KODIAK, Alaska — The Kodiak City Council has voted to raise the city’s sales tax cap by 300 percent to address a $2.8 million budget deficit.

The raise means sales tax will be collected on the first $3,000 of a transaction, up from $750. The increase lifts the maximum amount of sales tax that can be paid in a single transaction from $52.50 to $210, the Kodiak Daily Mirror reported .

The City Council approved the increase on a 5-1 vote Thursday. Councilors voted to exempt residential and commercial property rentals from the tax cap increase.

In addition to slashing at the budget deficit, the council hopes the cap increase will fund future capital needs, including vehicle and equipment replacements, sewer lift stations and the St. Herman Harbor replacement.

“Budget cuts do not solve the known issue of an aging infrastructure,” City Manager Mike Tvenge said. “It will take additional revenue to fund these projects.”

Community members at the meeting, including some local business owners, said they’re concerned that the increase will depress retail sales.

Resident Paddy O’Donnell asked the council for a more moderate cap increase, or an exemption for marine fuel.

“I can support $1,500 but going up to $3,000, I think it’s too much at this time,” O’Donnell said.

Resident Sarah Harrington, however, supported the tax cap increase.

“I’m very proud to be able to take my daughter ice skating, and to go to the racquetball courts, and to appreciate our beautiful library that’s open to everyone in the community,” Harrington said. “I’m also very cognizant of the fact that we’re lucky as Alaskans that we don’t pay a lot of taxes that other parts of the country pay. I look forward to seeing what solutions (council members) come up with to preserve the quality of life that we do have in this community.”

Councilor Rich Walker was the only dissenting vote on the council.

“I think the $3,000 is a little much, myself,” Walker said. “I’m in favor of more of a progressive-type 5-year plan and tax, so we can work things out as we go and see how it’s affecting the community and how it’s affecting the city.”

Other councilors cast the increase as necessary and overdue to address city needs into the future and maintain current levels of service.


Information from: Kodiak (Alaska) Daily Mirror, http://www.kodiakdailymirror.com