Seward proposes a 6% summer-only sales tax and a property tax cut for fiscal 2028

Seward's city administration has proposed replacing the city's year-round 4% sales tax with a 6% rate from April through September and no city sales tax from October through March, starting in fiscal 2028.

The plan, in a two-year budget posted Saturday, would also cut the property tax rate.

For a year-round resident, the seasonal rate averages about 3% across the year, the administration says, and the change "Shifts the burden from year-round residents to seasonal visitors."

City sales tax would bring in about $10.9 million in fiscal 2028, up 25.6% from $8.7 million in 2027, according to the budget reports. Property tax revenue would fall 23.1%, from $2.1 million to $1.6 million. About 81% of city sales tax already comes in from April through September.

The Kenai Peninsula Borough's 3% sales tax and its $500 cap on a taxable purchase, trip or lodging night would still apply all year. The borough already exempts groceries from October through March, so groceries would carry no sales tax at all in winter.

The administration points to rising heating oil and other costs, a subsidy that keeps the pool open, and new costs with no new revenue from turning the former middle school space into a community center. The budget also passes $750,000 a year in fiscal 2027 and 2028 to Providence Seward Medical Center for capital infrastructure.

General Fund spending would total about $19.2 million in fiscal 2027 and $19.7 million in fiscal 2028, up from $18.5 million budgeted this year. The administration calls fiscal 2027 a bridge year, covered by a larger transfer from the Campgrounds and Parking funds. "It is a bridge, not a consistent, sustained revenue source," the presentation says. The General Fund balance is projected to fall from $13.4 million at the end of fiscal 2025 to $11.5 million at the end of fiscal 2028, inside the city's policy range for reserves.

The city says it is waiting until 2028 because visitors book a year ahead, businesses need time to update booking and payment software and prices, and the borough, which collects Seward's sales tax, needs lead time.

Of the 247 people who answered the city's budget survey, 38% said they would most likely support a higher bed tax, the city's tax on lodging, and 24% a seasonal sales tax. The administration chose the seasonal sales tax, saying it spreads the cost across the tourism industry. Juneau voters this month approved adding 1% to their sales tax from April through September, for a 6% summer rate, a year after rejecting a different seasonal tax.

The City Council will review the budget at four public work sessions, Oct. 26 through 29, at 5:30 pm at City Hall. Because the 4% rate is written into city code, changing it would take an ordinance, and none is on the council's Oct. 26 agenda. Under the city charter, any council act can be put to a referendum.