales and sales of services have accounted for the large increase in sales tax collections since the COVID 19 pandemic. Accordingly, a very strong argument can be made that sales and services to the cruise industry is the driving factor behind this inflation-adjusted large increase.
Detailed sales and sales tax collection can be found in City and Borough of Sitka’s 2024 Annual Comprehensive Financial Report. The report is can be accessed through the City and Borough’s website by going to the Finance Department’s page on the website and clicking on the link there. In the report, sales and sales tax collection data by industry/business segment is found on page 118.
The city’s sales tax data shows overall sales growing from $436 million in FY21 to $810 million in FY24, an increase of $374 million or 85% over the three-year period. Adjusted for estimated inflation, the increase would still be $282 million or 65% over the three-year period. The data shows a big increase in construction sales, but – IMPORTANTLY – an almost negligible increase in corresponding sales taxes collected on those construction sales.
What is clear to me is that, when inflation is factored into the data and construction is factored out, there is a clear and compelling increase in retail sales and the sales of services! The inflation-adjusted data without construction shows that overall sales grew by $79.3 million. So, with inflation factored in and construction factored out, I ask what – exactly – accounts for this $80 million growth in sales in Sitka? What other segment of our local economy has expanded, besides tourism, to account for this growth? We always had independent tourism here, even before the pandemic, and independent tourism is limited by the availability of lodging.
It is also important to understand what a significant reduction in taxable sales and subsequent reduction in sales tax collections means to Sitka. Based on my experience as CBS Finance Director, reductions in sales tax revenue almost always result in postponements or eliminations of general governmental repair and maintenance capital projects, especially street repair. Push coming to shove, capital projects have always been paired back before reductions in school funding or staff reductions in the city workforce.
Shrinking our local economy will diminish overall prosperity for all. We need to grow our economy, utilizing what opportunities are afforded us. This is why I will vote No on Proposition 1.
Jay Sweeney, Sitka
