The Haines Borough Assembly will discuss on Aug. 9 whether Oct. 4 election ballots should include questions about sales tax reallocation, including redirecting some revenues from tourism and economic development to capital projects.

“I think we are collecting sales tax in an appropriate amount, but I think we are not allocating it correctly,” said assembly member Debra Schnabel.

Schnabel brought the proposal before the Haines Borough Assembly after having also discussed it with the Government Affairs and Services (GAS) Committee and the Finance Committee, though neither officially forwarded it to the assembly.

She decided to move it forward herself because of time constraints; proposed ballot items must be introduced by July 26.

“I encourage the assembly to be open to the idea that we can at least have a discussion,” Schnabel said.

She proposed three ballot questions. First is a recalibration of areawide versus townsite tax rates. Currently, transactions made outside of the townsite incur a 4% sales tax, and those inside the townsite are subject to an extra 1.5% (for a total of 5.5%).

The additional townsite tax pays for public works, canine control, and police coverage in the service area. For the past 10 years, that fund has been receiving less tax revenue, while the areawide sales tax fund has seen an increasing surplus at the end of each fiscal year.

Schnabel suggests that voters consider increasing the extra townsite sales tax to 2% — while also decreasing the areawide base tax to 3.5% so that total sales tax within the townsite remains at 5.5%.

In a second, separate ballot question, Schnabel’s proposal recommends that half of the 1% sales tax currently directed to “tourism and economic development” instead be allocated to the capital projects fund, which now receives a 1.5% tax on every purchase made.

“If you look at the use of the 1% sales tax that has gone into the (tourism and economic development) fund, we collect a lot more money than we allocate,” Schnabel said. She would like to see some of that surplus going into the capital projects fund, which pays for any major areawide construction or repair project and is often used for matching requirements when the borough applies for state or federal grants.

“We never have enough money for our matching funds,” Schnabel said.

To compensate for the loss tourism and economic development would incur — according to figures from the 2023 budget, tourism and economic development would lose $288,500 with the adjustment – the third ballot question proposes an increase in tax for “transient lodging rentals” from 4% to 6%, and the reallocation of all that money to tourism and economic development.

The lodging tax increase would affect tourists, not residents, and would more than cover the loss in regular sales tax income for tourism and economic development, according to values projected in the 2023 budget.

The assembly voted 4-2 to introduce the ordinance, with public hearings scheduled for Aug. 9 and 23.

Assembly members Cheryl Stickler and Gabe Thomas opposed the measure. “I think the basis for this proposal to be introduced is sound.” Stickler said. “The timing is unfortunate. I think we would need much more time with the public to work out the details in this specific proposal, and I would like to see the conversation continue, but I don’t think we’re ready to put it on this year’s ballot, unfortunately.”

Mayor Douglas Olerud at a July 12 Finance Committee meeting raised concerns about taking money out of Fund 01 — the areawide general fund — without ensuring a way to fully replace revenue.

“It’s only going to be a few years, and you’re going to eat through that entire fund balance,” Olerud said. “We still have two public hearings to work on (the proposal) to see if we can come up with something that’s going to garner enough support to move forward,” Olerud later told the CVN.