Anchorage Assembly to weigh jumble of new proposals for potential sales tax

Anchorage voters could decide next April whether to implement a sales tax. But the particulars of such a tax — the size, what it pays for — are still getting hammered out by the Anchorage Assembly.

There are now five competing proposals.

Four are variations on the same theme: A tax of 1.5% to 3% on the sale of goods and services within the municipality, revenues from which would be spent, depending on the proposal, on property tax relief, new public amenities, public safety and snowplowing capacity, or general government.

The fifth proposal is more modest: It would make the potential tax an “advisory question” on the April ballot, letting voters weigh in on whether they want elected leaders to refine a potential sales tax plan before seeking an official vote to enact it.

The initial concept came from Assembly members Randy Sulte and Felix Rivera, drawn from a set of policies called Project Anchorage drafted by the Anchorage Economic Development Corp.

Originally, the idea was to let municipal voters decide whether to adopt a 3% sales tax, which proponents say is conservatively estimated to generate $180 million a year. The tax would sunset seven years after its implementation.

The revised version of the Sulte-Rivera plan is similar to the first draft in most ways, but has enough small adjustments from feedback from community members and other city officials that they submitted a substitute version.

Two-thirds of the revenues collected would still go toward lessening property taxes. Sulte and Rivera calculate that applying $120 million to to property tax relief would break down to a 16% drop. For the owner of a $450,000 home, slightly under the average sale price for a single-family home in Anchorage in 2023, that would mean $1,195 off their tax bill.

[Previous coverage: 11 ideas for revitalizing Anchorage, as proposed by backers of a sales tax]

The remaining third would be put into a trust fund to pay for projects benefiting residents, including new recreational facilities as well as overhauling the city’s vehicle fleet to improve public safety and snowplowing. Interest spun off from the fund would help pay for maintenance and upkeep of new facilities.

“There has been a desire by the community to reduce property taxes and a desire to diversify our tax base by ensuring non-residents who purchase goods, consume services, benefit from public safety services, and use public facilities and streets within the Municipality primarily funded through residential property tax revenue will contribute to their provision and upkeep,” the substitute version of the ordinance states. “There is a desire to revitalize Anchorage through Municipal Area Projects (MAPs) that will attract and retain residents, increase resident and visitor enjoyment, and enhance the livability of Anchorage.”

Though the fundamentals of the Sulte-Rivera sales tax plan remain the same, the newer iteration has several significant modifications.

An already long list of products and services exempted from the tax — including gasoline, prescriptions and food — was expanded to include commerce conducted by nonprofits and regional housing authorities.

Licensed child care services, child care products and menstrual hygiene products and contraceptives are all also exempt in the newest version of the plan.

In order to mitigate negative impacts on low-income people, the sponsors included provisions that households with income at 80% or below the federal poverty line can apply for an exemption from the tax for most retail purchases.

Since the plan was first made public, it’s been criticized as primarily benefiting property and business owners, while heaping disproportionately higher costs onto renters and low-income residents. At a recent Assembly work session on the ordinance, some members claimed the biggest beneficiaries of the property tax relief provisions would be out-of-state real estate companies that own lots of commercial and apartment buildings.

At the top of the list for the proposed municipal projects is overhauling the city’s snowplow and police vehicle fleets to shore up core municipal services. There are several “trailside facility” projects proposed for popular parks, which would add a “full service indoor facility with space for year-round recreation amenities like food and beverage concessions, outdoor gear rentals, and gathering space” to each.

Other projects listed are redevelopment of the Alaska Center for the Performing Arts and pedestrian improvements to create a downtown arts district, as well as a new children’s museum.

Sulte said the idea of using sales tax revenues to improve livability and public amenities came from a policy that helped transform Oklahoma City.

Alongside the Sulte-Rivera ordinance are four other proposals:

• Assembly Vice Chair Meg Zaletel and member Daniel Volland’s version would also ask voters to adopt a 3% sales tax, but revenues would be split four ways: A quarter of the proceeds would pay for voter-approved capital projects; a quarter for public safety, snow fleet replacement, affordable housing and public transit expansion; a quarter for property tax relief; and a quarter into a trust fund “dedicated to funding any public purpose.”

• East Anchorage Assembly member George Martinez is proposing a 1.5% sales tax with no property tax relief component. Instead, two-thirds of the revenues would pay for community projects like those on the MAPs list. The other third would pay for administering the tax, with all remaining funds going to general government. Martinez wrote that the ordinance is about diversifying Anchorage’s tax base.

• Member Anna Brawley of West Anchorage filed a version of the 3% tax that would apply 0.5% of revenues to lowering property taxes, but use the larger portion for “funding community needs.” Rather than a list of specific projects that would be paid for, Brawley’s proposal lists out a set of priorities: “housing, repair of existing facilities, public transit, and other categories.” It also calls for a special election in September 2025 to handle the measure, rather than adding it to the regular municipal elections in April.

• Assembly Chair Chris Constant’s ordinance would simply give voters the chance to weigh in on the idea of a sales tax before elected officials got down to the technical particulars. His measure would put the prospect of a sales tax on the April ballot, and if residents decided it’s something they support, then Assembly members would come up with a firm plan. That plan would also then go before voters at a not-yet-determined future date.

“Given the complexity of the originally proposed ballot initiative and the broad diversity of opinions within the community, the proposed substitute version changes the ordinance to an advisory question for the April 1, 2025 ballot,” Constant wrote. That, he added, would give sponsors “an opportunity to further engage and educate the public on the proposed sales tax, while allowing the body the opportunity to gauge public opinion on the topic. Both of these processes would greatly inform our various positions while allowing additional time to refine the ordinance to deliver a better product.”

Mayor Suzanne LaFrance and her staff are reviewing the various proposals, but the administration has not said it favors one more than the others.

“The Project Anchorage proposal offers a positive vision to reinvest in Anchorage to improve our community’s quality of life and economic direction. It is also a complex proposal that likely represents the largest restructuring of the Municipality’s finances in decades,” the mayor’s office said in an emailed statement. “Getting the specifics right is critically important. The Municipality has been a partner in vetting the proposal’s structure and providing feedback on feasibility since this summer.”

The first opportunity for the Assembly to discuss the different tax proposals and take public testimony is at its first meeting of the new year, on Jan. 7.

In order to go on the ballot, the measure needs approval by two-thirds of the Assembly’s 12 members.