Seward budget would end winter sales tax and set a 6% summer rate as hearings begin

The Seward City Council opened the first of three public hearings Monday on a two-year budget that would set the city sales tax at zero in winter and 6% in summer starting in 2028. The city rate stays at 4% year-round through 2027, according to the agenda statement. The borough's 3% sales tax does not change.

City Manager Kat Sorensen said about 81% of taxable sales happen in the second and third quarters, so the summer rate drives revenue. She estimated the seasonal tax would bring in $1.67 million more in fiscal 2028 than in 2027.

The plan would also cut the property tax rate by one mill in 2028, from 3.64 to 2.64, and add a $75,000 primary homeowner exemption. Sorensen estimated the two together would cost about $650,000. The council took no vote Monday.

Council members questioned the property tax cut at an October work session. On Oct. 28, Sorensen floated cutting electric rates in 2028 instead, by eliminating a $678,000 administrative fee the electric department pays into the general fund. The budget before the council Monday keeps the property tax cut.

The new revenue would also cover $350,000 a year in hospital capital support, a second police sergeant, an IT technician, a maintenance and street worker, community center costs and a $200,000 pool contract the city took on after the borough said it would stop funding the pool. With the tax changes, those costs total about $1.85 million, and Sorensen said other cuts and adjustments close the gap. A one-time transfer from the campgrounds and parking fund would cover fiscal 2027.

Because the borough already exempts groceries except in June, July and August, Sorensen said winter grocery purchases would carry no sales tax. She estimated a family of four spending $15,000 a year on groceries would save about $150 a year.

Six people testified. Tom Tougas challenged the need for new revenue. "The sales tax in 2025, if you look on page 68 of the budget, came in at $2.2 million more than was in the budget," he said. He said city cash and investments grew from $60 million to $70 million over three years.

Another resident asked the council to exempt groceries from September through May and drop sales tax on heating oil and home utilities.

Council member Casie Warner raised a new exemption. "I would like to see perhaps a $75,000 property tax exemption for anyone interested in converting short-term rentals into long-term," Warner said. Council member Lori Draper said a primary-home exemption need not stop at $75,000.

The sales tax and exemption changes need separate ordinances, which Sorensen said will be introduced at the next meeting. Final action is set for Dec. 14. Residents can testify at the two remaining hearings before then.