2011-04-14 Work Session Kodiak Island Borough
Assembly Work Session
Thursday, April 14, 2011, 7:30 p.m., Borough Conference Room
Work Sessions are informal meetings of the Assembly where Assembly members review the upcoming regular meeting agenda
packet and seek or receive information from staff. Although additional items not listed on the work session agenda are discussed
when introduced by the Mayor, Assembly, or staff, no formal action is taken at work sessions and items that require formal
Assembly action are placed on regular Assembly meeting agenda. Citizen's comments at work sessions are NOT considered part of
the official record. Citizen's comments intended for the "official record" should be made at a regular Assembly meeting.
CITIZENS' COMMENTS (Limited to Three Minutes per Speaker)
ITEMS FOR DISCUSSION
1. Redistricting — Bob Brodie
2. Poly Tunnel Presentation (Hoop Houses)
3. 2011 Revenue Study
4. KHS Final Design Concept
•
PACKET REVIEW
PUBLIC HEARING
Ordinance No. FY2011 -14 Rezoning Lot G -1, U.S. Survey 3218, From B- Business To R3-
Multifamily Residential, and Lots D -2, H -1, H -2, and G -2, U.S. Survey 3218, From RR1 -Rural
Residential One To R3- Multifamily Residential.
UNFINISHED BUSINESS
NEW BUSINESS
CONTRACTS
RESOLUTIONS
Resolution No. FY2011 -25 Authorizing the Borough Manager to Enter Into a Land Use License
With the State of Alaska Allowing the Department of Fish and Game to Use a Portion of Tract B-
1A U.S. Survey 4947 and Entering into a Lease Agreement Upon Recording of a Plat.
ORDINANCES FOR INTRODUCTION
Ordinance No. FY2011 -15 Amending Title 9 Public Peace, Morals and Welfare by Instituting
Chapter 9.10 Fireworks Control to Restrict the Sale and Use of Fireworks in the Borough.
OTHER ITEMS
*Declare a Seat on the Kodiak Workforce Regional Advisory Council Vacant.
MANAGER'S COMMENTS
CLERK'S COMMENTS
MAYOR'S COMMENTS
ASSEMBLY MEMBERS COMMENTS
•
April 7, 201
TO: Borough Manager Rick Gifford, Mayor Jerome Selby & members of the Kodiak Island Borough
Assembly
Re: Proposed permit exemption for poly - tunnels
Dear Mr. Gifford, Mayor Selby and Assembly Members,
As many of you are aware, there has been an increased use of poly- tunnels (hoophouses)
nationwide and, in Kodiak, as a practical and inexpensive means of growing fruits and vegetables. The
KIBC does not specifically address building permits for poly - tunnels, but various provisions in the code
have been construed by Borough staff to require a formal building permit and approval process. In order
to clarify the lawful use of poly - tunnels within the Borough, we believe an exemption from the building
permit process is appropriate.
The poly - tunnel building and construction code exemption will allow gardeners to forego
securing a building permit to set up a poly - tunnel that is used exclusively for the production or storage
of live plants. The purpose of the exemption is threefold:
First, its provisions apply to all non - retail poly - tunnels, either those utilized by home gardeners,
commercial farmers, farm markets or residential homeowners, and it applies uniformly
throughout the Kodiak Island Borough.
Second, growers will not be burdened with the permit requirements of the building and
construction code and the attendant fees such as site plans signed and sealed by a licensed
architect or engineer, building subcode permit fees, etc. and
Third, the exemption will greatly enable gardeners to grow vegetables, fruits and other specialty
crops in our maritime climate at times of the year in which it would otherwise be impossible.
Growers who sell or utilize their poly- tunnel produce locally benefit from the extra income,
improved nutrition and the community benefits from the availability of locally grown food.
[PROPOSED] PERMIT EXEMPTION FOR POLY - TUNNELS
15.10.180 Poly- tunnels
A. A poly - tunnel, also called a "hoophouse" or "high tunnel," used exclusively for the production
or storage of live plants, shall be exempt from the permit requirements of the Kodiak Island
Borough Building and Construction Code if it meets the following criteria:
1. There is no permanent anchoring system or foundation;
2. There is no storage, temporary or otherwise, of solvents, fertilizers, gases or other
chemicals or flammable materials;
3. The structure is no wider than 31 feet and there is an unobstructed path of no greater
length than 150 feet from any point to a door or fully accessible wall area;
4. The covering of the structure is of a polyethylene material no thicker than ten mils;
5. The support structure of the poly - tunnel is made of non - combustible materials, e.g.
metal or plastic;
6. The structure is not utilized for retail sales.
We are hoping some time can be reserved at the April 14, 2011 Borough work session to provide
comprehensive information concerning poly - tunnels and the proposed exemption.
Respectfully yours,
Allan R. Thielen Marion Owen
J;13
Kodiak Island Borough
2011 Revenue Study
Current Situation
Operational costs continue to rise with increases in many areas. Some of these include school district
costs, fuel oil, health insurance, etc. Increases in assessed values have offset some of these increases.
When the voters approved the General Obligation bonds for the High School Swimming Pool, various
other school projects, and the High School Addition and Renovation Project, it went without saying that
revenues would have to be increased to pay for these costs.
To date the Borough has used available fund balance to pay for these increased costs. The FY2011
budget is balanced with a use of fund balance. Per the FY2011 budget this is the last year we can use
fund balance to balance our budget.
Revenue Estimates with Current Revenue Sources
FY2011 Budget
The FY2011 budget is balanced with a use of fund balance of $1,261,581. This is equal to approximately
1.25 mills. This includes both property tax and severance tax.
FY2012 Budget
Based on the current FY2011 budget, there will no longer be fund balance available to balance the
budget. This means that the mill rate will have to be increased 1.25 mills to 11.75 mills just to maintain
the same level of service. This also assumes that there would be no increase in costs or that increased
revenues (mostly increases in assessed values) would offset these increases.
It is anticipated that the School District will ask for an additional $934,833 in their local appropriation.
This is equal to about 1 mill.
To increase our revenues to balance our current budget and to fund the School District at their anticipated
request would mean an increase of 2.25 mills to 13 mills.
FY2013 Budget
In FY2013, the Borough is going to have to start making payments on the 2012A bond issue. This will
require about 1 mill in property taxes. This means the property tax will have to be increased to 14 mills
or about 3.5 mills from what it is today (10.5 mills). Again, there will be increased costs due to inflation
and increased maintenance of facilities as they get older.
FY2014 Budget
In FY2014, the Borough is going to have to start making payments on the 2013A bond issue. This will
require about 1 mill in property taxes. This means the property tax will have to be increased to 15 mills,
about 4.5 mills from what it is today (10.5 mills). And again, there are increased costs due to inflation
and increased maintenance of facilities as they get older.
2
Current Revenue Sources
The Kodiak Island Borough general fund receives funds from property taxes, severance taxes, licenses
and permits, intergovernmental revenues, interest earnings, and miscellaneous revenues.
The following pie chart shows how these revenues were budgeted in FY2011.
General Fund Revenues
1% 0%
1%
n Property Tax • Severance Tax
a Licenses& Permits • Intergovernmental Revenues
o Interest Earnings O Miscellaneous Revenues
As this graph shows, the vast majority of General Fund resources come from property taxes. In fact, 67%
of all General Fund revenues come from property taxes. Intergovernmental revenues accounted for 23%
of the revenue budget and severance taxes amounted to 8 %. The other revenue sources really don't
amount to much.
It should be noted that these revenues were $1,228,872 less than what was needed to fund the current year
expenditures. This difference was made up with a budgeted use of fund balance.
3
Property Taxes
At the current time property taxes make up 67% of the Borough's General Fund Revenues. This puts a
lot of reliance on a single revenue source.
Property taxes
1% 0%
1 ° k
8%
0 Property Tax • Severance Tax
O Licenses& Permits • Intergovernmental Revenues
O Interest Earnings 0 Miscellaneous Revenues
At the current time, the Kodiak Island Borough has an estimated assessed value of $1,000,000,000 (one
billion dollars) for the FY2012 budget. There is $900,000,000 in real property and $100,000,000 in
personal property.
Assessed Value
Budgeted `
1,000,000,000
900,000,000 1111
800.000.000 —
700,000,000 ' ' —
600,000,000 0 ■ ■ '■ ■ ■ ■ ■ ■ ' ■
500,000,000 0 1 .■ JI ■ M I N N A I N N
400,000,000 0 , C ■ : '■ ■ ■ k ■ ■
300,000,000
200,000,000 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ '■ M ■ ■ ■ ■ FY FY FY FY FY F FY FY FY
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
The value of real and personal property has increased in the last several years. Most of this increase has
been due to efforts by the Assessing Department to assign current values to properties which had not been
reviewed in some time.
4
Severance Taxes
Severance taxes make up approximately 8% of the General Fund budget. The majority of severance tax
revenues come from fish. At one time, logging was a major contributor but has not been since FY2000.
Mining has never been a significant revenue source.
Severance Tax Revenues
1% 0%
1% mea
8 %
O Property Tax • Severance Tax
O Licenses& Permits • Intergovernmental Revenues
0 Interest Earnings 0 Miscellaneous Revenues
We are estimating the value of FY201 I severed resources to be $128,000,000.
Value of Severed Resources
Estimated
140,000,000
120,000,000 - ,^
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000 -/
-1- - -
FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011
The Kodiak Island Borough's severance tax rate is set as the same as the mill rate. All of the other local
governments in Alaska set the severance tax rate to a percentage that is independent of the mill rate.
5
Boat Tax
Boat Tax
30,000
25,000 - `
ICI 20,000 I 'iI;� ll I -� I 15,000 I ' N I -
10,000 ! % ! I I '. 5,000 00 0000^ F , � 0 � 0 F � ~011
Only a minimal amount of revenue is derived from the boat tax. Unless the Assembly is ready to increase
this tax by 5 times or more, it won't make a difference in the budget. At this time, taxes on boats only
amount to .14% of the General Fund budget. Boats are taxed at this reduced rate since the Borough
receives severance tax revenues from the boats.
Motor Vehicle Tax
Motor Vehicle Tax
300,000
' Estimated
250,000
MON 150,000 Mr I I II 1 100,000 50,000 I .III=
4 Jti 00 ~ F ,~ 00 3 F ,ry0 0 b F , � 0 0 y F J � 0 0 0 F�� 0 01 F , � 0 0 � F ,~0 0 � F ,ry0 � 0 F ,ry0 1y
Due to increases in the motor vehicle tax rate tax revenues have climbed to between $252,000 and
$275,000. This is equal to about 1/4 (.25) of a mill. If these revenues were doubled, it would only amount
to '/z (.50) of a mill. It would be very hard to raise this rate high enough to make a material difference in
the property tax mill rate. Per Borough code, all motor vehicle taxes go to the KIBSD.
6
Interest Earnings
At the current time, interest earnings make up less than I% of the budgeted General Fund revenues.
Budgeted Interest Earnings
8% 1%
1 °%
_0 ^%
o Property Tax • Severance Tax
El Licenses &Permits • Intergovernmental Revenues
O Interest Earnings O Miscellaneous Revenues
Interest earnings have gone down rapidly since FY2008 and are not expected to rise again in the near
future. When taken together, the interest earnings in the General Fund and the Facilities Fund are around
$1,400,000 less than FY2008. This is about 1.5 mills.
Interest Earnings
3,000,000
2,500,000
2,000,000
1,500,000 ; r o General Fund ,00000 JiIi I1JF - •Facilities Fund
500,000 O Total
0
Intergovernmental
Intergovernmental revenues account for 23% of General Fund revenues. Outside of lobbying, the
Borough has no control over how much we receive in Federal and State aid.
Intergovernmental Revenues
o Property Tax a Severance Tax
o Licenses& Permits • Intergovernmental Revenues
o Interest Earnings 0 Miscellaneous Revenues
1 %0%
gel .- "
afro
1%
8%
PILT- Federal
Payments in Lieu of Taxes (PILT) arc federal payments to local governments that help offset losses in
property taxes due to nontaxable Federal lands within their boundaries. PILT payments are made
annually for tax - exempt Federal lands administered by the Bureau of Land Management (BLM), the
National Park Service, the U.S. Fish and Wildlife Service (all agencies of the Interior Department), the
U.S. Forest Service (part of the U.S. Department of Agriculture), and for Federal water projects and some
military installations. Congress appropriates PILT payments each year. The BLM allocates payments
according to a formula in the PILT Act that includes population, receipt - sharing payments, and the
amount of Federal land within an affected borough.
Federal PILT
1,800,000 ' Budgeted
1,600,000
1,400,000 ,,, _ Amount
1,200,000
1,000,000 ? _
800,000 - �t ti
600,000 v 'Z _, _ a —' _
400,000 D < . —a# _
200,000 i fp
a .— i
0
COIL CC 's OOP e CO 00 ' \ 004 a ors 01~ co'
8
National Wildlife Refuge
The Revenue Sharing Act authorizes payments to local governments whose jurisdiction includes land
being administered by the Fish and Wildlife Service (FWS). The payment that we receive is based on a
percentage of fair market value of lands that the FWS has acquired, the number of acres they hold, and a
percentage of net receipts the FWS collected in their previous fiscal year. This payment is a form of
payment in lieu of taxes, but the land owned by the FWS is not the same land owned by Fish and Wildlife
that generates a portion of the PILT federal payment. The difference is that the land under the National
Wildlife Refuge revenue was previously owned by private individuals and was taxable. The FWS
purchased the land to add to the Wildlife Refuge that they manage on Kodiak Island.
National Wildlife Refuge Shared
Revenue
500,000
Budgeted
400,000
Amount
300,000
100,000 • , , , ,■ ■ ., ■ ;, .,
0
JryO Al, J� F J ryO Oy J�O J�O ° � O O � J � OOO J � O NO F J~ O 1>
9
State Raw Fish Tax
Raw Fish Tax
1,600,000
Actual
am-
1,400,000 ? -
Amount
1,200,000 f " ��
1,000,000 _ �_ ; to -
800,000
,-1, t -+g r ;, '. i .<
600,000 - i . . ? $ ' x
^ , gy , — x tee
400,000 ' , ° .' 4 .; . - -
200,000 ' "� ' ' r °" « ., €
Q I I I I I
F Jry 0 O~ F , � 0 F J � 0 F Jry 0Oy F , � 0 F J � 0 F J � 0 F ,~ 0 F , � 0 F J � 0
The Borough's portion of the State raw fish tax declined significantly in FY2011, by over $300,000. This
is over'' 'A of a mill. Borough revenues from our fish severance tax have also declined.
State Revenue Sharing
State revenue sharing can be a very volatile revenue source. As you can see in the following graph, state
revenue sharing went from $0 in FY2006 to over one million dollars in FY2007.
State Revenue Sharing
1,200,000
Actual
1,000,000 ' Amount
800,000 . -
600,000 11 111 400,000 LII- 'I '. ,
200,000 , ,, , �- a a I 0
F�~ `c,� F�� F� F'�� �ry F'� ti OC) F� 4 1/41 ' 0% S 0%
At this time, we believe that the amount we receive in state revenue sharing will remain fairly constant
over the next 3 to 4 years.
10
Possible Revenue Sources
Sales Tax
In calendar year 2010, the total sales receipts in the City of Kodiak were $400,976,143. The City of
Kodiak realized $9,448,936 with a cap of $45 per transaction. This equals $1,574,823 per percent. If the
tax was not capped, the city would have collected $13,949,813 in tax revenues and each percent would be
equal to $2,324,969. Most of the retail stores in the Kodiak Island Borough are located in the City of
Kodiak.
City of Kodiak Sales Tax
Current Without CAP
Total sales $400,976,146 $400,976,146
Less
Senior Citizens 7,944,927 7,944,927
Government 65,453,204 65,453,204
Wholesale /Retail 27,803,776 27,803,776
Contractors 8,947,848 8,947,848
Amounts over $750 71,940,592 0
Sales Tax Included 719,292 719,292
Other 57,610,210 57,610,210
240,419,849 168,479, 257
Net taxable sales $160,556,297 $232,496,889
The sales tax revenues have been increasing steadily since calendar year (CY) 2002.
City of Kodiak Sales Tax
10,000,000 - j (
9,000,000 ' I. •
8,000,000 F I -
7,000,000 -i E`
6,000,000
5,000,000 ' t
4,000,000 tt (,
3,000,000 - { ( 4
2,000,000
1,000,000 -� �' 1. 1 1 7 -
02002 Cv2003 02004 02005 02006 02007 Cv2008 02009 02010
This would indicate a strong economy.
11
At this time, the City of Kodiak (6% with cap), the City of Larsen Bay (3% with no cap), the City of
Ouzinkic (3% with no cap), and the City of Old Harbor (3% with $500 cap) each collect a sales tax.
Per Alaska statutes, the Borough should collect all sales taxes within the Borough and distribute them
without a cost to the cities within the Borough.
Sec. 29.35.170. Assessment and collection of taxes. (a) A borough shall assess and collect property,
sales, and use taxes that are levied in its boundaries, subject to AS 29.45. (b) Taxes levied by a city shall
be collected by a borough and returned in full to the levying city. This subsection applies to home rule
and general law municipalities. (§ 10 ch 74 SLA 1985).
If the Borough institutes a sales tax the Borough could collect all sales tax or could contract with one of
cities within the Borough to collect the sales taxes for the Borough and the other 3 cities. If the Borough
was to contract with one of the cities to collect all of the sales taxes levied within the Borough, it would
probably be the City of Kodiak. The sales tax rules should be the same for the Borough and all of the
cities.
The City of Kodiak has a 6% sales tax which is capped. This table shows the amount of sales tax that
would have been collected in the City of Kodiak in CY2010 at different rates with and without a cap.
Capped Uncapped
160,556,297 1% 1,605,563 232,496,889 1% 2,324,969
160,556,297 2% 3,211,126 232,496,889 2% 4,649,938
160,556,297 3% 4,816,689 232,496,889 3% 6,974,907
160,556,297 4% 6,422,252 232,496,889 4% 9,299,876
160,556,297 5% 8,027,815 232,496,889 5% 11,624,844
160,556,297 6% 9,633,378 232,496,889 6% 13,949,813
12
Increase in Severance Taxes
At the current time the Kodiak Island Borough has one of the lowest severance tax rates in the State.
Most other municipalities are charging 2% or more.
Aleutian East Borough
�1♦�
Bristol Bay Borough ' ` " " }'"'`" t ,x ' . a a
Chignik - Other Fish - __
Chignik - Salmon'
Egegik — '—
False Pass - --
King Cove /1111
Kodiak Is. Borough
Lake & Peninsula Borough —_—
Pilot Point .. x
Sand Point - - - =■
St. Paul "'
j a
Unalaska
Yakutat nail
0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00%
The Borough currently sets the severance tax rate to be the same as the mill rate. We can change our code
through ordinance to set the severance tax to be a flat percentage.
Every percent of severance tax equals about I '/a mill.
Increases in the mill rate change the severance tax rate. By setting the severance rate at a flat rate, the
severer of natural resources would get more notice on rate changes. The mill levy is determined in the
first week of June which gives the severers only three weeks notice if there is an increase.
Boat Taxes
We could increase the amount of boat taxes. While this would not make a material change in our
revenues, unless we were to increase them by 5 or 10 times, it would help cover the cost of accounting for
them.
13
KODIAK ISLAND BOROUGH
ASSEMBLY WORK RK SESSION
Work Session of: Agri/ / 02011
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