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A group of business leaders assembled by the Anchorage Economic Development Corp. is proposing a sales tax in Anchorage to offset property taxes and raise money to build public facilities.

Project Anchorage’s proposal, which has been in the works for about a year, could help stimulate new construction and economic activity while curbing the outmigration that has weakened Anchorage’s workforce, the proposal’s organizers said Tuesday.

The idea calls for a 3% tax on some items, organizers said. Members of the public will propose the projects that could ultimately be built with the money. The tax would be eliminated after five years, organizers said. To reduce the impact on low-income households, many purchases would be exempt from the tax, including most groceries, rent payments, child care, gasoline, medical expenses and items resold, such as on Facebook Marketplace. Taxable purchases would be capped at $1,000.

Circumstances today are different than when Anchorage voters rejected previous sales tax initiatives, including a 70-30 vote in 2006, organizers said.

The proposal would help lower housing costs, they said. New amenities, perhaps additional city trails, community centers, indoor recreation centers, libraries or a downtown pedestrian area, could help attract residents and reverse a population decline that has been trending for several years, they said.

(Shrinking workforce hampers Anchorage’s economic recovery, report says)

“We have a housing affordability crisis right now and this project is designed to address that by reducing a cost associated with housing: property taxes,” Jenna Wright, president of the economic development group, told media on Tuesday.

Wright said the sales tax idea was inspired by Oklahoma City, which struggled with many of the same economic problems as Anchorage in the 1990s, including families moving away, she said. Voters approved a temporary sales tax on several occasions that focused on building amenities, she said.

The sales taxes have funded projects such as a large downtown park, a mixed-use canal and entertainment district, sidewalk improvements throughout the city, a whitewater rafting facility for the Olympics and a sports and entertainment center where the Oklahoma City Thunder play, she said.

The projects have helped Oklahoma City “attract billions of dollars in private investment, and the city’s economy is booming,” she said.

Laile Fairbairn, who was part of the group that drafted Anchorage’s sales tax proposal, said Tuesday the city needs to attract new workers to ensure businesses’ survival.

“We can’t sit idly by and allow the exodus to continue,” said Fairbairn, co-owner of several Anchorage restaurants. “That’s a recipe for a dying city.”

Wright said the coalition of business representatives that helped craft the proposal came from groups such as the Anchorage Chamber of Commerce, Anchorage Downtown Partnership, Visit Anchorage tourism bureau, Anchorage Homebuilders Association, Northrim Bank, RIM Architects and others.

$180 million from a broader tax base

Organizers of the proposal have set up a website called projectanchorage.com, which went live Tuesday. The site allows people to submit ideas for the public projects.

The organizers plan to accept ideas until September 15.

If the proposal is approved by the Anchorage Assembly, it will go before voters next April, organizers said.

The proposal only applies to a purchase amount of $1,000, or $30 for a new car, the organizers said as an example.

The measure could raise an estimated $180 million a year, said Nolan Klouda, executive director of the University of Alaska’s Center for Economic Development. The group was hired to conduct an economic analysis for the proposal.

About 20 percent of the revenue, or $36 million, is paid by people who live outside Anchorage, he said, such as tourists from out of state and Alaskans visiting Anchorage.

About two-thirds of the proceeds, or $120 million, would cover property taxes under the 1984 tax cap, organizers said. That would reduce property taxes on a $450,000 home this year by more than $1,150, Klouda said. That’s the average value of a home in Anchorage set by the municipality for tax purposes this year.

There would be a “dollar-for-dollar relief on property taxes,” Wright said.

Anchorage pays high property taxes among the highest in the country, but studies show that the overall tax burden on Anchorage residents is low. The city does not collect sales tax, the state does not collect income or sales tax, and state support for municipalities has been declining for many years.

(Anchorage property tax bills are hitting mailboxes. Here’s how to read them.)

The remaining third of the money, or $60 million, will be used for construction projects. One inspiration for the proposal is Project 80s, which led to the creation of public facilities such as the Coastal Trail, the Alaska Center for the Performing Arts and the Loussac Library in the 1980s.

If the sales tax proposal is passed, construction on each project would not begin until the necessary funds are available to complete it, organizers said. The project would then be debt-free, they said.

There is currently a nationwide competition among cities to attract and retain workers, and Anchorage can be more competitive by taking measures to improve the quality of life, Wright said.

“Our competitive advantage is the quality of life we ​​can provide, but we can do more to capitalize on that advantage,” she said. “This project provides us with an opportunity to come together as a city and imagine what Anchorage’s next chapter could look like.”

A net increase in tax payments

Klouda said that despite the property tax relief and new sales tax revenue from visitors, the sales tax, if approved, would mean a higher overall tax bill for an Anchorage household, about $240 more per year.

One benefit would be an improving economy with a broader property tax base as new developments are created, he said.

Getting voters to approve a general sales tax will be difficult, said two former Anchorage mayors.

Former Mayor Rick Mystrom, a Republican who served from 1994 to 2000, said he supported a sales tax proposal to make things fairer for Anchorage taxpayers. He said visitors to the city use trails, roads, police and other services but don’t pay for them through a sales tax, he said.

He said previous measures had failed because voters did not believe that property taxes would actually be reduced.

“People need to be convinced that property taxes are going down,” he said.

Former Mayor Ethan Berkowitz, a Democrat who served from 2015 to 2020, said the city could consider other options to raise revenue, including a municipal tax or a tariff on products arriving and departing at the Don Young Port of Alaska.

This would be easier to administer than a sales tax, partly because goods could be more easily recorded at the port as there was a single point of entry, he said.

The sales tax is regressive and “inflationary by nature,” meaning it would increase the cost of goods, he said.

“VAT is just an old, tired dog,” he said.

“Other options should have been part of the discussion,” he said. “The idea that we are stuck between a sales tax and a property tax is a false dichotomy.”

Several dozen cities and towns in Alaska already collect sales taxes, according to a 2023 state report on local taxation.

Anchorage also levies several types of taxes that raise relatively little revenue compared to the revenue from property taxes, which cover more than half of the city’s budget. Among these taxes, Anchorage voters approved a 5% alcohol sales tax in 2020 after several years of no attempts.

Randy Sulte, who represents South Anchorage in the Assembly and is an ex officio member of the Anchorage Economic Development Corp., said he is committed to drafting a sales tax resolution for the Assembly.

He said he did not know how his colleagues in the Assembly felt about the idea.

“Personally, I like it,” he said. “I’ve heard from people that they want relief on property taxes.”

Personally, he would like to see the creation of a community project like the Gathering Place in Tulsa, Oklahoma, a riverfront recreation area with playgrounds, a restaurant, urban gardens, a skate park and other public spaces.

He could imagine a similar attraction being built in the Ship Creek area near the Alaska Railroad headquarters.

“But ultimately the ideas will come from the community,” he said.

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