The Mat-Su Assembly voted 6-1 Tuesday to overturn a veto issued by Borough Mayor Talis Colberg that would have kept a combination sales tax/property tax cap measure off the October municipal ballot.

Colberg issued the veto last week after the Assembly voted 5-2 in favor of putting the measure on the ballot. At the time he said he didn’t believe the measure accomplished the goal of being “revenue neutral,” meaning most voters would pay the same total amount of tax. Colberg said it might remain revenue neutral for the first year, but as property values rise, benefits of a property tax cap and rebates on assessed value would fade.

Assemblyman Mark Ewing cast the lone vote supporting Colberg’s veto.

The measure headed to the ballot is three-pronged. It includes a three-percent sales tax on up to $1,000 – so a shopper would pay $30 on a $1,000 flat-screen television, but only if they bought it outside the city limits of Wasilla, Palmer or Houston. Inside those cities, shoppers will pay city sales tax plus the borough tax, if it passes.

Wasilla currently has a 2.5-percent sales tax, Palmer has a 3-percent sales tax and Houston a 2-percent sales tax.
In exchange for paying sales tax, property owners would get a 7.3-mill cap on property taxes. Borough residents now pay 9.98 mills, or $998 per $100,000 of property, as valued by the borough assessment division. The cap would limit that bill to $730 per $100,000. On the average home, which the borough says is valued at $209,000, the savings would be $561.

On top of the tax cap, the borough Assembly added a $20,000 rebate on assessed property value, a perk that applies only to taxpayers’ primary residence. With the rebate, that $209,000 home would be considered a $189,000 home for tax purposes. Coupled with the tax cap, the savings adds up to $706.

Fire and road service area taxes would not fall under the tax cap.

Borough economic development director David Hanson estimated the average family spends about $20,000 each year on taxable items. Under the sales tax, the family would pay about $600 in borough sales taxes. That doesn’t include the amount residents would pay for city sales taxes.

Assembly members Cindy Bettine and Pete Houston sponsored the measure in an effort to diversify the sources of borough revenue. Currently, property taxes bring in about 74 percent of the revenue for general borough operations.

City officials have opposed the measure, saying they believe it will drive shoppers to Anchorage and cripple their budgets. Additionally, if the measure passes, the borough would take over tax-collection duties.
“The city has no guarantee when it’s going to get paid back from the borough. The city’s bond rating is going to go into the toilet,” Wasilla Mayor Verne Rupright said at a July 21 public hearing on the issue.