Memorandum 15-065 Bed Tax

Memorandum 15-065

TO:                       Mayor Wythe and Homer City Council

FROM:                 Katie Koester, City Manager

DATE:                  May 6, 2015

SUBJECT:         Information on proposed bed tax ordinance

Councilmember Lewis has introduced Ordinance 15-13 asking Homer voters to approve a bed tax on the October ballot. It is important to note that even if the Homer voters approve a bed tax, the Kenai Peninsula Borough would still have to pass an ordinance authorizing a bed tax. The Ordinance proposes a 2.5% tax with revenue distributed 5 ways.

1. 25% to parks, arts, recreation and culture programs in the city.

2. 20% to council-approved programs to market and promote the city.

3. 10% to funding the Homer Accelerated Roads and Trails Program.

4. 10% to funding the Homer Accelerated Water and Sewer Program.

5. 35% to the general fund of the city to be appropriated as determined.

According to KPEDD literature published in 2014, using 2012 sales tax figures, a bed tax would generate $120,000 in Homer.

A 2.5% bed tax would generate $300,000

$75,000 to parks, arts, recreation and culture programs in the city.

$60,000 to council-approved programs to market and promote the city.

$30,000 to funding the Homer Accelerated Roads and Trails Program.

$30,000 to funding the Homer Accelerated Water and Sewer Program.

$105,000 to the general fund of the city to be appropriated as determined. 

It is safe to assume current numbers would be a little higher. However, the percentages proposed in the ordinance are not sufficient to replace the amount of revenue that was dedicated to the HART and HAWSP fund before 2009. The current distribution of sales tax revenue is 15% HART roads, 2% HART trails and 15% HAWSP. 

The Kenai Peninsula Borough estimates that the City of Homer would have collected an additional $800,000 in 2014 with a year round sales tax on non-prepared food. Using the KPTMC estimate from 2012, a 7% bed tax would be required to replace that loss.

A 7% bed tax would generate $840,000

$210,000 to parks, arts, recreation and culture programs in the city.

$168,000 to council-approved programs to market and promote the city.

$84,000 to funding the Homer Accelerated Roads and Trails Program.

$84,000 to funding the Homer Accelerated Water and Sewer Program.

$294,000 to the general fund of the city to be appropriated as determined.