Before the advent of the King Salmon Derby and summer vacation season, Wrangell residents are invited to enjoy the first of two annual Tax-free Days on Saturday.
“Twice a year we petition the city to have no sales tax,” explained Cyni Waddington, with the Wrangell Chamber of Commerce. The days give consumers a temporary reprieve from the borough's seven-percent sales tax, and area businesses often use the day to offer special discounts and case lot sales.
The last day was held in October to coincide with Permanent Fund Dividend disbursements, while this weekend's date looks forward to sunnier, summery pursuits.
“I kind of look at it like a season opener,” Waddington said. “One of the reasons that day is picked is because it is close to the Derby.”
The Derby kicks off the following weekend, on May 9. Tax-free Day coincides with other seasonal events as well, with the Community Market spreading out its stalls for the first time this year at the Nolan Center Saturday morning.
“It's kind of when things really get started,” Waddington added. “It's just a great time to get everybody out.”
Seven percent may not sound like much at first glance, but it adds up quickly enough. In Wrangell, sales taxes make up the most significant source of revenue for the city. Since 2010, it has increased each year. For the 2014 fiscal year, taxes were up by about four percent over the previous year, from $2,483,000 to $2,597,000.
Sales tax figures are calculated on a quarterly basis, and an audited total of this year's numbers should be available in August.
“It's more or less on target,” explained Lee Burgess, Wrangell's finance director. Projected taxes for this fiscal year will be around $2,675,000.
Four percent of sales tax revenue collected in Wrangell goes to fund its road repair and street projects, with another 68 percent going toward general fund transfers. The latter covers special projects, such as the ongoing repairs on the community pool. The remaining 28 percent makes up the city's contribution to the local school district.
Burgess explained this means of school funding is a recent change, being disbursed directly to the school district rather than through the general fund.
Forecasting what sales tax revenues will be in the upcoming budget requires taking several factors into account, rather than simply expecting what was collected the previous year. Burgess explained construction work, especially larger capital projects, can have a positive impact on sales tax revenue.
For instance, work planned to begin on Evergreen Avenue next year will bring in additional laborers to widen and improve the road. While staying in Wrangell, workers will need food to eat, new work clothing and tools, and so forth.
The continued low price of gas may also be a factor on people's spending, though that can vary. People may consume similar amounts of gas, which at a lower price will mean less tax revenue, or some may take the opportunity to stockpile or consume more. Money not spent on gasoline may similarly end up spent on other items instead.
Similarly, tourism dollars can vary with the number of visitors disembarking each year. An economic analysis for the community run by Rain Coast Data in Juneau for the ongoing waterfront development plan showed that tourism in 2014 had declined by three percent from 2013, though the industry has been bouncing back from post-recession lows in 2012. Of concern, impending cuts to the state ferry budget that would affect an estimated 9,000 travelers this summer may have an effect on spending in Southeast communities.
Tracking the spending by sector in Wrangell is a difficult and time-consuming task. Burgess explained the city may be able to track where the taxes are coming from more precisely in future, once its current accounting software is upgraded. The system it currently uses, while workable, is no longer upgradeable by its designing company.
The exact measure of sales tax revenue forfeited by the city by offering tax-free days is also not known. Lots of work is involved in collecting sales taxes, much less identifying their sources, and Wrangell's local government has been taking steps to meet the current workload.
An opening for a half-time collections clerk position, created by the Assembly in February, is currently being advertised. To offset the additional costs of the position, Borough Manager Jeff Jabusch volunteered a cut to his own pay.
“I think that it's something that is needed,” he told the Assembly at the meeting, adding the increased efficiency in collection would be a benefit to the community in the long run.
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