Is 'tax-free' going the way of the dinosaur in Southeast?

With Petersburg foregoing a tax-free day this spring, is Wrangell next on the list of Southeast cities that will abandon their customer-friendly days of no sales tax in the Borough?

This past weekend’s tax-free day was the latest sales holiday where money the Borough would usually take in did not make it into city coffers.

With the distinct possibility of a 5.5 percent sales tax rate reduction looming on the October ballot, the City and Borough of Wrangell could see an end to the tax-free holidays local citizens have enjoyed since its inception in 2008. The day was established twice a year as a way of luring shoppers from Prince of Wales Island on the now defunct IFA ferry route.

According to the 2013-14 budget for the city, which was approved by the Borough Assembly last month, a reduction in sales tax would cause an elimination of “tax free days since essentially every 4.5 times to the store would be equivalent to a tax free day when comparing to taxes at 7 percent.”

The budget also estimates a loss of $30,000 to the city’s general fund if the reduction passes. If passed, the total loss to the city would be estimated $503,000, according to the budget document.

In addition to the possible loss of tax-free days, one of the local services that could be affected by a tax-rate reduction is the Wrangell parks and recreation department. Amber Al-Haddad is the department head and she said she realizes her office may be one of the first to face cuts in light of a 5.5 percent tax rate.

“Understanding that the pool, and all of Parks and Rec in general, is one of the more non-essential services that the city offers to residents, we would likely see an effect from cuts,” Al-Haddad said. “That would be based on the fact that we are supported primarily from the general fund.”

Petersburg’s Borough Assembly failed to pass a resolution last month to hold its tax-free day on May 11. The motion failed to pass for lack of a second.

Assembly member Sue Flint asked during the meeting if tax-free days really were a help to the city’s bottom line.

“These tax free days cost the borough about $28,000 in lost tax revenue,” Flint said. “I would like to know if this is really a boon for retail sales? Is it really making a difference on main street?”

Petersburg Borough Finance Director Jody Tow added that the city is already facing a loss in revenue, which is a factor in keeping the tax holidays in effect.

“We already have a projected revenue shortfall of about $35,000 and we are taking this under consideration for the future of this program,” Tow said.

The opportunity to have two tax-free days per year was approved by Petersburg voters in October, though enactment of the resolutions establishing them is still required by the Borough Assembly.

Wrangell Mayor David Jack said he thinks keeping tax-free days in his Borough is a good idea – and that the city shouldn’t dictate what he sees as money belonging to the citizens.

“It does cost the city some money, but then again it is the people’s money,” Jack said. “If they have a little bit back in their pockets they end up spending it eventually and I guess in the long run it does not really cost the city any money to have these days.”

When asked if Jack supports the 5.5 percent tax rate reduction his answer was short and to the point.

“No, I do not,” Jack added.

The tax rate reduction initiative is set to be on the Oct. 1 general election ballot.


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