Skagway to send local sales tax hike to community vote

Last week Skagway’s assembly unanimously agreed to send a sales tax increase to the voters for approval. Advocates say the increase will bring the community more in line with other cities in Southeast Alaska and help alleviate general budget shortfalls.

Skagway Assemblymember Dan Henry, recently re-elected to the table after a multi-year absence, succeeded in his bid to bring a local sales tax increase to Skagway voters next spring. Currently, Skagway has a rate of 5% during the summer months and a 3% rate during the winter. 

The increase would bring the rate up to 6.5% for the summer while remaining 3% during the winter. Each year the assembly can vote for a sales tax holiday over the winter months, and one was approved for this winter, meaning sales occurring physically within the borough are not charged sales tax at this time. There is no guarantee that a tax holiday would be passed in the future.

During last week’s meeting, Henry argued in favor of his sales tax increase proposal over the phone while traveling.

“We should be drawing the appropriate amount of money for a community of our size to host the amount of people that we do host,” said Henry.

But exactly where he plans to spend the money isn’t clear. 

“That would be roughly an additional $1.5 million to $1.8 million. I think everyone at the table understands that there are different need areas that would be paid for with that additional revenue stream,” said Henry.

Finance Chair and Assemblymember Jay Burnham argued that the increase would put the town on par with other Alaska communities.

“There’s no reason, really, that I can see anymore, especially if other people are raising their sales tax, to not go to 6.5%,” said Burnham.

However, a 6.5% local sales tax would put Skagway in the top ten of the highest local sales tax rates in the state during the summer cruise ship season. 

Currently, Juneau and Sitka have a 5% sales tax, Haines is at 5.5%, and Ketchikan and Hoonah are at 6.5%.

There will be a special election sometime in the spring. If approved by voters, the rate increase would take effect on January 1, 2024. However, the actual rate increase wouldn’t begin until April 1 which is the start of the second quarter. The municipality is not sure if this will be the only ballot initiative for the spring special election.