City Council - workshop

Hello, everybody. I'd like to call the August 19, 2026 work session to order. Before I turn it over to City Manager Eubank, I just kind of wanted to stay a little bit, just for the record, why we're here. And at our last regular council meeting, we had a couple of members of the public that were looking for an exemption for taxpayers on the value of their homes. Basically, it would be a reduction on their taxes. And the justification had to do with the rapid increase value of properties. The timing was such where if we were going to get it on the ballot, we needed to act quickly. So we asked administration to put together an ordinance. It's in our packet that we're not going to be discussing tonight, but it's in there. So we could move forward and schedule this work session because we did not have any of the financials to back it up to know if this is something that we truly wanted to do or some other avenue or anything at all. So that's why we're having this meeting tonight. So with that, unless I missed something, Terry, turn over the city manager and if you want to take it from here.

Thank you, Mr. Mayor, members of council. We did put a presentation together here for you. So the ordinance that's in the packet tonight for introduction is Ordinance 3542-2026. OK. You can go ahead. So what is being proposed is a $75,000 residential property tax exemption. Who would qualify for the exemption? City residents who own or partially own and occupy the property as their primary residence and are deemed eligible for the borough's residential property tax exemption. That eligibility would be determined by the borough assessor. What approval is required? Initially, Council would have to enact Ordinance 3542-2026, which would put the issue before the voters, and the voters would have to ratify the amendment to code to put the exemption into place. It would become effective on January 1 of 2027. It would affect the taxes being paid in the fall of 2027, which actually would represent cities' fiscal year 2028 revenues. Go ahead, Shelly. Thank you. How is this exemption going to work, or how would it work? You know, exemptions are pretty simple. You take the assessed value of the home. where property minus the exemptions give you the taxable value of the property. You then apply the mill rate against that to determine what property taxes are owed. In this example, you have a $350,000 house receiving no exemptions at this point. So the no exemptions, taxable value 350 at 4.35 mils, that's the city's current mill rate, $1,522.50 in taxes owed. Using this exemption, again, we start with that same 350, you have the exemption of 75, creates a taxable value of $275,000. Using that 4.35 mills generates tax bill of $1196.25. Result is a reduction in tax of $326.25. That's the maximum savings to a property owner at 4.35 mills. If the mill rate were to decrease, that savings would decrease. If that If the mill rate increased, that savings would increase as well. So go ahead, Shelly. So who would be eligible? We did get some data from the Borough Assessing Department. We really appreciate that. We're estimating that 1,435 property owners would become eligible for this exemption. 49 of those are currently receiving the state's mandatory disabled veteran exemption. 533 of those are currently receiving the state's senior citizen, mandatory senior citizen tax exemption, and 853 of those are property owners who are either not disabled veterans or not seniors that are currently receiving the borough's 75K property tax exemption. I just want to stress here that this exemption will I'll call it stacking. This exemption will stack. In other words, this will be additive to the state mandatory exemptions. So what that means is a senior citizen, here's the example here, a senior citizen or a disabled veteran with that $350,000 house in the city of Kenai currently receives the state mandatory $150,000 exemption. This would add to that, if they apply and are granted $75,000 of additional exemption, bringing their taxable value down to $125,000. If you remember in the example before for the non-seniors, drop that number down to $275,000. creates taxable value of $125. Again, this would reduce the senior or the disabled veterans taxes by up to $326.25 at 4.35 mils. Those 1,435 exemptions are estimated to exempt 101.7 million in property tax values. Go ahead, Shelly. So where does property tax fit into the City of Kenai's revenues? When we look at the general fund, so property tax is a general fund tax source. Property tax represents 23% of the City's general fund revenues. You can see sales tax represents 50%, and then we have various other revenues, fees for services, interest earnings, inter-departmental charges and things that make up the other 27% of city's general fund revenues. Go ahead, Shelly. So how much property is currently taxable in the City of Kenai? The 2026 City of Kenai certified main rolls were for real property at $1.665 billion worth of property in the city. Currently, 34% of that property is exempt and 66% is taxable. So that 34 exempt, the largest portion of that exemption is related to government property. So that would represent the city's property. It would represent the borough's property and any other federal, state, mental health trust type lands that are inside the city. Other exemptions, the second largest exemption actually is the state mandatory senior citizen property tax exemption, the $150,000 for seniors. It's required by statute. That represents about 5.25% of the 13. And the exemption for charitable organizations represents about 4% of that 13%. Again, if this exemption was put in place, it would increase our exempt value from 34% to up to 40%. So instead of 66% of our property generating tax revenue, only 60% would be generating. It represents a reduction of the current tax base of 9.25%. The this exemption, we become the second largest at a total of 6.11% of the total. So again, it just increase our tax exempt values from 34% up to 40%. Go ahead, Shelly. So what is the fiscal impact? 101.7 million at our current mill rate of 4.35 mills is $442,202 annually. Again, that is dependent on the mill rate. If the mill rate goes up, that number would increase. If the mill rate goes down, that number would decrease on an annual basis. Next slide, Shelly. So I just wanted to touch real quick on different ways to provide property tax relief. Two prominent methods. One, you can provide that through exemptions, or you can provide that through a rate reduction, a mill rate reduction. This contrasts the difference. Applying a property tax exemption reduces the taxable value of property. Applying a mill rate reduces the tax rate to all properties. Applying a property tax exemption only applies to qualifying owners. Mill rate reductions apply to all property taxpayers. Property tax exemptions are typically used to provide targeted tax relief. Again, mill rate reductions provide relief to all taxpayers. Property tax exemptions are generally on a fixed dollar amount for the exemption where mill rate reductions, they reduce based on the value of the property. Again, property tax exemptions reduce the taxable taxable property base, mill rate reductions have no impact on taxable property base. Again, property tax exemptions generally support specific policy objectives where mill rate reductions treat all taxable property uniformly. The fundamental difference is who receives the tax and how that tax burden is then distributed. I just want to provide an example. In just recent history in 2023, Council did enact a property tax exemption on the first $100,000 of business personal property. That was targeted. It was targeted to reduce the tax burden and reporting requirements on Kenai businesses. At our current mill rate of 4.35 mills, that results in an annual maximum annual savings of $435 to a business. And that exemption was estimated to reduce our taxable revenue by $35,000 annually.

Go ahead, Shelly.

I think the big question here is can the city afford the exemption? I would say the city has sufficient financial capacity to absorb the estimated impact. However, the exemption definitely may affect future budget decisions. When we review the FY27 adopted budget, the city had a financial capacity of about just over $2 million for capital projects. And that's the term I'm coining here, and I'd like to define that for you. When we look at financial capacity, that is when we take total general fund revenues minus total expenditures for operations, excluding capital, without consuming fund balance, what capacity is left to invest in capital projects? In FY27, that's estimated, that's just over $2 million. By 2030, that was projected to decline to about $1.225 million. So, can we do this? Absolutely. Potential budget impacts of reducing $442,000 annually. We likely would try to make some adjustments to our capital expenditures. The decision could be to adjust service levels to reduce service to save costs, or the other choice would be to start to consume fund balance and utilize some of the city's savings to maintain to the same levels. I will say that the individuals that brought this forward, one of the points that they did make was that property assessments, especially here in the last five years, have really grown. I'll tell you that in the last 19 years, this is the date I had, the average annual growth for real property values was 4.8 percent. If you remember back, this exemption would exempt about 9.25 percent of our real base. at 4.8% growth within two years, our taxable values would be at, if growth continues at that rate, our taxable values would be at or where we are today, or above where we are today. So I do think his point is valid. It is supported by the data, and I wanted to make sure that that was pointed out. Again, all of this revenues really will be predicated based on what that mill rate is set at each year. So go ahead, Shirley. So kind of to summarize, you know, what is proposed is the residential exemption of up to $75,000 of assessed value for qualifying primary residents. Who qualifies? Again, city residents who own property or partly own and occupy property as their primary residence and are deemed eligible by the Kenai Peninsula Borough. Voter ratification is required on November 3rd in order for this to become effective. And it would become effective on January 1 of 2027, be applied to the taxes that are paid in the fall of 2027 and our fiscal year 28 revenues. So what changes if this is approved? City property tax would decrease by up to $326.25 for those qualifying property owners. Our tax base would be reduced. Our taxable tax base would be reduced by $101.7 million. which is $442,202 annually at 4.35 mills. The taxable share of the city's real property would decrease from 66% to 60%, and future property tax revenue would depend on assessed value growth and mill rates. Go ahead, Shelly. I think that's all we had. I'm happy to try to answer any questions.

OK, Council, open discussion if you have any questions of the city manager or finance director. It's open. Oh, OK. I don't have to turn it on. You can turn it on, but you don't have to get permission.

So you were talking, city manager Eubank, about the The reduction would be made up by adjusting capital projects. Would that have a significant impact on, like, the next five years of projects?

Yeah. Thank you, Vice Mayor. I think that's one option on how adjustments could be made, which is to adjust the schedule or amount of capital investment. You know, another option there is to utilize some of the city's fund balance. Our fund balance policy does permit the use of fund balance for one time expenditures, which capital projects would be considered. So I think there are a multitude of options. There are other revenue options that could be explored if that's the direction of council too. if that's the choice, but I just wanted to lay out what probable impacts would be and options would be.

If the ordinance is approved and the public votes for it and it's instated, Moving forward, can that number, the $75,000, be increased by council or decreased, or does it have to go back to the voters for any kind of a change down the road?

I think, Mr. Mayor, I'm going to answer part of that, and then I might defer to Scott. I don't know that he'll know the answer. But within statute, there is a provision that would allow council to adjust that number moving forward by CPI. so it could be increased over time i think that takes an annual ordinance to accomplish that as far as if council wanted to reduce it if that has to go back before the voters i i don't know the answer to that thank you mayor next head members of council i'm

My guess is to reduce the amount that was approved by voters, we would have to go back to the voters. As far as approving the CPI, or sorry, adjusting by CPI, I think the statutes allow for that, but I don't know if that has to be in the initial legislation approved or it could be added later. I can look into that and get back to you before we get public hearing.

Hi, I have a couple of questions. First couple I think are just sort of, I guess, housekeeping to make it make sense in my mind. One of your first slides when you showed there would be a maximum of 300 something dollars, I think the value you had listed was, was it a 300 and something thousand dollar house? Is that the average or median value of a home in the city of Kenai?

Yeah. Thank you, Councilmember Grimmie. I believe Christine just read me the number. I think it's $355,000 is the median house in Kenai that was published in the most recent work by KPED on housing in the report they published.

Thank you. And then I want to make sure I clearly understand You talked about stacking or bundling. This would stack with a regular primary residence homeowner who's already receiving the borough exemption. This would apply only to city tax, of course, but a homeowner could receive both.

Thank you, Council Member. If you're referring to an exemption for the borough side of tax and the city side of tax, yes. I mean, because our taxes are calculated independently.

Correct. Okay. In the proposition, it talks about only city residents that apply for and receive the Kenai Peninsula Borough's residential real property tax exemption under the borough's code of ordinances and now enacted or amended in the future will receive the city's residential property tax exemption. The city will work in tandem with the borough to ensure that that's enforced. Will that require... some additional level of research or record keeping on behalf of the city?

Thank you, Councilmember Gurme. No, that's why we chose this methodology is the, you know, under statute the borough is required to collect our taxes. We were trying to make it easy and utilize an existing process that was out there. So, we did speak with city or the borough attorney today and, you know, utilizing their process. What I think would be incumbent upon us And I would say we would do that if this gets passed, is we would want to run a PR campaign or an advertising campaign to advise city residents to apply for that. There are a number, I personally know two, both receiving, one's receiving the disabled veteran exemption right now, one's receiving a senior citizen exemption, where they're Under the borough's code, a disabled veteran gets an unlimited exemption on their house. So they pay no property tax. Well, that person's house is valued more than the $150,000 senior that we're giving, so they probably didn't apply for the borough's $75,000 because they didn't need it. They would absolutely want to apply for the borough's $75,000 even though they don't need it to be granted ours. I think we would want to advise the public of that. The same thing applies to seniors who have houses in Kenai worth less than $300,000 because the borough's Mandatory 150 and optional 150 for seniors is exempting their total property value. We're still taxing everything above the state mandatory 150. So again, those people would want, who probably didn't apply for the Borough 75K because they didn't need it, would absolutely want to apply for this. So I think we would want to run a campaign advising people to do that.

Thank you. Would, you also talked about the potential of using the fund balance to essentially close that gap that is currently being filled by property taxes. That the use of the fund balance could be used for that. Is that something that you or Mr. Storner would recommend? Why or why not?

Yeah, thank you councilmember gurney. I want to remind council right now that this began in the time of covid where the city established its fund balance policy right now. There is an additional amount being prescribed by city council with adoption of the budget annually that is in excess to what the policy says is the so we have a minimum level. We have a maximum level determined by that policy. Right now, our current level of fund balance is in excess of what the policy would describe as its maximum, and it provides a mechanism where council can designate those funds and carry balances higher. Right now, I don't remember the exact amount, $3 million, $3... A little over 3 million was dedicated by Council with adoption of the 27 budget for future capital projects. So we do have capacity there in that. I also remind Council that it was projected next year we'll spend in excess of $4 million on capital projects. So that reserve is being consumed. I mean, with the level of capital projects that are projected and planned. We've got some major road maintenance projects that are in the works and being designed. So I don't I what I want to caution council is that a extended use of fund balance is not I think the state of Alaska is a great example of that but I think the primary difference here is the state of Alaska is consuming their reserves for operations for recurring operational expenditures and I would never advise that I think that that's that's Not a good decision. I think it is a reasonable decision. Like I said, you know, if our assessed value continues to grow at the current rate, you know, that decline we're talking about is likely going to be, you know, is going to have a different outcome in our capacity for capital projects. We have seen, you know, 4.8%. That's the average over the last, like, 19 years. The average in the last five years is higher than that. So, you know, budgeting is all a game of estimates. And, you know, when those estimates come in high or low, it changes everything.

Thank you. I have one more question. You had a side-by-side slide comparing exemption to mill rate reduction. As I think we probably are all aware, when we did the city survey recently, Recently, maybe it's not recent anymore, but it feels recent. Two very important things that city residents prioritized were access to housing and business in the city of Kenai. enticing businesses and retaining businesses. That comparison slide that you showed indicated the differences of an exemption versus a mill rate reduction and the impact that that would not have on a commercial property owner. With that in mind, is there a comparable mill rate that you would suggest to that of the $75,000 exemption for primary residence homeowners that would then apply, could apply to commercial property owners as well. So that it could be applied across the board as a mill rate reduction instead of any property tax exemption or value exemption.

Yeah, thank you. Council member. I can certainly calculate it for you real quickly. If I have the numbers in front of me to if you if what you're asking me is, is what mill what the mill rate reduction would have to be to reduce total taxes in the city by 442,202 dollars. We could absolutely calculate that for you. I don't know what that is off top my head, but. I just need to look at the taxable value, current taxable value, and we could calculate that amount. Right now, I believe one mill in the city is generating about $1.1 million of tax revenue in that neighborhood. So it would be .4 of a mill, somewhere in that range, I would speculate right now. But that's a very easy number to calculate.

Okay. Thank you.

I was just gonna start opening up this to some dumb questions maybe for people who don't understand this not just me with the mill rate question I think if I'm understanding this correctly my first question is this seems like a temporary fix is that fair to understand if property if property taxable rates continue to increase we're looking at maybe a couple years and then this kind of disappears as a real benefit? Question number one. That's dumb question number one.

Yeah. Thank you, Councilmember Zavala. Placing the exemption in place is a permanent solution. I think if what you're alluding to is that if assessments continue to grow at their current rates, property tax owners will be paying the same level of property tax they're paying today in a couple of years. But in this interim period, it is going to reduce. If you don't put the exemption in place and exemptions continue to grow, they're going to be paying $326.25 more plus the growth, you know, a couple years from now. So I think that's what you're alluding to.

For sure. Thank you for the interpretation. Hopefully you're ready for another one. Similar to that, if a mill rate reduction, which I guess my first question is a mill rate reduction simpler, but also does it have longer lasting effects than an exemption would?

Thank you, Council Member. A mill rate reduction would, the tax savings would continue to grow for a property tax owner as the assessments grow. Right? Because at the end, you apply the rate against the taxable value. I think both, you know, have a similar effect on the front end. I mean, they're going to reduce property taxes, but that exemption would continue to grow with the mill rate reduction where it's relatively fixed with the exemption.

Thank you.

You're ready for another one? I have a sneaking suspicion you did do this math ahead of time, but I don't want to put you on the spot. Did you guys also calculate alternative values rather than $75,000, let's say $50,000 or another dollar amount?

I did not, but we certainly can.

How did we get to 75? Was it just a nice round number or?

That's the maximum permitted by statute and that's what the those that testified before you were looking for. So that's the number we started with.

Then I think just one more of my questions. I think in one of those folks is here today, so maybe if I get this wrong, he can help. But I got the intent of the message that this was supposed to help folks, residents in Kenai, with a small relief in cost based off of just things are expensive. And so I'm curious what alternatives would we have to, let's say, I guess maybe it was mill rate is the answer, but to apply that same cost savings to everyone, every resident, whether it's a $400,000 or what, rather than just people who own property. I mean, to a certain degree, I'm privileged to own a piece of property, whereas I know two of my family members do not. They cannot. And so they would not see any taxable benefit here. And so I'm just curious if we've looked at those other options or what other options there might be Maybe that's mill rate change. I don't know. And I'm not asking if... I guess I'm just asking what other options there could be to more equitably apply this to more than just property owners.

Yeah. Thank you, Council Member Cassano. You know, I think, you know, if property is not... the methodology, then I think you have to look at what other revenue sources the city has. The most predominant one, again, in the general fund is sales tax. Everybody buys it very low. I mean, so I just think we would have to look at different options there. I don't know that you're going to find anything that's going to give everybody some level of proportional relief or, you know, but I think there are other tools that could be used.

Well, this is all new ground for all of us, I think. So I'm one of those that doesn't look at my tax bill every year. My wife kind of handles that. But I don't believe that it's a linear graph, though, as the value of the property increases. If I'm not mistaken, I think it goes up and jumps. The question I have is, doesn't the borough come to Kenai and do an assessment in the Kenai or some area periodically? So is it every year that we can expect this to come up, the amount to go up, or is it going to be every three years or some other period?

Thank you, Mr. Mayor. I think it depends on what we're talking about here. I think what you're talking about, I think the borough has a five-year rotation for canvassing communities where they come out, they put eyes on every residence and go for it. I think why we see more significant increase in those years is for unreported property. Somebody builds a shed or somebody builds something new that they didn't report to the borough. So we would see more activity like that during years of Canvas. But in the mass appraisal system utilized by the borough, they make annual adjustments to key factors in their model or algorithm for how property gets valued. So I do think we've and we can consistently see that over this, you know, like the last five years where each year we're seeing significant jumps, you know, that the Taxable assessed value in the city of Kenai was up over 9% last fiscal year, between fiscal year 26 and 27. And, you know, that is, I don't, that is not, I don't know if that's related to a recanvass, I don't know when they recanvassed us last, but a significant portion of that is just changes to their assessing model and the base factors in it.

Yeah, I just want to make sure that if it is five years and they just did it, that we don't have to wait five years rather than two years for the makeup, assuming that it's on that average.

Mr. Mayor, if you give me half a second here. So let's go. So going back to fiscal 23, the city's, this is for real property alone, our taxable main role values increased by 9.65% for real. Fiscal 23, that number was 4.36%. Fiscal 20, I'm sorry, that was, yeah. Fiscal 25, it was almost 3.5%, 3.49. Fiscal 26, it was 6.86%. And then in fiscal 27, it was 9.26%. So it's not all related to re-canvassing. It's definitely happening. Each and every year, we've seen significant growth.

But Terry, that growth also is not necessarily- It's new construction.

Yeah. Sorry, I did leave that out. That also represents any new construction going on in the city. That's not just assessed value growth. Thanks.

to Councilmember Zavala's point about, I guess, spreading it, spreading the love. I know I was trying to come up with something better, but I didn't get there. I think, I mean, sales tax would obviously be a blanket, sales tax reduction would be a blanket way to do that. But that wouldn't impact everybody. There are a lot of shoppers who are exempt from sales tax. I think it would also, unfortunately, reduce our ability to collect sales tax from visitors to our community. I think that a mill rate reduction would impact folks who are not property owners if they're renting. That would reduce the overall cost of renting for the property owner, which would then hopefully in good conscience theory, reduce the cost of renting for the renter, right? I mean, it's gonna reduce your overall cost for what this property costs you, so it would reduce what, you're going to potentially ask for for rent. I guess I just see that as a trickle-down mechanism to expand this to non-property owners, which was what your concern was. And I think a mill rate reduction would do that because it would apply to all properties, not just primary residences.

Yeah, I'm not sure I share the same faith in our landlord experience passing the savings on, but I think I hear your point.

Based on what you were talking about earlier, Mr. Eubank, about probably in a couple years this $75,000 exemption probably isn't going to do much good. Would a reduction in the mill rate be a little more inflation proof, in your opinion, for a longer period of time?

Thank you, Vice Mayor Oskin. So I just want to be clear on what I said. As your assessed value continues to grow, a property tax owner who receives the exemption today is likely going to have a taxable value at or equivalent to what today's is within a couple of years if assessments continue to grow. Not that it would be worthless. They're still going to be getting the same, if the mill rate stays at 4.35, the same $326.25 savings. A mill rate reduction As the assessments grow, that $326.25 savings, if that's what the mill rate reduction generated, that savings would increase as the values of the property grow. Because a millage is just a rate applied against the taxable value. So, maybe I should have started with, I mean, not for you guys, but for the public 4.35 mills represents 435 dollars in tax on a 100,000 dollars of taxable value.

Council member so, and you had your hand up.

Thank you. Mayor next. So the original perspective that was brought to us was to allow the city of Kenai an opportunity to match what the borough is doing for property owners. I don't want this discussion or this endeavor to get too broad, broad of scope in trying to help renters at this time or sales tax at this time. I would like to focus on the problem that was put before us, and that is trying to get the city property tax exemption to match what the borough is doing. That's not to say I don't agree that these other facets need to be looked at. Quite possibly they do. But maybe that's something we could do a little down the road with a different ordinance or a different proposal. And I would like to streamline this process to put it back into focus for the property tax owners for their exemption to match what the borough is already doing. And if that's something, if the property tax exemption is something that we agree on and we wanna put it to the voters, then that's clear cut and it's focused. Then at a later date, we can discuss some of these other ways to give relief to other people. But I don't want this discussion to get so broad that we lose focus of the issue that was put in front of us, the issue at hand. And I've heard from several constituents who are property owners who are watching this very closely. And I just think we need to stay focused. That's all. Thank you.

I just wanted to say leave it to my former teacher to keep me on task even as an adult. So thank you, Debbie.

I would say we are on task. I don't think you can make a decision like this in a vacuum. And I think considering viable alternatives to determine your position on an issue, whether this is the best option or another option could be considered now or at another time, that's all part of the same conversation. I mean, at the end it comes down to yes or no, but it might be no because I see a better alternative or yes, we've discussed these other things and they would not provide this, they wouldn't be what we're looking for in the end.

And I agree with Councilmember Crammey. It's kind of new for all of us and we need to circle it and, you know, my training is you look at all options even if they're not good ones. Eliminate them. You know, what's the boundaries and what do we want to do? Or do we want to do it at all? It's also an option. Or do we want to change it? Don't know. We haven't had that discussion yet. We'll have that in another week. But it feels a little bit, City Manager Eubank, like investing in the stock market because all we have is past performance, you know, and moving forward and hoping for the best. You don't have a crystal ball, but I could ask you if you did. I mean, you don't see property values, the slope of the line reducing significantly in the next two to three years for anything, do you? I mean, yeah, I know I'm putting you on the spot, and it's a question you really can't answer definitively. But part of the reason for asking the question is because you can't answer it exactly. You're going to say probably not. Is there any safeguards that might be an amendment to the ordinance that would protect the city if we needed to, if property values suddenly dropped, something completely changed that we weren't expecting? This kind of goes back into our discussion about what are the boundaries.

I don't see that happening. I'm just asking the question.

Thank you, Mr. Mayor. Unless the city attorney, I don't know anything you could do to change this legislation. I think that the tools available to council on an annual basis where you get to set the mill rate annually, you know, you have control over the sales tax rate. I mean, council has the discretion in situations to, you know, and the ability to generate revenue by changes in those tax policies. I don't know how you would change this to provide any safeguards. I think it would I'm curious what the answer is to the previous question about if this wanted to be reduced in the future, if that has to go back before the voters. But I think there are other ample tools available to council to make adjustments on an annual basis to generate the revenues that are needed for whatever council chooses to appropriate.

That's it. Kind of talking freely here, but without other considerations. But if something did happen and we needed to make up the difference, then it seems like the sales tax would be, or the mill rate would be the obvious thing that the council could do. Perhaps a seasonal in the summer. sales tax adjustment or something along those lines. I think others have done that. Have you explored any of those options for increasing revenue if we needed to?

Yeah, thank you, Mr. Mayor. So again, sales tax is most impactful, I think, just purely based on the volume of revenue that it provides, right? It's 50% of the general fund's revenues. A annual increase in our sales tax rate of 1% would generate an additional $3.735 million, so $3.7 million per 1% of sales tax. A seasonal sales tax estimated to generate, that's a 1% increase from April through September, could generate about $2 million. These are just, I mean, we can run any scenario you want. These are the three that the finance director provided me. A seasonal increase of 1% from April to September, and then a seasonal decrease, so go 4% April through September, and 2% city during the winter, actually would generate $262,000 in additional revenue. So I think there's a lot of options. I do think sales tax is going to be the lever that's needed when we start having serious discussions about replacing the city's public safety building. That is going to require bonding and it's going to require significant bonding. That potentially sales tax or increase, whether that's seasonally or on an annual basis, is probably going to be the lever that needs to get pulled. And I think you bring you brought up the the community survey that we did council member gurney there was a slide or a club side there was a question in that survey that if the city of keen I needed to generate revenue what were the preferred methods. Surprisingly, it was how can we find somebody else to pay for the increase? The number one choice was a bed tax. You know, other choices were seasonal sales taxes, you know, other grants from the state, grants from the family, anybody else's money besides, you know, property taxpayers here. So I do think that sales taxes is a big lever. I would caution council that that lever should probably be saved for big projects, like a replacement of the public safety building or something like that. So we are looking at those things.

I don't know if it's appropriate or not, but I would like to hear from the originators of the proposal if they had considered a mill rate decrease. in comparison to what they think this would save.

Are you referring to the public?

I am.

When it's here, we have a public comment after we're done. So they'll have that opportunity if they choose.

So a couple of things. Thank you for bringing us together, first of all. Very helpful with the numbers. It sounds like to me that, for lack of a better term, the city can take the hit initially. We just reduce our capacity. for projects potentially in the future, depending on how things lie. I guess this is, you know, kind of for the body to think about, does it make any, and I don't even know if we can do this from the way this is written, we propose to the voters, because the way we're proposing it now is, do you want $75,000 off, yes or no? Is there a way we could say, hey, you want this, but This is the trade-off? I don't know if that's something. I just want people to be kind of like eyes wide open, just to make sure they say, yes, we want this. Does that make sense to show maybe where the funds would come from, whether it be fund balance in the short term or something different? I don't know if that makes sense what I'm asking.

Thank you, Council Member Daniel. This is where I would have to defer and work with the clerk and the attorney. I think we can provide factual information. You know, I think any amount is a bit of speculation on what the impact is going to be because we don't know what assessed value growth is going to be and all these things in the future. We don't know what no rate the next council is going to apply when we start talking about the budget. So I think we can put factual information about what the impact is based on the numbers we have today, but I defer to you guys a little bit on how much leeway we have there.

Thank you. Yeah, we, I mean, there's two things I think that you're talking about. One is putting out factual information, which I think we can. We have to be careful if we do want to advocate for one way or another, then we, have to file with the Alaska Public APOC, Alaska Public Office of Commissions. But we can generally put out factual information without that. And we can put a short blurb in the proposition itself. As far as presenting different options in a proposition, that's very difficult. Legally, we're restricted to a single subject for each proposition. Also, Like the last ballot question we had, we did sort of provide an option, but we had to be very careful so that the two options would work together because you can't put one option out that would cancel another one because each proposition is separately approved or not approved. So you never know which one would be approved or not approved.

Gotcha. And that makes sense. I guess maybe I'm looking for more just factual information because I don't want to bias one or the other. Sorry, I didn't mean to interrupt you. Oh, you're good.

No. We can certainly do that, and then other groups are certainly able to put out whatever information they want if they support or oppose a ballot proposition outside of the city government.

Gotcha.

Okay. Thank you. Then I have one. And I'm not sure if I even like this idea. It's just a thought of me writing it down if it's in that bad idea category, everybody. Because 450K or 442, whatever the number was, it's not a giant number in the city budget in the grand scheme of things, but it is a fairly large number. I mean, it could be three or four full-time people. It could be a project. You never know. And we don't have a crystal ball. We don't know what the future looks like, where property revenues are going to go and taxes. But it doesn't make any sense to, for lack of a better term, ease into it. And this year, we do this much of an exemption. Then we do this. We increase it over a period of a couple of years. I don't know if that makes any sense. That's getting kind of far from the intent of what was brought to us. So it's just a thought of what do you guys think.

I don't think it's a bad idea, and I like the intent. I guess what I would be worried about is how do you make that happen? I feel like that would be kind of an oversight nightmare. For the group, for example, that Terry described, they don't fill out their borough exemption because they don't need to. It wouldn't apply to them, but they would have to for this one. Would they then have to do it three years in a row? What if you didn't buy a house until the second year? I don't know. And I'm not trying to Debbie Downer it. I'm just saying I could see that being a logistical tough spot.

Agreed. Think about it out loud. It sounded good on paper, but that might be challenging for the city and borough to implement.

The other thing I would caution you on there is that there's only one other city in the borough that has a primary residence exemption. The city of Homer has a $20,000 primary residence exemption. No other city does. So council could absolutely amend this and put whatever amount you want in there as long as it doesn't exceed 75 K, which is limited by statute. But I do believe if you wanted to increase it every year, you would have to do like the borough did last year. The borough had a 50K primary exemption in place because that's what statute limited it to at that time. When statute was increased through legislative action, the borough came back and did another election. They put it before the voters again to increase up to 75K. So if the thought is, let's ease into it, I think every time you wanted to increase that, it likely would have to go back before the voters.

So if we were to propose instead a reduction in mill rate, that does not have to go to the voters?

Any further questions? Not trying to push it. We've got plenty of time.

Henry, sorry, I just wanted to clarify for Ms. Councilmember Stonart, because she talked about matching the borough's exemptions. We're matching the borough's residential property tax exemption, not the borough has other exemptions that we're not matching. So if that's... I just want to make sure that's understood, that this is just about the 75, at least in the ordinance that's being proposed, we're not matching the borough's exemptions overall.

Council Member Sonert, I see your hand up.

Council Member Sonert, I think you're still muted.

Thank you, Madam Clerk. Thank you, Mayor Nackstead. Yes, my statement was too broad. But Scott, yes, that was exactly what I meant. So thank you for clarifying. Also, just a few moments ago, Vice Mayor asked City Manager a question about the 4.35 mil tax, if it would have to go in front of the voters or not. And I could not hear or see an answer.

Thank you, Council Member Sonert. No, the mill rate is set annually by the council by resolution as part of the budget adoption process.

Got it. Thank you.

Any more pressing or inkling thoughts? Go ahead.

I do want to say thank you. You gave us a lot of information and we asked a lot of questions and you answered them all very thoroughly in my opinion. I learned what I wanted to learn and had my questions answered. So I appreciate you both being here and being so prepared and capable to answer our questions.

Just probably missed it, but if I if I did are those slides going to be available to us still the presentation you just gave Yes, I'll email them out to you, and I'll put them on our website Tomorrow when we wrap the meeting and there's three printed copies out there on the day.

It's a little table Thank you Say one thing I just want to make sure council understands where we are in this process, so there is an ordinance and proposing a 75K exemption that's gonna be introduced tonight unless it's pulled from the agenda. And at any point going forward between this meeting and the next meeting, members of the council could propose any changes to the ordinance and structure of the ordinance going forward.

Can you clarify that part? So can suggest a change with or without it being pulled?

So today is just for introduction. So it either is going to get introduced or not introduced tonight. We're limited to those actions. Between this meeting and the next meeting, anybody in administration or any council member could do it themselves, could come up with an amendment that they would propose. For example, If you wanted a 50K exemption instead of 75, we could amend the ordinance during the public hearing to do that.

Thank you. I appreciate you explaining that.

Yeah, the action, if you were to pull it tonight, would not be to discuss it, but just to essentially kill it. That would be the end of that. And Mr. Bloom was talking about kind of what I had in mind. We've brainstormed a lot, and I know you'll have more questions, or you may have some amendments, and I suggest that you talk to Terry and work through the city manager, perhaps the finance director, however you want to do that. If there's some other questions you have, or if you have an amendment or something like that, it would be good to have that done in advance so it is clear, concise, and what you intend it to be.

City go ahead. Thank you. Mr. Mary. I just want council be aware. I will be here through packet preparation for the September 2nd meeting, but I will not be at the September 2nd meeting. So we're happy to work on whatever and staff will be able to address things after that as well. But. I think the more time, especially if you want to look at other exemption amounts or something, we'll need time to play with the model and calculate those numbers and things like that. So as much heads up as you can provide would be appreciated.

Just a quick follow-up from a timeline perspective. If things, you know, we just need to make a bunch of changes or we have to postpone it, how much time do we need to get on the ballot, I guess, is my question.

Thank you for the question. I was trying to let you know. September 2nd is the last regular meeting that we have scheduled that will be able to take action on this. I believe that the date is September 11th to make the ballot. So we would have to schedule a special meeting if it were to be postponed.

Any further questions, comments?

Thank you, Mr. Eubank. With that, I'll move on to item E, public comments. Are there any members of the public who would like to address the council at this time? Mr. Bannock.

Good afternoon, council members. I'm Duane Bannock. It's a wonderful $250,000 home that the borough assesses for $389,000. Number one, thank you for taking this matter seriously. When James Bayesden brought it to me, I didn't think quite frankly that we were even going to get close to where we are tonight. On behalf of my friend James Bayesden, I say thank you. for considering this proposal and for your questions. I may blow past my five minutes, but I do have a few things. I also, on behalf of a friend, James Bayes, and I would tell you where he is at today. He was planning on being here, but if I told you where he was at, it would be a HIPAA violation. If permission to use the chalkboard for a couple of things, I got a pretty good voice. You should pick it up. Is that okay? Can I draw a couple things on your chalkboard?

Madam Clerk, you have a problem?

ahead thank you all right city manager used a word that is uh commonly used in property tax and finances taxation in general levers okay i want you to think of levers now in the context of property tax there's a couple of different levers rate mill rate which you determine As a council, right here, right now, next year's council is going to determine it. It could change annually. Rate. Value. The assessed value. You have nothing to say about assessed value. That's done by the borough. And thirdly, exemptions. Right now, you've never done anything other than what the state requires you to do. Next lever. Sorry for the sloppy writing. Sales tax. Like Ms. Sonner, I'll talk a little bit about sales tax, but I don't want to get into the weeds about sales tax. But the city manager did not tell you the truth, the whole truth, and nothing but the truth. The truth requires all three. All right. Let me say personally, $300 a year isn't going to change my world. Unlike the mayor who says he doesn't pay attention to his tax bill, I pay attention to every bill. I'm that guy. And especially after I paid my home off and no longer had an escrow account, that means literally taking the checkbook out and writing a check. It's amazing how much more we pay attention to that than the $100 a month that may go into the escrow account in our house payment. The reason that I like this idea and the reason that I wanted to join this idea with James didn't have anything to do with me and $435. What it has to do with is young people that we'd love to move to Kenai, Alaska. The proposed ordinance tonight in the sixth whereas says there's 1,435 taxable properties. I don't know that that's an accurate statement. I'll take it that they did do their job right. But to your point, Ms. Green and others that we're talking about rentals, rental properties that ostensibly rents could go down or not increase as much. I'm under the impression that this is only for owner occupied homes. This is not for rental property, of course, not for business property. It's the one thing that you can do just for a homeowner and a homeowner only. You want to talk about adjusting the mill rate lever? That's going to adjust raw land. That's going to adjust business property or business buildings. The red herring that he put up about the business personal property tax has absolutely no place in this conversation. I don't know if he was trying to confuse you with a number, but it doesn't have anything to do with this at all. Okay, so what we know is that we're building new homes in Kenai. I think it's the best thing about Kenai is the number of new individual single family homes that are being built. Now, the dollar amount of savings, $326 a year, just doing math, there is no fluctuation in that. Whether my house is 389, 489, or 289, the $75,000, the only variable is your mill rate. 4.35 is your mill rate, a $75,000 exemption equals $326. I had $330.

I'm glad you didn't fall off the chair first off. Thank you. Secondly, I'll give you a part of Mr. Bazin's time.

Thank you so much for that. So $300 isn't going to change my world, but $326 is going to help a young person and their first home. I have somebody in my mind that I talk about all the time who is a homeowner at age 21. It's a very modest home. $300 in a year would make a difference in that person's budget. It's not going to make a difference in my budget and probably not yours either. But one of the good things, the very few good things that's going on in Kenai, is more houses being built. I appreciate the math. In two years this is going to get caught up three max. 3 max. Now let's go to that middle lever that you don't have anything to do with. The property tax value. I've been a property tax payer in Kenai for over 40 years and for most of those 40 years it's been a real steady increased line. Then came 2001 and spikes started hitting, right? They weren't planned. They didn't cost the city any more money, but it brought in a bucket of more money. What this proposal does is it just takes that spike and resets it. And as your city manager told you, in less than three years, at the current average growth, you're going to catch it up anyway. Finally, briefly on sales tax, I want you to think about your car for just a moment. I want you to think about how many miles you drive. Average driver in Alaska is about 18,000 miles a year. If you're good at math, you can do this in your head. If your car gets 20 miles a gallon, how many gallons of gas is that? That's 900 gallons of gas a year that you burn. A year and a half ago, gasoline was a dollar less than it is today. The city of Kenai loves gasoline price increases. Why? Because cha-ching, cha-ching, cha-ching. I write a big quarterly check from a gas station. A big check, quarterly, from a gas station. City of Kenai's costs go up a little bit, cost more to run your cop cars, cost more to run your fire trucks, cost a little bit more to run your equipment, right? But there's a whole lot more of us paying that three cents, that three cents on that additional dollar, the additional dollar. By the way, that's 27 bucks a year extra that every car is paying. Every car for 18,000 miles a year at an extra dollar in Kenai is another $27. You guys have more money than you know what to do with. This proposal levels the spike in property tax, and I certainly hope that you pass this proposal just to give ourselves and our neighbors the chance to do it. You control the... mill rate lever. That's 100% yours. It's not set in stone. And one of the great things about Kenai, when I left the city, I'm almost done. When I left the city of Kenai in 2001, it was a huge fight. I had the privilege of sitting there. Should the mill rate be 3.25 or should the mill rate be 3.5? That was the last big budget fight that I was involved in, 3.25 or 3.5. I proceeded to buy a house in Anchorage just a few months later. And I called Mayor Williams and I said, I'm just signing a mortgage and my mill rate is 18 mills. And it just shrunk this stupid fight that we had had. The fact of the matter is City of Kenai can be proud of holding their mill rate steady. Congratulations for holding the mill rate steady. And a growing city that has a natural growth of property, that's what your inflation is. That's what pays your raises. That's what pays more for an ambulance this year than for one 10 years ago. But that middle lever that you have never, you will never have any control over has spiked. And this proposal, this proposal goes to your third lever that you've never used in your life before to offset the lever that you don't get to control. Mr. Mayor, thank you for your grace and giving me extra time.

Thank you very much. And absolutely, would you be available for any questions?

Love it. Absolutely love it.

Any takers?

I was just curious. Maybe this was asked while I stepped out earlier. Are there any other cities like Soldotna or anyone else using this lever, so to speak, for this exemption?

Just Homer, I understand. 50,000? 20.

Being a little bit of a smart aleck, there's other cities in the borough?

There is one neighbor that raises their sales tax for sure.

Never heard of them. I care about Kenai. I only care about Kenai. Appreciate that.

Go ahead.

So you're not in favor of a mill rate reduction? Sure.

Sure. I'll take a mill rate reduction. It'll help me at a couple of other businesses, which isn't what we brought this forward. I'll take a mill rate. Sure. Love a mill rate decrease. But that's not if I was bringing forth a mill rate increase decrease. That isn't what this plan was about. I have no idea what friend James thinks of a mill rate discussion. But remember, a mill rate is not targeted. One target in the Kenai Peninsula borough that's mill rate targeted. Anybody know it? Oil and gas properties. That's it. We don't have a lot of oil and gas properties inside the city limits, but there are a couple. That's the only thing that mill rate is out of your hands.

Mr. Vanek, thank you very much. Go ahead.

Thank you, Mayor. Thank you, Mr. Bannock, for coming out. As this ordinance is written, is this something that you would support, or is this something you think that should be changed?

And that's a loaded question. I'm very curious. I'm disappointed in it because it doesn't go far enough. What I came and spoke to you about two weeks ago included both the... I stand corrected. My goal was to match what the borough does on senior citizens disabled veterans, and everybody else. As noted, the borough's got all kind of bank stabilization, firefighter. There's a whole gaggle of other borough exemptions. My goal was just those three things. Everybody gets a 75. The borough has done it. You've never done it. Senior citizens get an extra one fifty. The only reason it seems is that you're giving them one fifty now is because the law requires you to do it. The borough successfully doubled that and same thing for um disabled veterans. I don't know what the demographics are of disabled veterans in our town. I know that there are more than a small handful of senior citizens that own and live in their home. That's the key part. In order to get this benefit, I can't buy a rental property. This benefit only applies to my house at 1908 Alleyock Street, where I sleep. Thank you. Thank you again for taking this matter seriously. Thank you for giving me the opportunity to address you directly. May I ask one question, Mr. Mayor? At the meeting tonight where this is scheduled for introduction, generally speaking, there is not any public hearing on an introduction. Will there be a public hearing for introduction of this ordinance tonight?

There will not be. However, it is something that, Madam Clerk, since it's on the consent agenda, is there anything on the consent agenda at some point that the public could speak to it?

Yes, with introduction of the ordinance, what they're technically doing is scheduling the public hearing for September 2nd, and that's when the public, it'll be noticed as a public hearing item, and that's when public is encouraged to speak to it. The merits of tonight's discussion is on the introduction of the ordinance.

Do not take my absence from your meeting at 6 o'clock tonight as a disrespect or not support of this. Uh, but if there's not going to be a scheduled public hearing upon the introduction only. Certainly Mr and I will be back at the next meeting when it is scheduled short of it coming off of the agenda tonight, which would make the next meeting move anyway. Thank you.

Thank you very much for being here tonight.

Thank you.

So having no further discussion, is there anybody else from the public that would like to speak? Anybody online? I'm going to move for adjournment. There's no further discussion. Thank you.