Property and sales tax revenues are up and the Kenai Peninsula Borough plans to spend more on education and borough staff.
That’s according to the borough mayor’s proposed fiscal year 2023 budget, presented to the assembly at Tuesday’s meeting.
It’s the money the borough will use to cover its expenses for the year starting July 1. And it’s a deficit budget — meaning the borough would spend about $6 million more than it’s taking in.
“This is in the hands of our mayor and hopefully he can take care of those things,” said Assembly Member Tyson Cox on Wednesday. Cox chairs the borough’s Finance Committee, which has been holding day-long worksessions on the budget.
He said the mayor’s office has mentioned that money from the state and feds could help. Otherwise, he said, the borough has the money it needs in its bank account to cover that gap.
“And so it’s not that we don’t have the money to make the budget, we will have the money,” he said. “It will just leave a little less money in the bank.”
Revenues
A good chunk of the borough’s general fund revenues come from property tax — about 48 percent. Another 44 percent come from sales tax.
And the borough says both of those are up this year. The higher property taxes have to do with higher assessed values on homes.
Borough Finance Director Brandi Harbaugh said sales taxes have come in higher than expected, too, partly because of a resurgence in the economy since the pandemic. Inflation and online sales tax also helped this year.
Expenses
At the same time, the borough is looking to spend more this year than it did last year.
On the expense side, the biggest slice of appropriations goes to the Kenai Peninsula Borough School District. That’s about 66 percent of the borough’s budget this year.
And the borough administration proposed funding the school district at about $52.5 million for its operations. That’s the maximum amount it can contribute.
There’s an additional $5.25 million written into the budget for capital projects — including construction of a new school at Kachemak-Selo. The borough cites the substantial increase in sales tax revenue for that, since 100 percent of it goes to education.
That full funding is a big change from last year, when the district and the borough were long at odds over whether or not to fund the district to the cap. This time, there was little fanfare over those appropriations at Tuesday’s meeting and at worksessions.
Separately, the assembly is considering putting a$65 million bond package to voters to address school maintenance costs. The bond package has already been improved by the district’s Board of Education.
Personnel costs are also up for the borough, due to a proposed new 14.5 full-time equivalent positions — a larger increase in staff than usual. Most years, the borough adds two or three positions across the borough and its service areas.
Borough Mayor Charlie Pierce said that increase is to accommodate the borough’s growing needs.
“I’ll say that for the last five years, we’ve said ‘No, no, no,’” he said. “The only sector that has actually gone up has been emergency services and public safety.”
He said this year, he wanted to make sure the borough had the personnel it needed to support existing staff amid high turnover and vacancy rates. He said he sees adding positions as a way to increase efficiency and save costs long term.
“I’m not an advocate or a proponent of growing the government,” Pierce said. “And I really don't think that the positions that we’re adding here were done in a way to grow government, but done in a way to center more efficiencies and savings.”
Another big spending area for the borough is its solid waste expenses. Appropriations for that are down this year from last, though the borough is purchasing a $3 million evaporator to deal with its ongoing leachate problem.
That’s a one-time expense that will be covered by grant funds, Harbaugh said, and it was not included in the FY2023 budget.
Mill rate
Another takeaway from the proposed budget is that residents will likely see a small change in their property taxes. The general fund property tax rate is decreasing about .2 mills, to 4.50 mills.
Pierce said that .2 mills is worth about $1.8 million for the borough. He said the intent is to mitigate some of the increased expenses for borough residents.
“Whereas the property tax went up, we could afford to give some of it back to you as a taxpayer because of our fund balance being in a favorable position,” he said.
The mill rate decrease could make a difference of about $60 a year for someone with a $300,000 property. The assembly has to vote separately on any changes to a mill rate.
Now, it’s time for the assembly and borough residents to take a look at the mayor’s proposed budget.
There will be an opportunity for the public to weigh in at the next Kenai Peninsula Borough Assembly meeting, on June 7, before the budget is finalized.
Read the mayor's proposed budget here:
