North Pole Council Mulls Sales-tax Hike to Offset Refinery-closure Revenue Loss

Nov 21, 2014

North Pole’s mayor says the City Council is considering hiking sales taxes to cover an estimated $180,000 drop in property-tax revenues caused by the shutdown of the Flint Hills Resources refinery. Ward and Fairbanks Mayor John Eberhart heard about other lcommunities' budgets challenges while attending the Alaska Municipal League’s annual local-government conference in Anchorage.


North Pole Mayor Bryce Ward says the City Council will consider hiking sales taxes in Monday’s meeting. They’re also looking at raising alcohol and cigarette taxes and cutting city staff and other expenses. All in an effort to avoid cutbacks in services.

Flint Hills Resources-Alaska shut down its refinery last summer and now uses the facility as a fuel terminal.
Credit KUAC file photo

“The reality is, if folks want the same level of service that they’ve had in the past, it’s going to cost a little bit more to do that,” he said.

Ward says city officials hope the proposals will enable North Pole to absorb the 3-and-a-half percent cut in city revenues they estimate will occur when the Fairbanks North Star Borough completes its assessment of the refinery. Flint Hills closed the facility last summer and converted it to a fuel terminal. The company is now asking the borough to lower its property-tax bill.

Ward says city officials expect that to happen. How much, they’re not sure.

“We’re trying to plan our budget,” he said. “We have to have our budget approved by the end of the year. We won’t actually get a full determination until sometime in January or February. So we’re looking at worse-case scenario.”

The refinery is the city’s biggest property-tax payer, accounting for about 40 percent of that source of revenue. The mayor says he and the council believe the burden of filling that revenue gap shouldn’t fall on the backs of local property-tax payers. Ward says in fact they should get a break.

“I have a couple of plans to actually look at potentially lowering our mill rate, but increasing our sales tax,” he said. “And – we’ll see how all that works out.”

Ward talked about the issue Wednesday during the Alaska Municipal League’s annual local-government conference in Anchorage. The organization helps local-government officials deal with problems in their communities, and represents their concerns at the state and federal level.

Most of the talk in the opening day of the conference was about another kind of revenue shortfall – the kind caused by cutbacks in state revenue-sharing. That’s money given to communities as their share of state revenues, mainly from the oil industry.

Fairbanks mayor John Eberhart says the city got about $1.6 million this fiscal year – a cut of about $100,000 of the share it was due.

“One-point six million is roughly 5 percent of the city budget, give or take,”he said. “So, it’s important.”

Municipal League officials told the more than 100 local-government officials from around the state that every community took a hit last year. Because the state cut back the $60 million that it’s given in revenue-sharing to municipalities since 2008.

Eberhart says that’s unfair, because revenue sharing is a relatively small part of Alaska’s multi-billion budget that helps all municipalities, especially smaller communities.

“The fact is, y’know the state still gets billions of dollars a year,” he said. “And so whether it’s $52 million, which is where it was cut to last year, or whether it’s $60 million a year, that’s still a lot less than in past years. And it’s a drop in the bucket compared to total state revenues.”

That may be a hard sell, given the prospect of an even tighter state budget in the coming fiscal year due to competing fiscal pressures and falling state oil revenues.

Muncipal league members will consider a resolution today urging the state to restore funding the revenue sharing program to $60 million. And another to urge the state to honor its agreement to maintain its present of funding for the state public employees' and teachers' retirement systems.