During Tuesday’s meeting, city council tackled big topics in work session. Utility rate increases and revisions to the sales tax code generated significant discussion.

Utility rates will rise at least 50 percent
Mike Hubbard, of the Financial Engineering Company, teleconferenced in to talk to council about paying off massive overhauls of three utilities. He’s given a similar talk before. But this time, Hubbard provided a clearer picture of what the new utilities might cost consumers.

Hubbard says monthly bills will increase by at least 50 percent -- and that’s on the low end. If the city chooses not to raise property or sales taxes, bills could go up by as much as 80 percent.

Council supported keeping utility rates as low as possible. If the city holds down rates, Hubbard says they’ll have to raise the sales tax by at least 0.3 percent, to pay off interest on state loans. He recommended that the city not pay for utilities with higher property taxes. And he said that there could be a tradeoff between holding down rates and repaying the general fund, which will cover some construction costs.

Hubbard said that if the city raised the sales tax by about 1 percent, they could put the additional revenue in a fund to pay for future improvements.

Councilor Roger Rowland warned against raising the sales tax too much. He said that fishing boats and industry provide a lot of the city’s tax revenue -- mostly from fuel transactions. Rowland said they’re already struggling with higher fuel costs.

"I just want people to keep in mind that it’s going to be fishing industry as a whole that’s going to bear most of this burden. But having said that, we need to keep rates low to keep the use up."

Council didn’t put the utility rates to a vote. Mayor Shirley Marquardt said that council will return to the issue in late November at a special, standalone meeting.

Changes to sales tax code on the table
City clerk Elizabeth Masoni walked council through some preliminary revisions to the sales tax code. Right now, most businesses collect the city’s 3 percent sales tax and turn it into the city four times a year. But if they choose to turn in taxes every month, Unalaska lets them keep 2 percent of the tax they collected.

"We went back and did some research, and we found that it was costing the city $185,000, just for the top five businesses that collect sales tax," Masoni said.

Masoni suggested that businesses with a quarterly tax liability of $5,000 or more be required to turn in their taxes every month. She said the city should still give bonuses to businesses with less tax liability if they decide to turn in taxes every month. She said the bonus should be capped at $100 per month.

Masoni also said the city should consider bringing back special tax exemption cards. Until 2003, a business owner could show that card to local merchants to avoid paying taxes on items they planned to resell in the community. The city eliminated the cards because some business owners were using them to avoid paying taxes on goods they were going to keep, like household items.

Masoni said there’s less fraud, but more red tape for business owners.

"Everybody has to pay sales tax, everybody has to charge a sales tax," she said. "And if they want the money back for an exempt transaction, they have to fill out paperwork and wait for the city to manage that paperwork and get the money back to them."

Masoni said Unalaska could bring back exemption cards that are specific to each business’ line of work to prevent fraud. Council had concerns about some of the specifics, which Masoni will bring to the city attorney.

Council approves grants, raises, foreclosures
Council voted to tweak the language in their acceptance of a $4 million grant from the Alaska Department of Environmental Conservation, which will go to the new wastewater utility. They also voted to grant Chris Hladick a 3 percent cost of living raise. Council voted to let the city hire Alaska Mechanical, Inc. for upgrades to the pool fan room at the aquatic center. The contract is not to exceed $376,998.

Council also authorized Masoni to start foreclosure proceedings on 17 properties. The property owners owe the city about $45,000 in back property taxes. Masoni says the city attorney will file the foreclosure in Unalaska superior court in a few weeks. Property owners will have a year to pay off their taxes and fines before losing their land.

And lastly, city council voted to send the mayor and councilor Rowland to the North Pacific Fishery Management Council in Anchorage on December 3-7. Rowland will attend if his schedule permits.

All of those votes were unanimous.