April 04, 2018
Wednesday AM

I have been on the Borough Assembly for a year and half now and thought I would pass on my observations/opinions of local government and the concerns I have moving forward. First, let me state that these are my own personal comments and I am not claiming to represent anyone…except the taxpayers.

As most of you may remember, the last two budget cycles have been challenging for the Borough. Last year the deficit was nearly a million dollars. Creative efforts on behalf of the Assembly and Borough Staff allowed that deficit to be closed without a sales or property tax increase.

The budget deficit for this year was initially projected at approximately ½ million, however that recently changed, primarily due to a significant increase in property assessments and an increase in sales tax revenue. Those of you who recently received your assessments probably noticed that your prior year assessment amount was listed on the form for comparison to your new assessment.

This year, assessments increased borough wide by an average 6.2% (about 3x’s the rate of inflation). This increase amounted to roughly $253,000 in ADDITIONAL taxes paid. Tobacco tax receipts are estimated to be $100,000 higher and about $100,000 in other additional revenue due to a mix of other reasons (FY19).

In total, this results in a borough deficit of less than $20k if we continue to fund services at the same level as last year. In truth, we will likely end the fiscal year with a small surplus (if we don’t expand government), as the staff/assembly has recently approved a no-risk plan to increase the investment earnings of borough reserves and because it is likely that an increase in tourism will produce additional sales tax revenue.

In truth, most Alaskan communities would love to be in the position Ketchikan is in now. So far, we have been isolated from the drama that many cities have experienced with yearly education funding problems, teachers getting pink slips each budget cycle, etc.

This has not come without a cost however. Of the 321 Alaskan communities, Ketchikan is one of the highest taxed areas in the state. Our in town combined sales tax is the 2nd highest, and our effective property tax (City/Borough combined) is in the top ten. Keep in mind that ½ of the land mass of the State pays no property taxes at all. Comparing our property tax to other communities is difficult, in part because many cities allow citizens to claim residential property tax exemptions of up to $50,000 per year. Our island has no residential property tax exemption.

At a recent Borough Meeting I listed off the 15 tax and revenue increases passed on to Ketchikan citizens in recent history, they include:

1. Every citizen who pays sales tax, pays more each year due to inflation. That is tax increase #1.

2. Nearly every citizen who owns a home has their assessments go up, year after year, some significantly, and just this year our citizens and businesses are paying an additional $253,000 in property tax. That is Tax increase #2

3. The city just increased electric rates, and water and wastewater rates have increased by over 30% in recent years that is tax increase #3.

4. New tobacco, marijuana and school taxes that is tax increase 4, 5, and 6.

5. Required local contribution increases every year and is now $4.7 million, up over $155 thousand in the last two years. This is tax increase #7.

6. The State has imposed additional taxes on the community regarding tax liabilities/increases on the Shipyard, boats in our harbor, and regarding discretionary local contributions to education. This is tax increase 8, 9, and 10.

7. Between the City and Borough, numerous fees have been increased… we will lump these together and call this tax increase #11

8. Every citizen has lost more than ½ of their PFD for the last two years, tax increase #12.

9. Every citizen who earns a livable wage pays more for health care each year, with our local health care costs approximately 40% higher than the national average… this has the same effect as a tax increase, we will call this tax increase #13.

10. Many service districts on the island have seen mill rate increases recently, tax increase #14.

11. State stopped school bond debt reimbursement meaning our citizens now must pay 100% of school construction costs, tax increase #15

I am likely missing a few local and State taxes/fees that have been imposed recently, and I did not mention the City’s two property tax increases and sales tax increase that occurred years ago; however I think most get the point. Combine all this together and it begins to paint the picture of why housing/rent and the cost of living is so expensive in Ketchikan.

Unfortunately, things are likely to get far more expensive in Ktown for the following reasons:

1. State is going after homeowners with outfall septic systems; even though it was the State that pushed homeowners years ago to replace leach fields with outfalls. This will raise costs for many.

2. FEMA recently completed flood mapping for the island and will soon (if we can’t stop it) force many homeowners to purchase flood insurance. Recent cost estimates indicate this will add $3-5 thousand to the annual mortgage payment for up to 1000 property owners and pull millions out of the community. I’ve talked to seniors who told me it would take three months or more, of their social security payments to cover this cost, and many simply do not have the ability to pay this.

3. This is an election year, so State legislators won’t do anything productive with the state budget, except increase it. Early this session, legislators, including our own Rep. Dan Ortiz, were told by the state’s fiscal expert, David Teal, that they under funded last years budget by $116 million. Further, that there were only two possible reasons for such a large under funding; that they intentionally under funded to make it appear that the budget was reduced, and/or the experts managing these departments are essentially… incompetent. I’ll leave it up to you to decide, however, a shortfall during one budget year is paid with a supplemental budget the following year that is not added to the prior year’s total.

4. The budget the Democratic House Majority just passed (Ortiz voted yes) is $400 million higher than last year, and is likely under funded just like last year, meaning the actual budget increase this year is likely over ½ billion. On a side note, for all the income tax supporters, this years budget increase (so far) is about $150 million more than the state would receive under the Governor’s latest income/payroll tax proposal. My point being that when yearly increases, exceed the amount generated by an income tax by over $100 million, AND we still have a $2.5-2.8 billion deficit, then its clear our deficit is not a revenue problem… it’s a spending problem.

5. The borough has been concerned for some time that the State may increase local PERS/TRS costs for Borough/City employees and may increase the Required Local Contribution (State Tax) that is already pulling nearly $5 million (and rising) out of our community. Expect the shoe to drop next year after the state elections.

6. City budget issues.

You would think that after all of the recent local tax/fee increases and looming State taxes, declining population, etc. that it would be more imperative than ever to do everything possible to avoid additional taxes. This would seem especially true since we currently have a balanced borough budget.

However, and this is the part that continues to amaze me, just about every meeting of local government anymore contains some reference, by some individuals who want to tax you even more.

Last year when the borough deficit was nearly a million in the hole, I personally went through the budgets of all departments, to include spending a significant amount of time going through the yearly overtime budget of one department. I looked at everything for savings, including down to the dues and publication budgets for each department.
One area of unnecessary spending concerned publications posted in the local paper. At my request, staff researched and subsequently reported that approximately $26,000 per year of borough funds were being spent on unnecessary advertising, in the local paper.

Essentially, we were posting more notices than required by law and paying to print information irrelevant to most people. Examples would be printing multiple times per week, that the Assembly says the pledge of allegiance at the start of each meeting and that the Assembly must adjourn by 10pm, unless it votes to extend, etc. Each line adds cost and over the year this amounted to roughly $26,000 in extra spending. Additionally, it was possible to save even more by posting only the basics in the paper and referring readers to the borough website for additional information.

I made two efforts to reduce our publication costs and some small savings were approved, but most were rejected. All I was told was that about three years ago publication frequency was increased…no real reason given. Personally, my opinion is that a decision was made on some level to subsidize the paper, which has experienced declining circulation, with the additional postings. I suspect this is occurring at the City as well, but that would be a question for City Council members. Its worth noting that several years back legislation was submitted that would allow local communities to post more of their notices on line, vs. in the local papers. KDN came out publicly against this legislation and it ultimately failed in the legislature.

Anyway, my attempts to save tax dollars regarding publications seemed to cause tensions between me and the KDN and at one point I wrote a letter to the editor that in retrospect was a fight I probably shouldn’t have picked. I appreciate the KDN greatly, and they do a good job for us and I do believe we are lucky to have them. Ultimately, I had to accept that reducing unnecessary publication expenses is something I simply can not change in our current borough environment.

There are also savings/efficiencies that can be obtained in other areas, but these are topics where although you are allowed to ask questions, you are really not supposed to ask questions. Trust me, I have asked the difficult questions, in many cases repeatedly, but some simply refuse to answer or treat you with distain for the attempt. These areas have strong constituencies that in many cases take offense if questions concerning their operations/spending are asked.

So why am I writing this?...because local governmental spending and a community risk assessment needs to become a community discussion, fast. In addition to the concerns mentioned above, we have serious issues the public needs to provide input on to their local officials. Those topics include:

1. Housing affordability. Average rents and home costs are becoming cost prohibitive for many. I met many elders who have told me they are being priced out of Ketchikan. One told me how he spends an entire month’s social security payment on his yearly property taxes. Recently, I read this persons name in the borough’s foreclosure list… he is delinquent on his property taxes. My first thought upon reading this was my hope that he was not in the FEMA flood zone. Imagine this person who can’t afford his taxes now being hit with a $5000 expense for flood insurance (mandatory in a flood zone). We are pricing our seniors out of Ketchikan.

I also hear constantly how our young people are moving off island because they can’t find affordable housing, or are living 2, 3, even 5 to an apartment to share costs. We are pricing our youth off the island.

Other issues affecting housing affordability include the cost of developing subdivisions (roads cost about $2 million per mile), and the cost of available suitable land. We also are seeing more out of state buyers, purchasing 2nd homes and companies purchasing available housing for seasonal workers. This limits available housing, raising prices and rents.

Consider for a moment what housing cost in California 20 years ago and how significantly higher home prices over the years in that state led to expansion and cost increases in Oregon and Washington. As was mentioned to me recently, many who live around Seattle spend two hours or more commuting each day, while Ketchikan is only 1.5 hours away by plane. The point being that our little slice of paradise is looking more attractive by the day. We must take steps to keep locals from being priced out of our own community, the way many were in Seattle, Portland, many California towns, etc.

2. High housing costs contribute to many other problems such as homelessness. My personal opinion is we are on the cusp of this getting out of hand like it has in Seattle, Portland, California, etc. Currently we have two shelters (PATH/WISH), and one Warming Center that just closed down for the summer. This was the first year the Warming Center operated.

The Warming Center is essentially a shelter. It is called a warming center because the building utilized does not meet code for human habitation. As such, beds are not allowed and people sleep on the floor. Located downtown near the State building, this facility provided services for about 13 people per night and was funded by the City last winter (about $80k).

At a recent borough meeting, the director of the Warming Center made comments that suggest that a request for additional borough funding is forthcoming. As a result, I made a request at a Borough/City cooperative relations meeting to bring this topic up for discussion.

Here is where I see this going and why I believe we need to discuss this. I believe there will be a request to have the borough fund employee(s) at the Warming Center this fall and/or eventually expand this shelter year around.

I fully support and believe we have a duty to provide care to the homeless, however, once a shelter is in place it’s usually permanent. The current location is not ideal; if it were people would not be sleeping on the floor. Additionally, because the Warming Center allows the homeless to be intoxicated/impaired in the facility, it is being used by law enforcement as a “sleep off center” (for lack of a better word). 50% of those at the Warming Center are impaired. Don’t get me wrong, I fully support law enforcement and the need for a place to take impaired individuals to, I just think we need to have a community discussion on where that place should be.

My opinion is that our very small downtown core area, where most of our tourism related functions take place, is a really bad place to put a shelter for the homeless and impaired individuals from across the island. I realize by even suggesting this I will be called all sorts of names and vilified by some. However, the number one complaint many tourist dependant communities receive concerns the negative impacts of placing these facilities in the core tourist areas.

In the past several years, Hawaii changed its approach on homeless issues, from providing services in the core areas to identifying more suitable locations to protect the ability of the state/community to generate the revenue necessary to address homelessness and other community needs. Hawaii passed Sit/Lie laws and moved homeless to shelters outside their primary tourist areas. This lead to an 85% reduction of homelessness in some areas.

My suggestion is to utilize the vacant youth center, currently owned by the city, that was designed for the safe care of high risk individuals. The location is ideal, close to the city and bus lines, kitchen services could be provided on location, and beds could be provided. A far safer location for intoxicated individuals. This provides needed services while maintaining the communities’ ability to foster a tourism industry that pays the bills, including those associated with homelessness.

It’s important to let your elected officials know your thoughts on this before the warming center/shelter becomes permanent.

3. Another pressing concern that needs immediate community input is crime. I remember years ago when long periods of time would elapse between serious violent crimes. Yet, in just the last two years this region has experienced multiple homicides. We have also recently had the largest heroin and meth drug busts in Ketchikan history, a string of commercial and residential burglaries, violent assaults, increased car thefts, etc. Most law enforcement would tell you that 20% of the criminals commit 80% of the crime, and due in large part to SB91 that 20% that should be in jail are out committing crime after crime. Consider for a moment all those you read about in the paper who are arrested for new offenses while out on bail. This is something Rep. Ortiz needs to work on ASAP and push for a full repeal of SB91.

4. Taxes. We are at the limit of what we can pull from the community without driving out more citizens and businesses. Consider the millions in new taxes and expenses that are being imposed on this community, how many jobs that will cost, and the effect on our cost of living.

The last thing we should do is increase taxes; however some elected officials are actively working to raise your taxes even though our budget is currently balanced. The current plan supported by some is to raise the sales tax cap from $1000 to $2000. They will claim that the cap has not been raised in many years, has not kept up with inflation, etc. as justification.

Here is what you should consider regarding the cap. First, you pay more in sales tax each year due to inflation already. That basket of groceries that cost you $100 last year will cost you about $103 this year. As inflation goes up, your sales tax goes up. Additionally, the largest single area that will be affected by raising the cap is the cost of hiring contractors. Businesses who fix your plumbing, the workers who replace your roof, fix your electrical, etc. will be required to collect additional taxes if the cap is raised, raising the cost of home repairs. This accounts for 25.06% of all charges above the tax cap.

The next largest segments affected by raising the sales tax cap are manufacturing, food, and transportation. Think about the fishermen who purchase large amounts of food/supplies prior to their trips, or places like Madison where locals purchasing supplies can easily exceed the current $1000 cap, or even the cost of car repairs. Raising the cap hits locals and businesses the hardest and is yet another incentive for people to buy on line or out of state. Retail, jewelry and curio only account for 10.69% of the total. Most tourists do not spend more than $1000 on a single transaction, meaning that most of the funds obtained from increasing the cap will come from locals.

In closing, government is run by people that show up…and speak up. I realize how hard this community works and how many people simply don’t have the time to attend borough meetings. However if you fail to let your elected officials know your thoughts, those that show up and ask for ever increasing amounts of funding will likely get it.

If you have comments or concerns for me, including feedback on how I can do better for you as a Borough Assembly person, please email me at rodney.d@kgbak.us

Rodney Dial
Ketchikan, Alaska

About: Rodney Dial is not speaking on behalf of the Ketchikan Borough Assembly in this letter to the Editor.

Editor's Note:

The text of this letter was NOT edited by the SitNews Editor.

Received April 03, 2018 - Published April 04, 2018

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