Petersburg sees early revenue gains after senior sales tax exemption removal

Petersburg Borough Finance Director Jody Tow told the assembly Thursday that sales tax collections rose by $26,000 in January and $22,000 in February compared to the prior year. The increases came two months after the borough removed the senior citizen sales tax exemption.

Tow said sales exempted for seniors dropped from $527,000 in January 2025 to $74,000 in January 2026. She cautioned that some January 2026 senior-exempt sales may reflect December 2025 transactions that were not billed until January. She said she expects the exempted-sales total to drop to around $50,000 in future months.

The full revenue impact remains uncertain. Tow said some senior purchases that previously used the senior exemption may now fall under the borough's general $1,200 sales tax cap exemption. She said it is too soon to forecast the full effect of the exemption removal.

The borough removed the senior exemption as part of a broader effort to balance the fiscal year 2027 general fund budget without drawing on reserves. Property tax is at the 10-mill cap for operations in Service Area 1.

The assembly will consider raising the $1,200 cap at its second meeting in May. Tow said businesses exempted over $25 million in sales in 2025 due to the cap. Tourism-related purchases accounted for a significant share.

Petersburg's $1,200 cap is the lowest in Southeast Alaska. Ketchikan's cap is $2,000. Wrangell raised its cap to $5,000 last year. Juneau's is $10,000 or higher.

The assembly will hold three readings on the fiscal year 2027 budget. Final approval is scheduled for June 1. Any sales tax cap increase must go to voters.