Seward council members question proposed property tax cut, float exemptions instead

Seward City Council members on Tuesday questioned a proposed 1-mill property tax cut worth about $500,000 a year, which city administration has tied to a new seasonal sales tax starting in 2028. Some members asked whether the money could instead help year-round residents and renters, and a local prevention coalition asked that it fund programs for families with young children.

Alaska News reported Oct. 24 on the proposal, which would replace the city's year-round 4% sales tax with a 6% city sales tax from April through September and 0% the rest of the year. City Manager Kat Sorensen said the plan rests on three votes: the two-year budget, an ordinance setting the seasonal sales tax and an ordinance lowering the mill rate.

Council member Casie Warner supported the seasonal sales tax but not the mill rate cut. She pointed to a new state law, which took effect Sept. 20, that lets cities exempt owner-occupied homes and short-term rentals converted to long-term rentals. "I'm wondering if there's a different way to maybe look at that where we could potentially keep that 1 mil rate inside city limits, but allow for some property exemptions around primary residences," Warner said.

Council member Lori Draper said the law deserves a closer look. She said the state previously allowed only a $75,000 homeowner exemption, which needed a public vote and which the Kenai Peninsula Borough offers but Seward does not.

Another council member said a property tax cut would mainly benefit property owners, not year-round renters or lower-income residents.

A representative of the Seward Prevention Coalition said the group had planned to ask the city to put a 1% seasonal sales tax for child care and prevention before voters, then shelved the idea when the city proposed its tax overhaul. She asked the council to table the cut and consider a children's fund instead. She said local youth drinking fell from 33% in 2019 to 13% in 2024 and 7% in the coalition's most recent data.

Sorensen said the rest of the city's property tax revenue goes to debt payments, so any new exemptions would have to replace the proposed cut rather than add to it. The proposed budget shows the cut only in 2028, lowering the mill rate from 3.64 to 2.64 (a mill equals $1 of tax per $1,000 of assessed value). Sorensen said the council could revisit the cut in a mid-cycle budget adjustment and that she would check with the city attorney on whether exemptions can now be set by ordinance.

Public hearings on the budget and the two tax ordinances are scheduled for Nov. 9 and Nov. 23, with a final vote set for Dec. 14.