Anchorage Assembly to consider a 3% sales tax, aimed at property tax relief and city improvement projects

Two members of the Anchorage Assembly are proposing a sales tax that could go before voters in April.

The measure would put a 3% tax at the point of sale on a range of consumer goods, though with many exemptions, according to the current draft of the proposal sponsored by South Anchorage Assembly member Randy Sulte and Midtown member Felix Rivera.

“It’s meant to revitalize Anchorage,” Sulte said of the measure.

The product of more than a year and a half of work by a coalition of business groups, the measure is essentially two different tax proposals rolled into one. Two-thirds of the money collected would go toward tax relief for property owners, knocking off a chunk of their annual payments to the city while diversifying the municipality’s revenue sources.

The other third of the sales tax would go toward quality of life improvements and amenities for city residents. Sulte compared that component of the proposal to Project 80s, the gobs of state money that rolled into Anchorage at the height of the oil boom and paid for major development projects like the Alaska Center for the Performing Arts, Sullivan Arena, Loussac Library, and other prominent civic investments.

“Our philosophy is we want to make this a place for us, that we want to live in,” he said.

The measure would expire after seven years, but could be renewed and remain in place.

Though Sulte and Rivera are sponsoring the ordinance, it grew out of an effort led by the Anchorage Economic Development Corp. called Project Anchorage aiming to “grow Anchorage’s economy and make Anchorage a better place to live, work and play for all of us.”

The group modeled the quality-of-life portion of the proposed tax on a measure implemented in Oklahoma City in the 1990s, where a 1% sales tax has paid for beautification and amenities like a new canal and waterfront entertainment district, sports stadium, downtown library and convention center.

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In Anchorage, as laid out in the current sales tax draft, a third of the proceeds — minus administrative costs — would be put into a trust fund dedicated to what are being called Municipal Area Projects. A group of seven people would be appointed to an advisory and oversight board by the mayor, with approval by the Assembly required. And that board would determine which local projects to fund.

In a statement, Mayor Suzanne LaFrance called the proposal “an important conversation to be having.”

“We need to be talking about how we invest in ourselves as a community, and where we get the best return on investment. Our team has been having productive meetings with the Project Anchorage coalition, and we look forward to more conversation as the proposal continues to be worked out.”

Sulte rattled off concepts that have floated to the top so far in discussions and requests for ideas: an indoor market and food hall, a Ship Creek river walk and entertainment district, aquatic center, downtown arts development and sports complexes, among others.

“It’s not meant to be for existing operations, so replace school bonds or road bonds — it’s meant to be something new,” he said.

The sponsors envision that investment earnings from the trust fund will be spun off to pay for “operations, maintenance, and safety improvements” in any new facilities. That’s a significant departure from how the Project 80s buildings and similar big investments that were paid for with capital appropriations have been handled in the municipality, where the city sometimes found itself on the hook to pay for upkeep of major buildings.

According to AEDC, their conservative estimate is that the 3% sales tax would bring in $180 million a year in revenues. That would break down to around $60 million annually for Municipal Area Projects, and $120 million to lower property owners’ tax bills.

“Citizens have been asking for property tax relief,” said Sulte.

According to projections in the draft ordinance, what that means for homeowners is $265 less for each $100,000 of a home’s assessed value. If your home is worth $400,000, you’d pay $1,060 less in property taxes the year after the sales tax went into effect.

Compared to many other cities, Anchorage’s property taxes are high, even though residents’ overall tax burden is relatively low. With no broad-based state or local sales tax, and no state income tax, municipal services and government in Anchorage are paid for largely through property taxes. Part of the pitch for the new sales tax is as a diversification measure: Take some pressure off of home and real-estate owners by shifting it onto a broader pool of consumers that includes in-state and out-of-state visitors.

“To reduce the regressive effect of a general retail sales tax, exemptions will be provided for common and basic necessity transactions,” the ordinance states.

The list of exemptions is long: gasoline, most groceries, medical care, child care and baby essentials like diapers and formula, rental payments, yard sales, and several others. Nothing above a thousand dollars in a given transaction would be taxed, so whether you bought a $40,000 new car or a $1,200 generator, both would cease accruing taxable value above the first grand and generate no more than $30 in tax.

But plenty of consumer goods, restaurant meals and services would be subject to the tax, as would some goods that are already subject to taxation. Alcohol and cannabis, for example, would be double taxed under the proposal.

Sulte said he wanted the measure to include a seven-year sunset provision because he thinks residents should have to opt in to potentially reauthorize it.

“I don’t trust the Assembly, I don’t trust bureaucrats. And this is my poison pill … I want to have a protection in place,” he said.

The measure will be discussed at a work session on Thursday before it is formally introduced to the full Assembly. After that, it will be open to public testimony.

It is not yet clear if two-thirds of the 12 Assembly members will favor putting the measure before voters on the April ballot, the threshold necessary for a Charter amendment. Over the summer, when an early version of the sales tax proposal was rolled out, two former Anchorage mayors expressed skepticism about voters’ willingness to get behind such a provision.

If the proposal does go on the ballot, it will need support from a simple majority of voters to go into effect.

Correction: An earlier version of this story incorrectly implied a simple majority of Assembly members must approve the sales tax proposal for it to go on the municipal ballot. The tax proposal requires a higher threshold; two-thirds of the Assembly must vote to approve it.