Kenai passes 2021 budget with no new taxes

May 27, 2020

Last week, the Kenai City Council passed its budget for fiscal year 2021. Despite the upheaval due to the coronavirus pandemic, the budget is close to status quo, with no property or sales tax increases included.

That’s in part because the city will use some of its fund balance to cover the difference between revenues and expenses, with the general fund using about $757,000 of it. The property tax rate will stay at 4.35 mills, though, the same rate it has been for the past several years.

Kenai’s fund balance policy requires them to balance the budget within three years, but they can still do that despite using fund balance this year, said city manager Paul Ostrander.

"We were able to do that even though we did utilize fund balance during this fiscal year, but the council felt very strongly that during these trying economic times that increasing taxes either through sales or property tax was something they were not interested in doing," Ostrander said.

One place that will bring in some extra revenue is in airport land and facility leases and rent. The city also operates Vintage Pointe, the senior housing facility on the bluff. A consultant report on market rate rentals the city commissioned found that both the senior rentals and the airport properties are going for below market rate right now. Both will see rate increases in the coming fiscal year, with units in Vintage Pointe going up $35 per month for the year, and again in future years until they reach the market rate.

The city is due to receive about $7.7 million in pandemic relief funds over the next two years as well, though it’s currently restricted on how it can be used. Some can be used to pay for operations like firefighter and police salaries, but otherwise, it can’t currently be used to replace lost revenue. About $1 million can be used for resilience and recovery, which includes capital projects and expenses specifically to mitigate the pandemic crisis.

Municipalities all over the state are expecting shortfalls in sales tax revenue due to the economic shutdown that began in March. Kenai’s no exception. Ostrander said revenue was up from January through March this year, surprisingly enough.

"Our sales tax was actually up 11 percent year over year, which was quite surprising," Ostrander said. "[Finance Director Terry Eubank’s] estimates were that we were going to see a reduction in sales tax during that quarter, but we saw an 11 percent increase. The next quarter, almost certainly we’re going to see a reduction from year over year."

As the summer goes on, though, the city might start to see a more significant dropoff in revenues unless tourism ramps back up. The main thing stopping tourists from coming is the governor’s mandatory fourteen-day quarantine for out-of-state visitors. With other business restrictions being lifted, the Kenai City Council passed a resolution asking the governor to lift the interstate travel quarantine mandate and find another way to get visitors here safely.

Council member Robert Peterkin said there are a number of other methods being used to move travelers around without risk of outbreaks. The resolution is just a request to the governor, but could help Kenai’s tourism industry.

"We have just countless amounts of fishing guides, hotels, restaurants… I know the brewers with Alaska West Air, everybody… this is devastating," Peterkin said. "People are cancelling reservations daily. It is something that is within our realm of control as a state to try to get visitors here safely without quarantining. And there are safe ways to do it."

More information and the full FY 2021 budget is available on the City of Kenai’s website under the Finance Department.

Reach Elizabeth Earl at