Nome proposes new taxes to deal with dwindling state, federal dollars

Business owners, nonprofit workers, and residents (including Rep. Neal Foster, left) made for a full house in Nome City Council chambers Monday as the council debated contentious tax issues. (Matthew F. Smith/KNOM)
Business owners, nonprofit workers, and residents (including Rep. Neal Foster, left) made for a full house in Nome City Council chambers Monday as the council debated contentious tax issues. (Matthew F. Smith/KNOM)

Nome’s nonprofits and churches will remain exempt from city sales tax—and retailers won’t have their unsold inventories taxed—but efforts to charge property tax on airplanes moved forward.

The rejection of the city council’s tax proposals are just the latest in the city’s months-long struggle to find more revenue after disappearing state and federal funding left an $800,000 hole in the city’s budget.

Last week City Manager Josie Bahnke attended the Alaska Municipal League’s annual conference, a gathering of city administers from around the state. At Monday’s city council meeting Bahnke said other Alaska cities, large and small, are facing similar budget shortfalls and identical scrambles for revenue, raising questions of just what jobs people expect their city to do.

During the meeting, many residents called on the city to get its own financial house in order before raising taxes, but Bahnke said it wasn’t a ballooning city budget—but rather shortfalls in state and federal funding—that has led to the current deficit. She said the new tax proposals were not considered on a whim.

“We did make cuts, we did get down to a bare-bones budget. This year our operating budget has gone down, we all continue to deal with healthcare costs rising … The discussion was around how we could make up for that approximately $800,000,” Bahnke said. “I think the idea of (sales tax) exemptions (as well as) meetings with the city attorney led us down that road.”

While dislike for the proposed taxes was nearly unanimous, Rolland Trowbridge of Trinity Sails and Repair (and KNOM Chief Engineer) took the podium—without expressing support or opposition to any particular ordinance—to emphasize the need for organizations and individuals to be more willing to support a city that allows their nonprofits and businesses to exist.

“There’s a lot of business going on in Nome where sales tax isn’t being collected. A lot of people doing business on the side, repairs, the kind of stuff where they’re just taking cash money,” Trowbridge said. “And for those people doing that, you’re not helping yourself, you’re not helping anybody, because that is what it costs to run this town.”

“The reality is, I depend on this city to function correctly for my business to operate, and so do the nonprofits,” he added. “We all need to start saying, OK, where do we want the money to come from?”

When it came to a proposed property tax on aircraft, Paul Costo, the Nome station manager for Alaska Airlines, stepped up to the podium to tell the council that taxing airplanes could send businesses to other hubs like Bethel, Kotzebue, or Unalakleet.

“There’s some real-life ramifications for the airline industry if you were to start taxing aircraft. Nome would lose not only aircraft, they would lose services and they would lose jobs.” Costo requested more information on how the city would assess any tax, “a formula, a tax plan, and quite frankly, what the aircraft owner is going to get in return for paying their tax dollars.”

Costo added that few other Alaska cities collect property tax on planes, and when they do, it’s usually on city-owned airports, whereas Nome’s airport is state-owned. Council member Jerald Brown said there are enough city services at the airport to merit the tax.

“I’ve seen the fire trucks responding to issues at the airport, I’ve seen police responding to issues at the airport. I know there’s water and sewer provided out there, probably for a fee, so services are being provided,” he said.

The proposal comes up for a second reading — and formal public comment — at the council’s next meeting on Dec. 8.

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