After spending the bulk of Tuesday’s work session hearing from City of Nome department heads, the Nome Common Council scheduled an additional work session for Friday evening. As spring sunlight irradiated the council chambers, six councilmembers met to discuss its most pressing item – how much it would contribute to Nome Public Schools before its May 31 deadline.
The city is anticipating balancing its budget through appropriations for the fifth consecutive year, that’s if they don’t take corrective measures.
Standing in for the absent Mayor, councilmember Mark Johnson invited members of the audience to address the council before getting underway. Bering Straits Native Corporation VP of Nome Operations, Larry Pederson, encouraged the council to reconsider a seasonal sales tax.
“The only immediate solution that would be fair, kind of across the board, and capture the seasonal workforce is the miners that show up in the summer, and all of that would be a sales tax,” Pederson said.
Nome previously had a seasonal sales tax of 7% between the months of May and August, but that was repealed by voters in the fall of 2022. An increase in sales tax, whether seasonal or year-round, would require a majority vote to approve.
A budget option presented to the council earlier in the week showed that a year-round increase from 5% to 6% would increase revenues by $800,000 in its first year. How much revenue a renewed seasonal sales tax would generate has not been shared publicly at this time.
An increase to the mill rate, which is used to calculate property taxes, from 11.5 to 13 is also being considered. According to a draft budget, such an increase would raise an additional $731,810 in revenue.
Councilmember Scot Henderson said he wasn’t leaning toward one option, but wanted the council to be mindful of the long-term impacts repealing the seasonal sales tax has had.
“I'm not saying one tax is better than another, or even preferred. But when you just look at the numbers and kind of get away from the emotional parts of it, or the political parts of it, it seems pretty clear to me that once we got rid of that seasonal sales tax our deficit spending started,” Henderson said.
Pederson suggested expanding city limits to increase its taxable base.
“Long term, I would encourage the council and the new city manager and staff to look into the city limits,” Pederson said. “There's probably over 100 households outside of city limits that utilize city facilities but don't pay any taxes on the maintenance and upkeep of those facilities.”
Pederson’s thoughts on expanding city limits ignited a lively discussion, with City Manager Lee Smith, Public Works Director Cole Cushman and Johnson chiming in.
“So if we expanded our boundaries outside of town and they're on state roads, wouldn't the state still have to maintain those?” Johnson asked.
“They'd wind up negotiating with us,” Smith said, conceding that the move would put extra work, and expense, on Public Works’ plate.
“Then you would potentially be responsible for plowing the roads at Banner Creek and Osborne and wherever, Newton, Snake River,” Cushman chimed in.
Douglas Doherty elaborated on a letter he drafted favoring an increase in sales tax to as much as 9.5%, with the tradeoff of eliminating property tax entirely. He made the case for property owners freed of a property tax bill having more cash to spend on goods and services, which are then captured by the elevated sales tax.
“That takes care of problems of inequalities that we face in our community, from people out of town not paying tax, people in town maybe overtaxed,” Doherty said. “This eliminates all of that and it creates a larger net and it is fair for everybody.”
Henderson played devil’s advocate with Doherty, saying the move could have a disparate impact on low-income residents who are often renters. He said property tax is often a small part of the cost of maintaining rental properties, and that any savings from his proposal could be offset from the increased sales tax.
Nanook in the room
With a fast-approaching deadline of May 31 to provide a final funding number to Nome Public Schools, Henderson propelled the conversation forward with a middle-of-the-road proposal. He suggested with an anticipated deficit of $2.2 million and a potential tax increase cutting that deficit in half, the city and school should split the remaining burden.
“If there's about a million dollars left to sort of fix or reduce our budget by, what about splitting that equally between the City of Nome and Nome Public Schools?” Henderson said. “Whether it's through a reduction of costs in terms of reducing operating hours of parts of the city, hiring freeze, travel freeze, sort of, you know, seasonal closures of buildings.”
He suggested the district may need to dip into its apartment fund, earmarked for new teacher housing, as a temporary measure. Nome Public Schools’ Superintendent, Jamie Burgess, joined the meeting by Zoom. She pushed back against the idea, noting that the apartment fund had just over $1 million in it.
“I know you guys have to figure out how to not deficit spend. Be aware that the schools have been facing what you guys have been facing for a decade,” Burgess said.
Wanting to push the council toward a decision, Henderson attempted to poll the council members ahead of a vote at a subsequent city council meeting. Johnson put a kibosh on the informal survey, but not before several present council members indicated they would support such a middle-of-the-road reduction.
The council is expected to vote on resolution R-25-05-06 Tuesday night, which will officially set the city’s contribution to the district ahead of its May 31 deadline.
KNOM will livestream the Nome Common Council's work session and regular meeting Tuesday night starting at 5:30 p.m. The livestream is available on KNOM's Facebook and YouTube pages.
