Cordova council advances 14% tax on lodging, rentals and alcohol on first reading

Anyone renting a room, a car or a skiff in Cordova would pay a percentage point more under a tax increase the Cordova City Council approved on first reading Wednesday. The rate on those purchases would rise from 13% to 14%. Mayor Miles Smith said the tax is aimed mainly at nonlocals, though it applies to any qualifying purchase regardless of who buys it.

The increase also covers marijuana and marijuana products, cigarettes and other tobacco products, and alcoholic beverages. Cordova levies a general 7% sales tax plus a 6% surtax on those categories. The council adopted the measure by voice vote with no opposition heard.

Sales tax collections, including surtaxes, are running about $250,000 behind where the city stood at the same point last year, Smith said in reporting second quarter figures. "Our sales tax, including surtaxes, is looking at about $250,000 less than where we were this time last year," Smith said. Third and fourth quarter are typically the city's largest.

Smith said the increase would reach his own business, and he backed it anyway. "I do understand that this tax is focused mainly on folks that are not locals in Cordova," he said. He added that it lands on excess items and that "Cordova is desperately in need of a revenue increase." He also warned against relying on the tool again. "We cannot tax our way out of issues, and we need to stop taxing things and figure out a different way because businesses will not be able to function if people don't come because we price them out," Smith said.

The ordinance as introduced covered motor vehicle rentals "excluding watercraft." Skiff and boat rentals would have stayed outside the 14% rate. A council member moved to strike "excluding" and substitute "including," arguing that skiff and boat renters draw on the same visitors. The amendment carried. Smith questioned whether it would collect anything. He said most skiff rentals in town are attached to bed and breakfasts or arranged privately rather than by licensed rental companies.

Cordova lodging and tourism operators have raised concerns in city work sessions about the community's existing sales tax and surtax structure, already at the higher end of Alaska rates. They said further increases make the destination less price-competitive, which could reduce visitor demand and undercut the revenue the changes are meant to raise.

The move fits a broader pattern in Alaska, where local governments are revisiting taxes on lodging, alcohol, tobacco and marijuana to find new revenue in the absence of a statewide sales tax.

Alaska News previously covered Cordova's decision in June to hold its property tax mill rate flat at 11.44 mills, and council warnings that a weak salmon season could squeeze winter services.