Opinion ID: 2350715
Heading Depth: 4
Heading Rank: 1

Heading: The assembly-enacted sales tax increase

Text: The Kenai Peninsula Borough, a second-class borough, [1] enacted Ordinance No.2005-09 (Ordinance 9) in June 2005. Ordinance 9 increased the sales tax rate from two percent to three percent. The relevant factual background shows that in October 1964 Borough voters authorized the Assembly to levy a sales tax not to exceed three percent, and that the Assembly established a three-percent sales tax in April 1965, though it reduced the rate to two percent in August 1975. In June 1985 the State enacted AS 29.45.670. That statute provides: A new sales and use tax or an increase in the rate of levy of a sales tax approved by ordinance does not take effect until ratified by a majority of the voters at an election. The statute was a re-numbered modification of AS 29.53.420, [2] and it included a savings clause which directed that [a] right or liability of a municipality existing on January 1, 1986, is not affected by the enactment of this Act. [3] Twenty years later, on June 7, 2005, the Borough Assembly enacted Ordinance 9, increasing the sales tax rate from two to three percent. The increase was to be effective on October 1, 2005, but the effective date was later extended to January 1, 2006. [4] On June 8, the day after Ordinance 9 was enacted, members of ACT and others filed three applications: (1) an application for an initiative to set the sales tax rate at two percent; (2) an application for an initiative to require 60% voter approval at a regular election to approve any sales tax rate over two percent; and (3) an application for a referendum to repeal Ordinance 9. During the October 2005 election, 54.17% of Borough voters approved an initiative setting the sales tax rate at two percent and requiring a 60% supermajority voter approval to increase that rate. One year later, in October 2006, the referendum to repeal Ordinance 9 was put before the voters. The explanation of the repeal referendum in the voter's pamphlet stated that a yes vote would leave the sales tax at two percent, and a no vote would retain the ordinance and allow the sales tax to be increased to three percent. A 57.31% majority voted to retain the Ordinance. On April 3, 2007, the Assembly enacted Ordinance No.2007-07 to impose a three-percent sales tax effective January 1, 2008.