Two years after Petersburg voters rejected a sales tax cap increase by a five-vote margin, the borough assembly voted 6-1 on May 18 to send the question back to the ballot this October.

The ordinance, approved in its first reading, would ask voters at the Oct. 6 municipal election whether to raise the maximum taxable amount on a single purchase from $1,200 to $5,000. If approved, the maximum sales tax collected on any single transaction would rise from $72 to $300. The sales tax rate would remain at 6%.

Wrangell sets the same taxable limit on sales — the tax shuts off on any purchase or service invoice over $5,000.

The Petersburg measure was introduced by Vice Mayor Jeigh Stanton Gregor.

The last time the question went before voters, in October 2024, it failed 516-521.

“We were hoping that increasing the sales tax cap to generate more revenue would offset the need to increase property taxes significantly,” Finance Director Jody Tow said at the time.

It didn’t pass, and the borough ended up drawing $400,000 from reserves to balance that year’s budget. Tow warned in 2024 that at that pace, reserves would be depleted in roughly six years if nothing changed.

“It is very unfortunate that this proposition did not pass,” Tow said after the 2024 election. “It is going to be a very difficult budget year this spring for the borough assembly.”

That spring arrived, and the borough faced hard choices — drawing on reserves and approving a 0.8-mill property tax increase for fiscal year 2026 to balance the budget.

“I would like to get it on the ballot so the community can vote on it,” Stanton Gregor said of this year’s effort during an interview on KFSK. “I hope the community will vote to approve it so that we don’t end up in those really scary conversations of trying to decide whether we value library or parks more.”

The single-purchase sales tax cap was established in Petersburg in 1959 at $1,000 and has been raised only once in the intervening 67 years, going to $1,200 in 2002. Had it kept pace with inflation since its inception, it would now be close to $11,300, according to the borough.

Finance Director Tow told the assembly that more than $25 million in sales were exempted from taxation in calendar year 2025 because of the current cap, with more than $6.3 million of that total coming from travel, charter, guides, lodges, hotels and bed-and-breakfast sales.

Raising the cap to $5,000 would capture a portion of that exempted spending, while still leaving Petersburg with one of the lowest single-purchase caps in Southeast Alaska.

Assembly Member James Valentine read through the regional comparisons at the meeting: Haines caps its tax at $10,000, Juneau at $15,000, Sitka at $12,000, Wrangell and Craig at $5,000, with Ketchikan at $2,000 per single item. Kake, Skagway, Pelican and Gustavus have no caps at all.

Stanton Gregor and other assembly members framed the increase primarily as a way to capture visitor spending rather than increase the burden on residents, noting that larger purchases during festivals, charter trips and tourist season would generate much of the additional revenue.

Assembly Member Rob Schwartz pushed back on that framing, noting that local businesses and fishing operations making large purchases would also feel the change.

“It’s nice to think about this falling just on visitors but,” Schwartz said, citing an example of a fishing vessel needing to buy an expensive engine. “Local businesses will generate probably quite a bit more money than the visitors from out of town.” He said he would still vote yes on the ordinance.

Raleigh Cook, addressing the assembly during public comment, offered a business owner’s perspective.

“When I started the business in this town, I was very curious why the cap was at $1,200,” Cook said. “It’s about time it was going to change.”

The ordinance advances to a second reading at the assembly’s June 1 meeting, where a public hearing will be held. If the assembly approves the ordinance in three readings, the measure will appear on the Oct. 6 ballot.

If approved by voters, the higher cap would take effect Jan. 1, 2027.