The Fairbanks City Council is scheduled to vote tonight on a proposal to increase the alcohol sales tax rate to 6% from 5%.
The council’s meeting starts at 6:30 p.m.
The raise could bring additional income to the city budget and lessen property owners’ tax burden, but only under certain conditions, officials said.
Councilwoman Shoshana Kun, who introduced Ordinance 6140, said the tax could generate as much as $467,000 for the city. However, the city’s tax cap would force the property tax to lower by the same amount in 2021.
“This is a one-time attempt to generate revenue for the city and also potentially lower the property tax for the property owners,” Kun said.
The increase would, if approved, take effect Jan. 4 and be the first alcohol tax hike in over 35 years.
Councilman Jerry Cleworth opposes the measure, explaining that raising more taxes next year would be above the city’s tax cap, the maximum amount of tax revenue Fairbanks can collect yearly. Adding alcohol tax in 2021 will lead to lowering the property tax, evening out the city’s total income.
“With the start date in January, the ordinance has no effect on the revenue for the city of Fairbanks,” Cleworth said.
Kun said she is considering introducing an amendment tonight that would move the ordinance start date up to October 2020 to allow the city “to collect funds that are currently not being collected.”
If the ordinance is instituted before the end of 2020, it will bring additional money this year and raise the 2021 tax cap, but it still won’t change the next year’s revenue and will only benefit the city budget as a one-time increase.
“A lot of work for a very little gain,” Cleworth said.
While collecting additional taxes would lower the property tax and reduce the tax burden of the property owners, it would also hit the hospitality industry, already under the blow during the COVID-19 pandemic.
“I think the industry is going to come in force on Monday and speak up about it,” Cleworth said.
On Aug. 24, the City Council had the first hearing on raising the alcohol tax, where council members voted to advance the measure to a public hearing. Aaron Gibson, Valerie Therrien, June Rogers and Kun voted for advancing, while David Pruhs and Cleworth voted against it.
At tonight’s meeting, City Council members will hold a public hearing and the final vote.
Up to 30 members of the public can attend the meeting in person, with the requirement to wear a mask or a face covering. People can also listen to the meeting live and submit their testimony online or via phone by signing up in advance on the City Council’s website at www.fairbanksalaska.us/citycouncil.
Contact staff writer Alena Naiden at 459-7587.