Soldotna's reserve fell $900,000, report says, as mayoral leader seeks to undo sales tax

Soldotna's discretionary reserve fell about $900,000 in the fiscal year that ended June 30, leaving $4.07 million in the General Fund, the city's main operating account, for the City Council to spend at its discretion, according to a report City Manager Janette Bower prepared for the council's Nov. 12 meeting.

The report comes as Chuck Winters, who campaigned on reversing the sales tax increase the council passed in May, leads Mayor Paul Whitney in unofficial results from the Nov. 3 election.

An outlook shown at a March 25 work session put the reserve at $4,973,345 a year earlier. The new report puts it at $4,072,897, down 68% in five years. The total General Fund balance, $12.1 million, is down 37% since fiscal 2021 and from a 2013 peak of $20.9 million. The report cites "the City's continued investment in capital projects and community infrastructure and increased operating expenses." All fiscal 2026 figures are unaudited; the audit is due in December.

The report conflicts with itself on fiscal 2026. A summary says expenditures exceeded revenues by about $924,722 before capital transfers. The finance department's Sept. 23 statement shows revenue exceeding spending by that amount before transfers, so the summary appears to reverse the direction. The city has not confirmed the discrepancy.

The report says the Alaska Municipal Bond Bank Authority and its adviser, PFM, indicated future city bond issues "may receive increased scrutiny" unless the city shows fund balance growth or more revenue for debt service. The same sentence appeared in the March document, before the council voted on the tax.

At that session, according to a recording, Bower said the bond bank unanimously approved the second installment of Field House borrowing but "did kind of send a warning." She said she told it the drawdown was for projects that benefit the community.

The November report says the trends "do not indicate an immediate concern" and that its purpose "is not to suggest the City is in financial distress."

The council enacted the increase May 13 on a 5-1 vote, raising the sales tax from 3% to 3.5% on Jan. 1, 2027. The 3% rate had been unchanged since 1984. Staff estimated in March the increase would raise about $1.7 million a year. It applies to the first $500 of a sale, adding at most $2.50.

Council member Dave Carey, the lone no, said, "I would like to see a vote of the people." Whitney, who votes only in a 3-3 tie, said he supported it and, of the ice arena, "if we don't do it, there won't be any ice." Nick Sorrel and three others testified against it, according to the minutes. Sorrel said residents were "repeatedly assured that taxes would not need to be raised" for obligations such as the Field House bond. One emailed comment supported the increase. Bower said the city doesn't want to cut services.

Tax Becomes Campaign Issue

Unofficial results show Winters leading Whitney 422 to 386, excluding absentee, questioned and special needs ballots. In the borough voter pamphlet, Winters wrote that he would have vetoed "the recent tax resolutions" and added: "I want to reverse the new sales tax increase and get back to the basics of living within our means."

A new mayor could not reverse the increase alone. Two-thirds of the council can override a veto. All five council members who voted yes stay on the council if Nelson's Seat B lead holds.

Reversal would take a council vote or a voter petition. The charter allows initiative and referendum as state law provides, but the Alaska Constitution bars initiatives from dedicating revenues and referendums from applying to revenue dedications. The ordinance both sets a rate and dedicates the money, and city records do not say how that limit applies.

The Dedicated Fund

The half-cent goes to a dedicated fund for capital projects and related debt, not "ongoing operating expenses," the report says. It argues the tax preserves "flexibility in future borrowing" but does not say whether the money meets the bond bank's condition.

A May 27 draft 2027 budget projected $854,000 into the fund for the first half year and, separately, a $1.7 million General Fund decrease. The council enacted the budget June 24 with changes, so final figures may differ.

The Ice Arena

The report's preliminary estimate to replace the arena's refrigeration is $5.7 million, up from $5.3 million in March. It says the system uses R-22, "no longer produced or imported in the United States," and that a failure could cost the ice sheet. The rink nearly lost its ice at least once this year, the parks director said in October.

The city has set aside $450,000 for design. Construction money needs a future council vote. In March the city estimated a 30-year refrigeration bond at about $350,000 a year and said borrowing "may be more challenging to obtain given current financial trends."

What Happens Next

The city's Canvass Board meets Nov. 10. The council meets Nov. 12 at 6 pm to certify the results and swear in newly elected officials. The financial outlook is part of the city manager's report, not an action item.