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City Council Advances Plans Removing Nonprofit Sales Tax Exemption, Tax Aircraft

The City Council is exploring new ways to collect property and sales tax in Nome. Photo: Matthew F. Smith, KNOM.

The City Council is exploring new ways to collect property and sales tax in Nome. Photo: Matthew F. Smith, KNOM.

In a combination work session and regular meeting Monday, the Nome City Council moved forward with big changes designed to collect more taxes, as well as addressing a zoning complaint, plans for winter road work, and the utility’s new multi-million dollar line of credit.

With the city budget projected to run a deficit, the council’s one-hour work session looked at ways to increase tax revenue. After much debate, the council agreed to move forward with a draft ordinance removing sales tax exemptions from more than 40 local nonprofits, churches, and other charities in town—a move City Finance Director Julie Liew estimates could bring in about $300,000 a year.

The City Council may remove sales tax exemptions from organizations listed as "other." Image: City of Nome. (Click to download PDF)

The City Council may remove sales tax exemptions from organizations listed as “other.” Image: City of Nome. (Click to download PDF)

Council member Matt Culley said he’s in favor of removing all the exemptions, with the possibility that nonprofits could be given the tax money back in years when the city’s bottom line is in the black.

“You get rid of the sales tax exemption, most of the time these other exemptions aren’t given—we’re a very nice city [to do] it,” Culley said. “When we sit down at budget time, [with] the numbers to look at, if we want to donate that [money back to nonprofits], the money can go all back in … but we have control over it now, as opposed to it going whatever direction that we have it going now.”

The council is also pushing forward with plans to collect property tax on aircraft. Nome is one of the few cities in Alaska that doesn’t collect such aviation-related property tax, according to information provided to the council from city tax advisors. Numbers cited at Monday’s meeting estimate that, with about $10 million worth of aircraft in Nome, collecting property tax could bring in about $120,000 annually.

The council is also pursuing collection of sales on inventory held by retail businesses in Nome.

All of the proposed tax changes are far from law, however; the City Council is still several meetings away from a vote, and the public will have an opportunity to weigh in before the council takes any final action.

Shifting gears into their regular meeting, the council approved administrative formalities with the state Department of Transportation with regard to winter road maintenance and road projects connected with the Snake River Bridge before addressing a zoning complaint against Nome resident John Hager and his property on Lester Bench Road.

Based off at least two zoning complaints on file, the city mailed Hager a notice for an abatement hearing (which was held during the Monday meeting) to classify his property as a “public nuisance”; the notice was delivered to Hager Oct. 31.

The city came prepared with a resolution to declare the property a hazard and to order “immediate remediation, removal, or demolition” by a specific date. Otherwise, the resolution stated, the city would remove or demolish the building and bill Hager for the cost.

Hager took the podium to address the complaint, and criticized the city’s heavy hand in putting the issue through the abatement process when, he suggested, it could have been resolved easily with a more neighborly approach.

“I believe this whole thing could have been done with a five-minute phone call. ‘John, what’s your intention with the property? How can we help? What are you going to do with it?’” Hager said.

“None of that. From anywhere,” he added, saying he was sure any of the council members would have appreciated a similar courtesy. After answering a few questions with regard to the safety of property, the council gave Hager until Sept. 1 of 2015 to address the complaint and remedy the property.

Finally, the city heard from Nome Joint Utility Manager John Handeland about the $2.2 million line of credit recently extended to the utility by the city. Handeland said the credit line was needed due to the nature of the grants the utility receives, often as reimbursement for money spent on projects. But Handeland said there were other problems that needed to be fixed.

“Through all this, what did come up is the fact that we have not had a rate change in 20 years, and that has eroded the financial position of the utility,” Handeland said.

Council member Jerald Brown asked Handeland to address the findings a recent audit as to any mismanagement of utility funds.

“Was there anything that was brought to your attention by the audit firm that would lead the reader to believe that there was any issue whatsoever related to fraud, or embezzlement, or any of those bad things that have been alleged?”

“No, no,” Handeland said several times, shaking his head.

“Thank you,” Brown said.

Handeland said the utility’s new full-time financial officer is also helping settle its accounts—and move in a more “positive direction.”

The next City Council meeting is set for Monday, Nov. 24.

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