Officials to discuss tax increases in face of state budget cuts

Town Hall scheduled for March 13


March 7, 2019

Along with tax increases and spending cuts, the Haines Borough Assembly will consider raising the borough’s tax cap during budget discussions because Gov. Mike Dunleavy’s proposed budget would reduce state revenue to the borough by about $1.7 million.

Dunleavy’s cuts to school debt reimbursement, raw fish tax and the education budget among others, means roughly two thirds of state funding the borough typically receives will be gone. Although borough manager Debra Schnabel doesn’t think the legislature will approve the budget as proposed and that some state revenue will be restored, borough staff and officials must begin working on the budget before the state spending plan is resolved.

“I think what I need from the assembly is a sense of what kind of budget do you want to see,” Schnabel told the assembly during a meeting last Tuesday where she outlined how state spending impacts borough coffers. “Do you want me to present you a budget that ignores totally what you just learned? We can start right now to say the sky is falling in and start dealing with raising taxes, cutting expenses and talking about ways we can move through this.”

Schnabel told the CVN this week she plans to discuss several options at a March 7 meeting where officials will set spending priorities including increasing the property-tax cap that’s currently set at 10 mills and removing the dedication of 1 percent of sales tax to tourism promotion and economic development, both of which were approved by the voters.

“It would be very helpful to the administration and to the community if the restrictions we have on our budget process right now go away,” Schnabel said. “When we collect this much tax that has to go to tourism or economic development, we are a little bit stymied because we develop a fund balance in that department. We keep trying to think of ways to get it to pay for other things that we need, but it’s difficult to do. There’s also the tax cap so I will be drafting an ordinance for increasing the cap.”

The borough doesn’t have much more wiggle room to raise taxes. A 2003 voter initiative capped the property tax rate at 10 mills by a margin of six votes. The townsite is currently taxed at 9.49 mills. Increasing it to 10 would raise less than $100,000, Schnabel said.

Items on Dunleavy’s chopping block that affect the borough include the loss of school debt reimbursement, about $900,000 the state provides the borough annually to repay the cost of building the school; and the raw fish tax, revenue the state gives back to municipalities where commercial fishing occurred. This year the borough received about $352,000. The borough would need to increase taxes, just below 3 mills, to offset the local school debt reimbursement funding.

With threats of job and program losses such as art and music, the Haines Borough School District is also facing a $665,627 reduction, which means if the community wants to keep the school funded at current levels, the borough will have to chip in. But according to state statute, municipalities are restricted to a maximum allowable contribution to local education. Legally, the borough could still give the school an additional $324,000.

“In order to do that it will require a 1 mill (property tax) increase for us to do the maximum allowable cap,” Schnabel told the assembly last week. “That’s not enough money to make the difference. If we want our school programs to remain as they are then we need to find $665,000, if the governor’s budget stays as it is. But we can only by law make up only $323,000 of that. We’re kind of in a bind.”

What do assembly members have to say?

“Obviously there are places we can trim,” assembly member Heather Lende said. “I don’t think it should be the school. That’s got to remain our number one priority because it’s just critical for the community.”

Assembly member Tom Morphet said the manager ought to build a budget that reduces the governor’s cuts by half. “Also, I think in the fall we should put the tax cap back to the voters and put our marijuana and alcohol tax back to the voters,” Morphet said. “We knew a rainy day was coming and we have fund balances in most of our funds we can draw on. I don’t think we’re yet in a crisis, but obviously we’re going to need new sources of revenues unless the governor does an about face which I don’t think we can expect.”

Although she wasn’t specific, assembly member Stephanie Scott said the assembly will likely reduce services. She is also open to increasing the property-tax cap. “Maybe we should ask people to remove it, or we have to show people what would be sacrificed if that tax cap remained,” Scott said.

Assembly member Brenda Josephson said she wants to protect the school, public works and public safety. “Every area outside of those three, we need to start talking cuts,” Josephson said. “We have grown government when we’ve had times of excess funds. Now people are addicted to this growth in government. We need to come together and say how can we change this. What can we divest out of to bring us where we should be? We’re a community of 2,400 people.”

She said she’d support raising the mill rate, but that she would not support an ordinance raising the property-tax cap. “I have no will to go against anything the voters have done,” Josephson said.

Assembly member Sean Maidy said he would oppose such an ordinance. “I would be for discussing it going back to a vote.”

Prisciandaro could not be reached by press time. A town hall meeting on the issue will be held Wednesday, March 13 at 6:30 p.m. at the ANB/ANS Hall.


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