Common Council shakes piggy bank for 2018 budget funds
During a regular meeting on Monday, the Nome Common Council wrestled to adjust a summer two-percent sales tax increase, but did not succeed in taking it down to the mat.
The Council looked for ways to amend the City of Nome sales tax ordinance.
Last fall, Nome voters approved a two percent increase from five percent to seven percent effective May through August. However, the Council has since discussed which organizations should be exempted from paying the extra two percent. Monday’s work session found consensus on two points—one concerning no tax on goods and services sold by student organizations for fund raisers, including games of chance, and two, to add pull tabs to the exceptions list. The City garners about $344,000 a year from five percent sales tax on pull tabs, according to Andersen, and used to do as much as $500,000, he said.
“I’d be in favor of adding pull tabs to the exceptions if at the same time we would limit charitable gaming to Nome organizations,” Councilman Jerald Brown said. “I don’t want to exempt pull tabs if out of town organizations are competing for local dollars with local charities.”
Tom Moran, city manager will check with the City’s attorney on excluding out of town pull tab permittees.
Councilman Lew Tobin was not so sure the sales tax shouldn’t apply to pull tabs, as rippies represented, for him, passive fundraising that required little effort compared to raffles, bake sales and other fund raisers. He could go with exempting the pull tab sales from the two percent increase if the sales of heating fuel would also become exempt from the two-penny per dollar hike, Tobin said.
Boosting sales tax by two percent on heating fuel would add six cents to eight cents per gallon, according to Scot Henderson, Bonanza Fuel manager.
Most pull tabs are purchased at bars, where a nickel or seven cents added to a dollar pull tab complicates the sales transaction.
Unlike other Council sessions concerning sales tax on pull tabs, when permit holders turned out in force to argue against taxing pull tabs or to debate whether sales tax should apply to gross or net proceeds, no one attended the Feb. 27 work session.
“I’m surprised no charities are here,” John Handeland said from the public comment podium. Handeland had experience with the Bering Sea Lions Club pull tab sales. Charities should collect the sales tax, but they found charging a nickel on the dollar to be a “pain in the butt,” so the charities opted to absorb the sales tax. The charities could increase the net and funds raised from pull tabs by charging the purchasers the sales tax, Handeland said.
“The charities have elected to cut into their profits because they have elected to pay the taxes,” he said.
The Council is looking for additional money from sales tax as budget relief during decreased revenue sharing and other state cuts, people leaving town, and other pressures on the City’s finances.
The schools are hurting and will be looking for more money from the City, Moran said.
There are additions going to be built into the 2018 budget, he warned.
“The school is going to ask for another half million. They are in the red,” Moran said. “They have been borrowing against their own savings account.”
Moran went on. “We are going to lose $100,000 from community revenue sharing in 2018. Now we are up to $600,000. This Council has asked for a mill rate reduction, which is about $300,000. So theoretically, at full strength, the seasonal sales tax could generate $750,000, according to Julie Liew, financial director, so that means we will go into the savings by $150,000, or we are cutting the budget by $150,000,” he said “ So if all things this council has discussed come to fruition, we are down about $150,000. I want everybody to be aware.”
“Except, that over the last number of years, we have increased our unobligated fund balance by at least a million a year, so if we don’t do anything at all, we are on the same thing, minus the $100,000 from the state,” Councilman Mark Johnson said.” So we’ll still be around $900,000 in the black.”
“Not if we reduce the mill rate and we give $500,000 to the school,” Moran came back.
“Part of that is skewed because of the sale of the property to the college, ” Andersen said.
“We are running out of assets to sell. You are right, it has been skewed. We have done pretty well, but I see a lean time coming forward. Mark’s right, but how much money are we supposed to have in the bank? The auditors said we should have six months of operating costs in the bank. We are trying to be steward of the tax payer dollars, we’re not out there willy-nilly spending it, but we are putting it away,” Moran said.
The recession hasn’t really hit yet, Andersen observed. “The state spending is going to dry up.”
Whenever federal programs receded, Nome’s revenue went down, he observed. To keep state funding in the black, oil needed to be $103 per barrel, contrasted with the current price around $30 per barrel, Andersen told the Council.
The school’s minimum student count was very low this year, so their funding stream dried up.
“We’re providing a lot of services that aren’t paying for themselves,” Andersen said. Sooner or later the Council was going to have to look at what services and quality of life issues the City wanted to provide.
Sure enough, Nome Public Schools Superintendent Shawn Arnold confirmed an upcoming budget crisis at the schools. The district administration anticipated cutting 15 positions, he said.
Meanwhile back in the neighborhood of the current budget, the Council voted to amend the City’s budgets to align actual spending and revenue with the figures projected at budget time. The Council approved seven City budgets for the Port of Nome, general fund, capital projects, school debt service, capital projects, construction capital projects, special revenue fund budget and Port of Nome capital projects.
The Council and City of Nome staff have started to travel along the schedule to achieve a budget for spending year 2017-2018.
In other business, the Council:
• Adopted an ordinance approving the Port of Nome tariff revision, No. 13, to replace all existing tariffs for Port of Nome. For the second year in a row, there would not be an increase for goods coming across the port of Nome, Johnson noted.
• Passed a resolution approving a memorandum of understanding with James West Jr. as fire chief in the Nome Volunteer Fire Dept. for the next two years. West has held the position since October of 2014. The volunteer job comes with a $500 per month stipend, workers’ compensation insurance and travel expenses for training.
• Adopted an ordinance authorizing the sale of the old Library and Museum. At a bid opening last week, there were no bids to open. The reserve price was around $700,000, coinciding with the last assessment, not likely market value, as the property did not sell. The City may readjust the disposal sales procedure to allow negotiation with nonprofit interests. A sobering up facility has been mentioned.
• Approved the Nome Joint Utility System’s labor agreements with International Brotherhood of Electrical Workers, Alaska Public Employees Assn., and International Union of Operating Engineers. The three pacts called for a three percent raise now followed by two percent raises for the next two years.
• Passed a resolution awarding bids from the City’s unclaimed, abandoned and forfeited vehicle auction. A 2001 Polaris XC700 went for $520 to John Wasen, a 1995 Chev. Astro Van for $501 to Joe Horton and a 1999 Ford Expedition for $1,052 to Joy Baker.
• Passed a resolution awarding the Thornbush Site Development and Snake River Dredging Phase II bid to Q Trucking, for $1,124,110.42. Ridge Contracting bid the next lowest at $2,094,550.
• Passed a resolution awarding the Middle Dock Concrete Ramp Extension as a contract amendment to Orion Marine Contractors, etc. for $253,225.