Dillingham looks to tidy up tax exempt code

Sep 13, 2017

Res. 2017-08 proposes changes to who gets automatic tax exempt status, which small business must collect sales tax, and raising the sales tax cap from $2,000 to $5,000. A workshop and two public hearings are being planned before it comes up for a vote.

Credit KDLG

At its Thursday meeting, the Dillingham city council introduced resolution 2017-08, the lengthy result of month of months of work by the code committee. The council had sought to clarify which non-profits are exempt from paying sales tax in town, and which small businesses are exempt from collecting it.

“We started out looking at our code to change to those or to fix them, and then because we were doing a comprehensive review, we found a lot of areas where we felt there could be some cleanup and revisions,” Mayor Alice Ruby said.

Last year the city recognized its tax exempt list had grown oddly long, with clearly for-profit businesses slipped in among any organization that claimed to be non-profit. Then-manager Rose Loera and finance director Navin Bissram began removing some obvious mistakes from the list and asked the council to set a policy for which non-profits should be granted tax exempt status.

Resolution 2017-08 recommends 501(c)(3) and 501(c)(4) organizations be included, and allows room for others to apply. Most religious and charitable organizations, like the SAFE shelter, fall under 501(c)(3), and social welfare organizations like the Bristol Bay Economic Development Corporation, are 501(c)(4). BBEDC offered the loudest protest after the city originally moved to revoke its tax exempt status.

The proposed code changes would also raise the sales tax cap from $2,000 to $5,000, which may not affect most grocery shoppers but will add to larger purchases like snowmachines or boat motors that a person could choose to buy from Anchorage instead.

“The net effect to that is an addition $180 in sales tax, so that might be something the public is interested in weighing in on,” said Ruby.

Several years ago a citizen initiative to help artists and local growers resulted in a larger change to code that any business that did less than $10,000 did not need to collect sales tax.

“That’s sort of not worked out either,” said Ruby.

The new recommendation is to leave “home businesses” that gross less than $10,000 in sales exempt, and pull the rest back into normal city compliance.

The council will have a workshop for Resolution 2017-08 in October, followed by two public hearings to gather input before taking it up for a vote perhaps in December.

In other business, interim city manager Don Moore said he is bound by family reasons to leave when his contract expires October 1. He spoke about some of the problems the city has had with retention and turnover. The public works director resigned over the summer, and in the past few weeks the city clerk, fire department office assistant, and a payroll technician have quit. The Public Works Department is routinely turning over its laborers.

Port director Jean Barrett is now filling in as acting head of Public Works along with his usual duties. Moore asked the council to create a new position to allow similar sharing of duties upstairs in city hall, too.  

“We have essentially had the planning director doing the work of an assistant city manager, and I think it’s very important that you formalize that, codify that change so that your organization reflects reality.”

Courtenay Carty is the city planner Moore recommended for the new position. He said an assistant manager could provide continuity during transitions and help cover what he called a “broad range of responsibilities” recently passed from the state down to municipalities.

He updated the council on other business, including the ongoing battle to keep the city sewer infrastructure working and in compliance with state environmental regulations. The lagoons near the Wood River are in violation, and Moore suggested that a proposed new aeration system will likely solve most of the problems there.

“The current aeration system was installed in the 1980s, and not only is it old and aging, but it’s broken. There are pieces missing, and it just doesn’t do what it’s supposed to do,” he said.

With the council’s blessing, Moore will put a design for a new system out to bid. An engineer’s estimate put the cost of the design alone at $90,000, but Moore got preapproval of funding for that from Alaska Native Tribal Health Consortium. He suspects the actual replacement cost will come closer to $1 million. There has been no discussion about moving the sewage lagoons, which are increasingly near the river’s eroding banks, rather than investing more to fix the old ones, something the old city administration had suggested was a possibility.

The city’s annual fuel purchase was awarded to low-bidder Bristol Alliance Fuels, the second year in a row the Bristol Bay Native Corporation subsidiary has won the contract. The fuel bill went up from $244,000 last year to $318,000 fiscal year 2018, Moore said, because the city is purchasing more fuel, and the prices went up.

“Diesel #1 was raised .32 cents per gallon, diesel #2 .52 cents a gallon, and unleaded gasoline .46 cents a gallon.”

In other business, the council approved action, up to and including seizing fishing boats, against three local fishermen who are several thousand dollars behind on their personal property taxes. The state sent a letter saying some sort of changes are coming for their municipal jail contracts, but did not specify what except that it would not necessarily be “bad” news for the city. Moore spoke for several minutes about the bear problem he said is being encouraged by poor handling of waste at the landfill’s fish bin, something he sees a lot of room for improvement on. And Mayor Alice Ruby mentioned she had taken a number of complaints over the summer about the broken ice machine at the harbor, and suggested the city consider replacing that piece of equipment that is so critical to local spring halibut and fall coho fishermen.

dave@kdlg.org or 907.842.5281