Mat-Su Assembly rejects 3 tax proposals, but a new one may be coming

What you need to know:

• The Mat-Su Assembly rejected three tax-related ballot proposals during a regular meeting Tuesday: a 1.5% sales tax paired with a $75,000 residential property tax exemption, a 6.5% boroughwide sales tax paired with a partial property tax repeal, and a 25-cent-per-ton gravel tax.
• Supporters said the measures would reduce reliance on property taxes by shifting some costs to shoppers, visitors and industry while diversifying borough revenue sources. Opponents said the proposals lacked clear plans to offset potential revenue losses and could harm businesses or create budget shortfalls.
• A 5% alcohol sales tax previously approved by the Assembly will still appear on the November ballot. Assembly member Ron Bernier said he plans to propose a 3% areawide sales tax paired with a property tax cap later this year.

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Matanuska-Susitna Borough voters will not see a new trio of tax proposals on the ballot in November after the Assembly rejected the measures during a meeting Tuesday.

A proposed 5% tax on all alcohol sales in Mat-Su, approved for the ballot earlier this month, will still appear before voters.

The rejected tax proposals included a 1.5% sales tax outside Palmer, Wasilla, and Houston paired with a new $75,000 exemption on some residential properties; a 6.5% sales tax across Mat-Su that would be added to current city taxes and paired with the repeal of one of Mat-Su's five property taxes; and a 25-cent-per-ton tax on gravel extracted by the region's largest pit operations.

Assembly member Michael Bowles proposed a 6.5% sales tax and partial property tax repeal. Assembly member Stephanie Nowers proposed a 1.5% sales tax with a $75,000 exemption and a gravel tax. Bowles represents District 1, which includes Butte. Nowers represents District 2, which includes Palmer.

The gravel and 1.5% sales tax measures were postponed indefinitely in votes of 3-4 and 4-3, respectively, a step that effectively kills the proposals.

Assembly members Ron Bernier, Dee McKee, and Nowers voted against postponing the gravel tax. Assembly members Dmitri Fonov, Bill Gamble, and Bernier voted against postponing the sales tax.

The 6.5% sales tax proposal was rejected 4-3, with Bernier, Bowles and Gamble voting in support.

If approved, the measures would have appeared on Mat-Su ballots during the regular election scheduled for November.

Bowles said he proposed the 6.5% sales tax paired with a repeal of about 60% of the region’s average property taxes as a way to reduce annual costs for property owners and shift some of the burden of funding government services to shoppers.

He said the measure could also force the borough to reduce its annual budget because the sales tax would likely generate less revenue than the borough currently spends. Such a measure could also bring in more revenue than estimated, he said.

The proposal could create a $20 million shortfall compared with the current budget, according to borough estimates.

Bowles said the proposal is a risk that could trigger positive change.

“This change, it’s scary — big change is scary,” he said. “But unless you take chances, you never find out if you’re really doing something that’s great, that’s going to help the people.”

Assembly member Maxwell Sumner said he also wants to lower taxes but does not support making cuts based on guesswork without evidence showing what level of shortfall the proposal would ultimately create. He said he also researched proposing a sales tax to replace property taxes but decided against it because of the negative impact it could have on the community, including businesses and jobs.

“We just went through the budget cycle. We didn't cut $20 million off the budget — but now you're proposing to cut $20 million off of revenue. I mean, that's bonkers to me,” he said. “I think it's incredibly irresponsible to try and run a government on ‘I hope' and ‘I wish,' and that's what you're saying right now — that ‘I hope we're going to make more money than the math says,' and ‘I wish that we had a lower sales tax rate that replaced areawide.' That's not reality.”

Nowers said she proposed the gravel tax and 1.5% sales tax as a way to reduce the borough's reliance on property taxes to cover costs, including road maintenance and school funding.

A sales tax paired with a new exemption would shift some of those costs from property owners to visitors who shop at the region's stores, she said. Adding a gravel tax would also diversify the tax base, she said.

“I'm looking at it for how we can most benefit people who live here and get people who come and visit to help pay the cost of the services,” she said.

Bernier said he supports taxing gravel sold from Mat-Su to Anchorage but does not want to risk hurting small operators.

“By all means, any gravel heading to Anchorage, I want to see taxed. You’ve got my support on that,” he said. “But I don't want to mess with the mom-and-pops or digging in people's back pockets and look in their underwear and stuff, just trying to dig – this is just kind of invasive.”

The measures voted down Tuesday may not be the last tax proposals considered for the ballot this year.

Bernier said he plans to propose a 3% areawide sales tax paired with an areawide property tax cap of 4 mills, or $400 per $100,000 of assessed value. The areawide property tax mill rate for 2027 is 7.955 mills, or about $796 per $100,000 of assessed value.

“We all tried to come up with some answers as far as alleviating property tax,” Bernier said during the meeting. “I think the more you give them a choice on the ballot, then maybe we'll actually come up with an answer.”

The deadline for the Assembly to approve propositions for the November ballot is August 28.

-- Contact Amy Bushatz at contact@matsusentinel.com