Petersburg voters to decide on sales tax cap increase in October

Petersburg Borough Assembly voted 6-1 on Monday to send a sales tax cap increase to the October 6 ballot. The measure would raise the single-purchase cap from $1,200 to $5,000.

If voters approve, the maximum sales tax on one transaction would jump from $72 to $300. This would be the second time the cap has changed since 1959.

Finance Director Jody Tow said about $25 million in sales escapes the current cap each year. Raising it would capture more visitor spending during tourism season, she said.

Assembly Vice Mayor Stanton Gregor, who requested the ordinance, said the increase would help fund borough services, including the school district, while keeping Petersburg's cap the lowest in Southeast Alaska.

"We are increasingly becoming a visitor-focused economy, which is great," Gregor said. "Leaving uncaptured dollars, especially from our out-of-town and out-of-state visitors on the table, seems like low-hanging fruit we should grab onto."

The proposed $5,000 cap would match Wrangell's and remain below Juneau's $15,000 cap and Sitka's $12,000 cap. Petersburg's sales tax rate is 6 percent.

Assembly Member Matt Schwartz said local businesses would see more revenue from the increase than tourists would generate.

"The main income is going to come from hundreds of thousands of dollars worth of business and purchases in town," Schwartz said. "The visitor thing will be like a little bump."

The measure failed by about five votes two years ago. After that defeat, Wrangell's assembly raised its cap from $3,000 to $5,000 without a public vote, Tow said. Wrangell also has a 7 percent sales tax, compared to Petersburg's 6 percent.

Assembly Member Tony Newman cast the sole dissenting vote Monday.

The ordinance returns for a public hearing and second reading on June 1. If approved, the measure appears on the October 6 regular election ballot.