A special election on Tuesday will be asking Skagway residents to decide whether to increase the local sales tax. The extra revenue would allow the municipality more funding flexibility, but some residents think it is not the right time to impose more costs on businesses.

The first question on the ballot in Tuesday’s special election asks if the sales tax collected in Skagway should be increased from 5% to 6.5%.  

The tax applies to sales of goods and services, including rents.

Skagway Mayor Andrew Cremata says if voters choose to increase the tax, the municipality will have more flexibility in funding.

Cremata: “Sales tax money can be used to fund all sorts of different things. You can be very liberal with how the money is spent. That is why the general fund is so important, it’s a general fund. So increasing the amount of money in the general fund potentially allows the municipality more latitude when it wants to fund capital projects, subsidize the school, subsidize the clinic, etc.”

A group of business owners, calling itself the Skagway Business Association, wrote a letter to the assembly. In it they stated their opposition to the tax increase. They cited two straight years of severely reduced or zero income from the pandemic, then last year’s reduced income due landslides that forced the closure of one of the docks. Now, they say, is not the moment to raise taxes. The letter paints a picture of vacant buildings, closed businesses, and devalued properties. The association’s message to the community is this: “Please focus on bringing full-scale tourism back to Skagway and leave the tax at 5%”

Kristine Harder owns a store on Broadway. She says customers are watching their expenses in Skagway.

Harder: “By the time tourists get to Skagway, they have already shopped in Ketchikan, Juneau, other ports.”

Skagway’s current 5% tax is low compared to some other communities. Sitka’s is 6%. Ketchikan’s is 8% during the tourism season. 

Harder: “A number of businesses in Skagway have told me that they use that hook, that we have the lowest taxes in Southeast Alaska, to make their final sale. So when people are trying to make a decision, they are sitting on the fence, that is what they say to close the deal.”

Skagway recently took possession of a cruise ship dock after leasing it for decades to a private company. Some of the opposition to the sales tax increase rests on the assumption new income from this dock will provide ample revenue to the municipality.

Skagway Assemblyman Dan Henry disagrees. He supports a tax increase.

Henry: “The revenue that is going to be generated by the port is a long way down the road. As a matter of fact we are going into debt presently trying to put everything together down on the port.”

Henry says the increase could bring in about an extra $1.5 million to the city. He lists some reasons he wants to see more sales tax revenue. 

Henry: “Services within the city are subsidized by sales tax, and as everyone knows budget cycles over the last year and a half/two years have been strained. We subsidize the school, the clinic, EMS, fire department, police department, and a myriad of other things. Actually raising the sales tax to 6.5 just gets us really in line with a good part of Southeast Alaska and the rest of the state.”

Henry said the school would benefit from greater funding.

Henry: “We were strained heavily to fully fund the school,  which we did not in all areas, which we would in the future with additional revenue streams, i.e. a marginally higher sales tax.” 

The 2023 budget estimates the sales tax at the current 5% rate will bring in around $5.4 million. Sales tax revenue in 2019 was closer to $9 million.

Mayor Cremata encourages all residents to vote in the special election..

Cremata: “Get out and vote. We have important issues involving the clinic, we have this important issue involving sales tax. And we live in a place where people people can go and cast their vote. Whether you are for it or against it, get out and vote, and whatever the majority of this community wants to do will be the direction the assembly takes.”

The polls will be open on Tuesday until 8pm.