HomeMy WebLinkAbout04252011 City Council Work Session Notes - Library/Museum Funding -2
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WOHLFORTH I BRECHT I CARTLEDGE I BROOKING
A PROFESSIONAL CORPORATION
Julius J. Brecht TELEPHONE
Cheryl Rawls Brooking ATTORNEYS AT LAW 907.276.6401
Cynthia L. Cartledge
Michael Gatti 900 WEST 5TH AVENUE, SUITE 600 FACSIMILE
Clyde W. Hutchins Jr. 907.276.5093
Leila R. Kimbrell ANCHORAGE, ALASKA 99501-2048
Eric E. Wohlforth WEBSITE
WWW.AKATTY.COM
MEMORANDUM
TO: Seward City Council RECE ED
APR 2 20
FROM: Cheryl Brooking, City Attorney 5 -TF�11E
�)F-
DATE: April 25, 2011 CITY CLVRK
SUBJECT: Work Session Regarding Financing Alternatives for Library/Museum
Project
This Memorandum summarizes legal issues related to various funding
alternatives, and incorporates some discussion points raised at public meetings. It is
intended to serve as information to assist Council in its decision-making process. In
2009, Seward voters agreed to pledge the City's full faith and credit for repayment of up
to $5 million principal amount of bonds for the library/museum project.
1. Alcohol Beverage Taxes.
AS 04.21.010(c): A municipality may not impose taxes on alcoholic beverages except a
(1) property tax on alcoholic beverage inventories;
(2) sales tax on alcoholic beverage sales if sales taxes are imposed on
other sales within the municipality;
(3) sales tax on alcoholic beverage sales that was in effect before July 1, 1985;
and
(4) sales and use tax on alcoholic beverages if the sale of alcoholic beverages
within the municipality has been prohibited under AS 04.11.491(a)(1), (4), or (5).
a. Property Tax on Alcohol Beverage Inventories.
The alcoholic beverage inventories would be tax based on the City's mil rate,
which is currently 3.12.
Seward City Council
April 25, 2011 .
Page 2
AS 29.45.090(a) ". . . all property on which an ad valorem tax is levied shall be
taxed at the same rate during the year." (This provision applies only to property taxes
and not to sales taxes.) Keane v. Local Boundary Commission, 893 P.2d 1239 (Alaska
1995).
The business inventory would be valued on January 1 unless the City by
ordinance adopts the average monthly method. AS 29.45.110(b).
Business owners would be required to file an annual property return with the
Borough. The Kenai Peninsula Borough would collect and remit the tax to the City of
Seward pursuant to AS 29.35.170.
b. Sales Tax on Alcoholic Beverage Sales.
Currently alcohol is taxed with other retail sales according to SCC 5.35. State
law requires that there must be at least one other item taxed at the same rate. AS
04.21.010(c)(2) and Interior Cabaret, Hotel, Rest. and Retailers Ass'n v. Fairbanks
North Star Borough, 135 P.3d 1000 (Alaska 2006).
A tax on the wholesale sales of alcohol may be prohibited as double taxation
because the City taxes alcohol sales at the retail level.' Furthermore, there may be no
actual wholesale sales of alcohol in Seward that would trigger a taxable event or
provide the nexus for a taxable sale to occur. Quill Corp. v. North Dakota, U.S.
(1992). Bragg/Fannon v. Matanuska-Susitna Borough, 192 P.3d 982 (Alaska 2008).
The Alaska supreme court distinguished an excise tax from a sales tax on the basis that
a sales tax involves a transfer of ownership for consideration within the jurisdiction of
the taxing entity. There may be no taxable event at the wholesale level occurring within
Seward, at least with regard to alcohol.
2. Sales Tax on Alcohol and Tobacco Products.
As stated above, the sales tax should be at the retail level, and if there is going to
be a differential sales tax rate on alcohol there must be at least one other item taxed at
that rate. AS 04.21 .010(c)(2) and Interior Cabaret, Hotel, Rest. and Retailers Ass'n v.
Fairbanks North Star Borough, 135 P.3d 1000 (Alaska 2006).
The Kenai Peninsula Borough would be expected to collect, disburse and
enforce this tax.
1 "Sales tax" is not defined by Alaska Statutes. Black's Law Dictionary defines the tax as being on retail
sales. The State Assessor believes a sales tax could be on wholesale sales, but not if there is a retail
sales tax in place.
Seward City Council
April 25, 2011
Page 3
The potential impacts would primarily fall on business owners and the Kenai
Peninsula Borough in terms of accounting for the tax, collecting, disbursing, and
enforcing.
a. Tobacco Products Only.
The State of Alaska currently imposes an excise tax on cigarettes, exempting the
first 400 for personal use. AS 43.50. The City currently imposes a sales tax on the
retail sale of cigarettes. SCC 5.35.
The City could adopt an excise tax on the importation of cigarettes and other
tobacco products similar to the excise tax recently enacted by the Matanuska-Susitna
Borough. MSBC 3.30. It is likely that the City would need to exempt these products
from its retail sales tax to avoid a challenge for double taxation.
b. Increased Sales Tax on Alcoholic Beverages and Tobacco Products.
A 10% tax on alcoholic beverages and tobacco products is proposed. Taxing
both items at the same rate would meet the requirements of AS 04.21 .010(c)(2). Local
businesses would make a one-time change to their systems to calculate and collect a
different rate of tax for those items.
The Kenai Peninsula Borough would collect and remit the sales tax, as it has
done in the past. AS 29.35.170. It is not known if the different rate would be an
administrative burden for the Borough.
3. Seasonal Sales Tax.
A differential seasonal sales tax with a higher rate during the summer months
and a lower rate during the winter months was proposed. This variable rate model
could be based on the ordinances now adopted in Seldovia. SMC 3.08. The Kenai
Peninsula Borough has the legal responsibility to administer the tax. AS 29.35.170.
The considerations in adopting a seasonal sales tax include the following:
a. The ordinance should clearly state that the taxable event occurs at the
time goods are transferred or when services are provided.
b. Business owners within Seward currently need to change their systems
twice annually to reflect the Borough's seasonal exemption for non-prepared food items.
Seward seasonal sales tax would require business owners to change their systems four
times annually.
c. At the borough level, the Kenai Peninsula Borough is required to track and
allocate the tax dollars for each community based on the dates as reported by the
businesses. Currently, the Seldovia seasonal tax has imposed an administrative
Seward City Council
April 25, 2011
Page 4
burden on the Borough because the taxes need to be processed manually. The
Borough has expressed concern over the administrative burden that may be caused by
a seasonal sales tax if adopted by Seward.
4. Increasing the Sales Tax Cap.
Currently the City caps the sales tax on individual sales at $500. In the past
there have been discussions and attempts to raise the tax cap to $1000. An increase in
the tax cap would have no effect or minimal effect on the procedures already in place
for the business owners, the City of Seward and the Kenai Peninsula Borough.
The impact of this sales tax increase may fall more on renters and visitors to
Seward who purchase lodging and other services.
5. Flat Sales Tax Increase.
A sales tax rate increase would have no or a minimal effect on the existing
procedures and administration of the City's sales tax at both the City and Borough
levels.
The revenues from an increase in sales tax would primarily stem from sales and
services provided during the summer months when most sales occur, thereby spreading
the burden beyond just the tax paying residents of the City of Seward to include other
visitors to the library/museum.
In 2009, Seward voters rejected, on an advisory basis, an increase in the sales
tax of .5%. The advisory vote occurred prior to the analysis of other options. It is
uncertain whether the result would be the same if the facts known today were to be
presented to those same voters. Council may want to consider hiring a polling company
to conduct a survey of the Seward residents.
6. Increase in the Real Property Tax Rate.
The current mil rate is 3.12 within the City of Seward. A real property tax poses a
greater burden on land owners and does not share the cost of the library/museum
expansion with all potential visitors to the library/museum.
Council considered and rejected an increase in the property mil rate. If the
bonds are issued and no other funding sources are available, the City will have pledged
its full faith and credit and may need to take another look at this option at some point
down the road.
Seward City Council
April 25, 2011
Page 5
7. Other Potential Options.
a. Increase in the City's bed tax. Currently the bed tax is 4%.
b. Occupational taxes. The City of Seward has the legal authority to levy
taxes on commercial business activities, such as a vehicle rental tax or other
occupational taxes. Currently the City's policy has been to encourage persons to
conduct business in Seward and does not impose occupational taxes for the privilege of
doing business in Seward.
Statewide Public Library Construction Projects Status Updates / FY2012 State Assistance Funding Requests4( II
State State J
Community Project Type Project Status Funding Funding -
Request Received
/Cordova New Library Construction Began September 2009. Completion Anticipated Fall of 2012. $2M FY2011 •
e ✓Kenai Expansion Construction Began May 2010, Completion Anticipated Summer of 2010. $1.5M FY2011
✓Seward New Facility Completing Design Phase.Anticipate Spring 2011 Construction Start. $4.7M FY2011 w
m ti✓ Petersburg New Facility Completing Design Phase,Anticipate Spring of 2012 Construction Start. $3.25M FY2011 3
co
y /Barrow Expansion Construction Began June 2010. Completion Anticipated February 2012. $350K FY2011
/Sutton New Facility Completing Design Phase. Anticipate Spring 2010 Construction Start. $1.5M FY2011
Design CIP State Timing
Community Project Type Site Space Concept List Cost Local Funding Funding For State
Ownership Program Study Ranking Estimate Request Funding
$2.5M G.O. Bond +
d Soldotna Expansion Yes-City 6,431 SF A( #3 $6.4 $425K City+Grants+ $3.2M FY2012
Local Fundraising
ft $5.2M G.O. Bond +
c
Ketchikan New Facility Yes-City 16,250 SF ✓ #3 $12M Grants+ Local $6M FY2012
Fundraising o
Sales Tax Revenue+ • 3
u.
cv Skagway Expansion Yes-City 1,200 SF ✓ #3 $1.3M Grants+ Local $650K FY2012
N Fundraising
>. General Fund + Grants
Kodiak New Facility Yes-City 17,000 SF ✓ #2 $13.6 $6.8M FY2012
+ Local Fundraising
Note: The communities of Anchorage and Fairbanks are seeking FY2012 state funding assistance for necessary renovations/upgrades to existing aging public
library facilities(ANC-Z.J. Loussac Library and FBX-Noel Wien Library) outside of the current Library Construction and Major Expansion Matching Grant Program
as current grant regulations address new construction and expansion only. The Alaska State Library Association fully supports these funding requests.
Design CIP State Timing
Community Project Type Site Space Concept List Cost Local Funding Funding For State
Ownership Program Study Ranking Estimate Request Funding
Portion of$10M Trust+
Fairbanks/ New FacilityYes-Borough In Next TBD TBD $550K Earnings+
g $5.5M FY2013
North Pole Progress Step Grants+ Local
Fundraisin.
Sitka Expansion Yes-City In Next TBD TBD G.O. Bond + Grants+ $7.5M FY2013
Progress Step Local Fundraising
The Following Public Libraries Are In Early Stages Of Planning.Further Information Will Be Provided As These Projects Evolve.
Anchor Point—New Facility • Craig—Expansion • Juneau, Downtown—Improvements • Juneau, Mendenhall Valley—New Facility • Nome—New Facility
Palmer—Expansion • Talkeetna—New Facility • Wasilla—New Facility
Version 04.25.2011
SUPPORTING INFORMATION FOR DEVELOPMENT OF STATEWIDE PUBLIC LIBRARY CONSTRUCTION PROJECTS
- FY2012 STATUS UPDATES/STATE ASSISTANCE FUNDING REQUESTS
This matrix represents the collaborative initiative of statewide library directors, community leadership, Friends of the Library groups and volunteer steering committees. These partnerships are
leading and supporting new construction or renovation of public libraries in their communities.The intent of this effort is to continue to provide a comprehensive statewide view of all known public
library construction or renovation projects highlighting each project's current status toward meeting today's commonly accepted criteria for applications to funders for capital funding.
Senate Bill 119(Chapter 55 SLA 08)was signed into law on June 4,2008. Section 2 of the bill (AS 14.56.355)established a public library construction and major expansion grant matching program.
Many libraries are currently poised to begin the grant application process in order to secure funding from this program.A focus group is currently working with DCCED administration and staff to:
• Align grant regulations and grant solicitation processes to better serve Barrow(expons,on)
Alaska's public library Statewide
brary
• Determine the best long-term opportunity for state funding of library PuP
construction projects Prrc ojea citss
• Achieve the intent of the legislation enacted and to support public library
construction funding as a recurring line item of the state budget
C
This group includes library leaders, and supporters as well as government
administrators and construction professionals from around the state. It is the intent of
NomeFairbanks(expansion)
this group to have recommendations for improvement of this grant program approved roewrotinu �Nwth Pole(new facility)
and in place by July 1 FY2011 to better serve those communities seeking state funds in
FY2013 and farther into the future.
A ranking process and criteria for known library projects was developed to: 6 •Sutton(new facility)
Wasilla••Palmer(expansion)
(new focihty)igAnchorage(improvements)
• Confirm outcomes of project planningand feasibilityactivities SoldMna( a van)
P j +Kenai jrxponsion/7Cordo� S�a�aY
wherein projects: Anchor Point SSeward (new Jorilrty) (expa`uo-- ` Juneau(new facility)
• (new facility) (new facility) renovonor *\(improvements/
Meet a documented need oSitka T Petersburg
• Are consistent with strategic/community plans v (expansion) • ` :to....facility)
Kodiak ` �
• Have explored funding opportunities with collaborators
(new facility) Craig Ketchikan
• Have appropriate facility and site plans and realistic project 0=1 (expansion) i'`'ra,day)
budgets that are financially sustainable Ca 00
• Will not negatively impact the sustainability of the proposing 42X
organization "'°
• Have a fully developed and vetted business plan
• Identify timing of need for state funding critical for each community's ability to leverage additional capital funding from agencies and private funders agencies
• Identify local matching funds as required
This information formed the basis for building the consensus among the librarians and all stakeholders for the communities of Cordova,Kenai,Seward,Petersburg,Barrow and Sutton to apply
and receive state funding for FY2011 and for the communities of Soldotna, Ketchikan, Skagway and Kodiak in FY2012. (To report new or additional projects and to obtain a list and contact
information for statewide librarians participating in this effort contact David Ongley,President,Alaska Library Association at david.ongley(atuzzy.orq or 907-852-4050 x22.)
The following links are offered for your reference:
AS Statute Reference; AS 14.56.355.356 enacted into law September 2, 2008. Enacted Library Construction Regulations and Major Expansion Matching Grant Program. Multiple Library Projects
have received the support of The Foraker Group Pre-Development Program. To learn more about this program visit: http://www.forakergroup.org/index.cfm/Shared-Services/Pre-Development or
contact:Chris Kowalczewski at ckowalczewski@forakergroup.org or 907-743-1200.
•
CITY OF SEWARD
CASH BALANCES IN ALL FUNDS
at 4/25/11
Fund Name Cash Balance
General Fund $6,844,328
Harbor Fund
Harbor Enterprise Fund $1,171,527
Harbor MMRF $1,428,149
Harbor expansion capital project(Z float) $402,959
Seward Marine Center(Sikuliaq) ($34,818)
Harbor dredging capital project ($661 )
USCG building relocation $104,621
Harbor renovations (T-Dock) $11,537
Harbor passenger fee bond fund $256,254
3,339,568
SMIC Fund 639.349)
Parking Fund $367,073
Electric Fund
Electric Enterprise Fund $732,828
Transmission Line Capital Project $566,136
Depreciation Reserve Fund $423,889
Fort Raymond Generator Project $66,964
1,789,817
Water Fund
Water Fund $1,652,434
Depreciation Reserve Fund $4,019
W/S line model, engineer, construct $30,663
Water storage tanks capital project ($353,272)
Fire hydrant Phase II capital project $47,416
Third Avenue water line project $45,000
1,426,260
4l Z5/11 ui.5
CITY OF SEWARD
CASH BALANCES IN ALL FUNDS
at 4/25/11
Wastewater Fund
Wastewater Fund $364,292
Depreciation Reserve Fund $112,115
476,407
Motor Pool Internal Service Fund $740,398
Capital Project Funds
Capital Acquisition $229,691
Library/Museum project ($92,896)
Library inventory, automation, earthquake grants $11,788
Police comm. equipt& camera grant ($190,298)
Fire equipment grant ($37,447)
Seward Mountain Haven $12,098
MIS VOIP, networking, web page $51,980
Fourth & Adams Park Grant $8,524
Flood mitigation & disaster grants ($218,610)
Playground R&M funding $7,293
ASLC seawater pump grant ($1 13,645)
Hoben Park grant $17,808
(313,714)
Special Revenue Grant Funds
Litter Patrol $547
Two Lakes Park $2,520
Historic Preservation grants (Wada, JLH) (S78,151 )
(75,084)
Compensated Absences Fund $457,188
LTC Debt Service $2,404,847
Hospital Debt Service $657,076
Teen Council Fund $48,818
$18,123,633
4720f
CITY OF SEWARD
1/()
CASH BALANCES IN ALL FUNDS
GENERAL FUND DETAIL at 4/25/11
(A) (B) (C)
Cash Balance Council
Fund Name at 4/25/11 Designations Undesignated
General Fund $6,844,328
Other Fund cash shortfalls 770,395 (a)
Designated for working capital 1,500,000
Designated for insurance reserves 126,418
Designated for PERS payment 134,704
Designated for Hospital cash flow 500,000
3,031,517 3,812,811 (b)
Unbudgeted potential requirements:
Library/museum project fundraising shortfall
Library/museum project cost escalations
Alaska Sealife Center needs
Hospital/LTC operational shortfalls
Community Health Center startup costs
Enterprise Fund shortfalls
Hospital capital budget
General Fund-related infrastructure replacement(no funding mechanism in place to replace $129 million in governmental assets
and$158 million in business-related assets)
Cash covers 3.9 months'expenditures. City of Seward Fund Balance"band" is between 3 and 6 months,or between$2.8 million and$5.7 million.
(a) Other fund shortfalls does not include funds which are combined into enterprise funds,which legally the General Fund would be required to cover.
(b) Undesignated fund balance is not the same thing as cash,but undesignated fund balance is an approximation of cash.
4(z/,, W5
ALSO ALS 25-Apr-11 10:32 AM
City of Seward
Audit Lead Sheet
as of if/2s/ii
FUND: 001 - Central Treasury
Adj Entry Reclas
Sub Last Year This Year This Year Debit/ Adjusted Debit
GL Acct Description Balance Budget Balance Credit Balance Credi
ASSETS:
1020 Cash- Treasury $ 1,667,414.37 $ - $ 4,453,483.50 $ - $ - $ -
1030 0010 Investments 15,921,336.32 - 13,670,149.99 - - -
1300 0101 General Fund (7,956,131.31) - (6,844,677.99) - - -
1300 0102 Motor Pool Fund (675,324.65) - (740,397.26) - - -
1300 0103 Capital Acquistion (224,770.80) - (229,690.09) - - -
1300 0104 Compensated Leave (457,188.35) - (457,188.35) - - -
1300 0208 Lawing/Ft.Ray.T-Line (575,599.38) - (566,135.55) - - -
1300 0215 ALPAR (587.84) - (546.59) - - -
1300 0220 Two Lakes Park (2,520.19) - (2,520.19) - - -
1300 0271 FY97 Muni Grants - - 78,150.59 - - -
1300 0274 Sm Boat Harbor Exp (723,922.66) - (402,959.01) - - -
1300 0275 Sm.Boat Hrbr.South 15,875.23 - 34,818.00 - - -
1300 0276 B Street Dock 111,591.61 - 661.18 - - -
1300 0277 Harbor Cap Projects (263,914.42) - (104,621.49) - - -
1300 0306 1995 Flood Disaster 7,957.86 - 1,599.70 - - -
1300 0315 SBH Repair/Renovate (11,537.41) - (11,537.41) - - -
1300 0401 Harbor Fund (1,534,330.55) - (1,171,526.69) - - -
1300 0402 Harbor MRRF Fund (1,053,856.32) - (1,428,148.82) - - -
1300 0403 Parking Revenue Fund (387,337.54) - (367,073.04) - - -
1300 0417 SMIC Operations 27,141.18 - 39,348.93 - - -
1300 0501 Electric Fund 233,894.11 - (732,828.19) - - -
1300 0502 Electric MRRF (387,761.07) - (423,889.40) - - -
1300 0505 Stndby Elec Generatr (71,713.45) - (66,964.12) - - -
1300 0600 Fourth & Adams Park (8,523.98) - (8,523.98) - - -
1300 0626 Library/Museum CP 156,044.48 - 92,895.57 - - -
1300 0651 Police Cap. Projects 159,105.35 - 190,297.63 - - -
1300 0660 Public Safety 1,913.50 - 1,913.50 - - -
1300 0666 NRCS Levee/Road 347,887.69 - 52,443.88 - - -
1300 0668 Networking, Web Page (53,111.97) - (51,979.97) - - -
1300 0670 Hospital Grants (12,098.45) - (12,098.45) - - -
1300 0700 Water MRRF (4,019.00) - (4,019.00) - - -
1300 0701 Water Fund (1,604,280.77) - (1,652,433.89) - - -
1300 0702 Wastewater MRRF (112,115.31) - (112,115.31) - - -
1300 0703 Wastewater Ent. Fund (396,005.81) - (364,292.32) - - -
1300 0704 Forest Acres/Gateway (30,662.62) - (30,662.62) - - -
1300 0707 Storage Tank & Lines - - 79.82 - - -
1300 0708 Fire Hydrant Phase 2 (61,912.00) - (47,416.13) - - -
1300 0709 Water Tank Phase I 353,192.26 - 353,192.26 - - -
1300 0713 3rd Ave Water Main (45,000.27) - (45,000.27) - - -
1300 0800 Seward Mtn Haven (1,689,691.75) - (2,404,847.43) - - -
1300 0801 Hospital Debt Svc. (546,694.90) - (657,075.50) - - -
1300 0804 Teen Council Fund (46,894.44) - (48,817.60) - - -
•
ALSO ALS 25-Apr-11 10:32 AM
City of Seward
Audit Lead Sheet
as of
FUND: 001 - Central Treasury
Adj Entry Reclas
Sub Last Year This Year This Year Debit/ Adjusted Debit
GL Acct Description Balance Budget Balance Credit Balance Credi
1300 0806 Harbor Revenue Bond $ (249,553.18) $ - $ (256,253.60) $ - $ - $ -
1300 0810 Hoben Park (17,807.79) - (17,807.79) - - -
1300 0811 Parks Capital Projec (7,293.15) - (7,293.15) - - -
1300 0826 Library S.R.Projects (11,788.22) - (11,788.22) - - -
1300 0851 Fire Dept. Grants (3,679.00) - 37,447.40 - - -
1300 0866 Natural Disasters 224,139.22 - 162,652.47 - - -
1300 0890 Pass-thru SR Fund - - 113,645.00 - - -
(135.37) - (350.00) - - -