Mat-Su proposal would add 1.5% sales tax outside cities, add property tax exemption

What you need to know:

• The Mat-Su Assembly will consider two new tax proposals June 16 that could go before voters in November: a 1.5% sales tax on most purchases outside city limits paired with a new property tax exemption, and a 25-cent-per-ton tax on large gravel pit operators.
• The 1.5% sales tax proposal aims to shift some of the borough's tax burden away from homeowners. It would create a new $75,000 property tax exemption for owner-occupied homes, reducing average tax bills by about $700 annually for roughly 26,000 residents. The tax is projected to generate about $11 million a year but could still leave the borough facing a budget shortfall of up to $4 million.
• Assembly members will also weigh a separate 6.5% regionwide sales tax proposal during the June 16 meeting. That measure would eliminate one type of property tax and cut average property tax bills by about 60%, but borough officials estimate it could create an annual revenue gap of $10 million to $22 million. Only one of the sales tax measures is expected to appear on the ballot.

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PALMER — A new Mat-Su tax proposal that could go on ballots this fall would add a 1.5% sales tax to most goods and services outside city limits, while giving residents a new property tax exemption. A second proposal would levy a stand-alone tax on large gravel pit operations.

If approved, the measures would appear before voters in November.

The measures are proposed by Assembly member Stephanie Nowers, who represents District 2, which includes Palmer. They will be considered at a regular assembly meeting scheduled for Tuesday.

A separate 6.5% regionwide sales tax proposal will be considered at the same meeting. That proposal would repeal one of the region's five types of property taxes, reducing average annual bills by about 60%. It would be added to most sales in Mat-Su and boost total sales tax rates in Palmer, Wasilla and Houston to as high as 10.5%.

A new borough fact sheet says the plan could create a significant annual budget shortfall because the proposed 6.5% sales tax is estimated to generate about $10 million less in overall revenue than the property tax it would eliminate. That deficit could grow to $22 million if an amendment is approved that exempts seniors and 100% disabled veterans from paying the sales tax.

The Assembly is unlikely to approve both the 1.5% and the 6.5% sales tax measures for the November ballot, Nowers said.

Both are on the table to encourage dialogue and new ideas about how to fund borough services, such as schools and roads, she said. Members of the public can come share their thoughts during the meeting, she said.

If placed on the ballot, the measures would join a ballot question approved earlier this month that asks whether the borough should levy a 5% tax on all alcohol sales.

1.5% sales tax ballot proposal

The 1.5% sales tax proposal is meant to bring in money in a new way while also reducing what’s paid through property taxes, Nowers said in an interview this month.

"What we're trying to do is find a way to reduce property taxes for people who live here, and do it in a way that also continues to pay for services that people want, and get visitors who use the valley to pay some of the tax," she said.

The plan would create a new $75,000 property tax exemption for owner-occupied properties. The exemption would reduce average tax bills by about $700 per year for the about 26,000 residents who do not already receive a senior citizen or disabled veteran exemption, Nowers said.

Senior and veteran exemptions would remain unchanged at $279,720, she said.

Linking the measure to a new property tax exemption is intended as a safeguard to ensure the borough does not implement a new type of tax without reducing revenue collected through existing tax systems, she said.

If approved, the proposed 1.5% would also apply only to sales outside the area’s three cities.

Shoppers inside city limits would continue to pay sales tax rates of 4% in Palmer, 2.5% in Wasilla, and 2% in Houston, according to the proposal. Income from those taxes helps fund city services.

The tax could generate about $11 million each year, according to the borough tax proposal fact sheet. That amount would be offset by money no longer collected as a result of the measure’s property tax exemption, the sheet states.

Depending on how many people participate in the new exemption, the measure could also create a borough funding shortfall of up to $4 million under current borough spending levels, the fact sheet states.

Gravel tax ballot proposal

The Assembly will also consider a 25-cent-per-ton gravel tax on operators that extract more than 150,000 tons per year. It would affect about 20 of the 150 pits in Mat-Su with active permits, Nowers said.

Previous gravel tax proposals sparked heated debate and were met with broad opposition. A 2002 proposal would have charged operators who moved more than 50,000 tons a year 10 cents per ton. A 2017 measure that would have charged all operators 25 cents per ton regardless of how much they removed was narrowly defeated in 4-3 vote.

The new proposal is less controversial because it shields small operators from paying the tax, she said. It also protects subdivision development and the use of gravel on farms, according to a memo attached to the measure.

If approved, the tax could generate about $956,000 in annual revenue, according to a borough fact sheet. It could reduce average property taxes by about $25 per year based on current tax and borough budget rates.

-- Contact Amy Bushatz at contact@matsusentinel.com