Anchorage economic development group proposes 3% sales tax to help reduce property taxes and build public projects

A group of business leaders assembled by the Anchorage Economic Development Corp. is proposing an Anchorage sales tax to offset property taxes and raise money to build public amenities.

The proposal by Project Anchorage, in development for about a year, could help trigger new construction and economic activity while aiming to reduce the outmigration that has thinned the Anchorage workforce, organizers of the proposal said Tuesday.

The idea calls for a 3% tax on some items, organizers said. Members of the public will propose the projects that could ultimately be built with the money. The tax would end after five years, organizers said. To reduce the impact on lower-income households, it would exempt many purchases, including most groceries, rent payments, child care, gasoline, medical expenses, and items that are resold, such as on Facebook Marketplace. Taxable purchases would be capped at $1,000.

Circumstances today are different from when Anchorage voters rejected past sales tax initiatives, including by a 70-30 split in 2006, organizers said.

The proposal would help lower housing costs, they said. New facilities, perhaps additional urban trails, community centers, indoor recreational centers, libraries or a downtown walking district, could help attract residents and reverse several years of declining city population, they said.

[A shrinking workforce is hobbling Anchorage’s economic recovery, report says]

“We have a housing affordability crisis right now, and this seeks to address that by reducing one expense that’s involved in housing, which is property taxes,” said Jenna Wright, president of the economic development group, speaking to news media Tuesday.

Wright said the sales-tax idea is inspired by Oklahoma City, which in the 1990s faced many of the same economic struggles Anchorage faces, including families that were leaving, she said. Voters on multiple occasions approved temporary sales taxes that focused on building amenities, she said.

The sales taxes have funded projects such as a large downtown park, a mixed-use canal and entertainment district, citywide sidewalk upgrades, an Olympic whitewater rafting facility, and a sports and entertainment center where the Oklahoma City Thunder plays, she said.

The projects have helped Oklahoma City attract “billions of dollars of private investment and their economy is absolutely booming,” she said.

Laile Fairbairn, who was part of the group that created the Anchorage sales-tax proposal, said Tuesday that the city needs to attract new workers to help businesses survive.

“We cannot sit by and let outmigration continue to happen,” said Fairbairn, who co-owns multiple restaurants in Anchorage. “It’s a recipe for a dying city.”

Wright said the coalition of business representatives who helped create the proposal came from groups such as the Anchorage Chamber of Commerce, the Anchorage Downtown Partnership, the Visit Anchorage tourism bureau, the Anchorage Homebuilders Association, Northrim Bank, RIM Architects and others.

$180 million from a broader tax base

The organizers of the proposal launched a website, projectanchorage.com, that went live on Tuesday. People can submit ideas for the public projects on the website.

The organizers plan to take ideas until Sept. 15.

If approved by the Anchorage Assembly, the proposal would go before voters next April, organizers said.

The proposal applies to only $1,000 of a purchase, so that would be $30 for the cost of a new car, organizers said as an example.

The measure could generate an estimated $180 million a year, said Nolan Klouda, executive director of the University of Alaska Center for Economic Development. The group was commissioned to do an economic analysis for the proposal.

About 20% of the revenue, or $36 million, would be paid for by people who live outside Anchorage, he said, such as out-of-state tourists and Alaskans visiting Anchorage.

About two-thirds of the revenue, or $120 million, would offset property taxes under the 1984 tax cap, according to the organizers. That would reduce property taxes by more than $1,150 this year on a $450,000 home, Klouda said. That’s the average-valued home in Anchorage, as assessed for tax purposes by the municipality this year.

It would be “dollar-for-dollar for property tax relief,” Wright said.

Anchorage has high property tax payments nationally, but the overall tax burden on Anchorage residents is low, studies show. The city collects no sales tax, the state collects no personal income or sales tax, and state support to municipalities has fallen for many years.

[Anchorage property tax bills are hitting mailboxes. Here’s how to read them.]

The remaining third of the money, or $60 million, would be dedicated to building projects. An inspiration for the proposal comes from the Project 80s effort that in the 1980s led to the creation of public amenities such as the Coastal Trail, the Alaska Center for the Performing Arts and the Loussac Library.

If the sales-tax proposal is passed, each project would break ground only when the funding is available to complete the work, organizers said. It would be debt-free, they said.

A national competition among cities is underway to attract and retain workers, and Anchorage can better compete by taking steps that improve the quality of life, Wright said.

“Our competitive advantage is the quality of life that we can offer, but there is more that we can do to lean into this advantage,” she said. “This project offers us the opportunity to come together as a city and imagine what the next chapter of Anchorage could look like.”

A net increase in tax payments

Klouda said despite the property tax relief and new sales tax revenue from visitors, the sales tax, if approved, would mean an Anchorage household would have a larger overall tax bill, about an extra $240 more a year.

One payoff would be an improved economy with a broader property tax base as new development is created, he said.

Getting a general sales tax approved by voters will be difficult, two former Anchorage mayors said.

Former Mayor Rick Mystrom, a Republican who served from 1994 to 2000, said he supports a sales tax proposal to increase fairness for Anchorage taxpayers. He said visitors to the city use trails, roads, police and other services, but don’t pay for them through a sales tax, he said.

He said past measures have failed because voters didn’t believe property taxes would actually be relieved.

“People need to be convinced the property taxes will go down,” he said.

Former Mayor Ethan Berkowitz, a Democrat who served from 2015 until 2020, said the city has other options it can consider to increase revenue, including a municipal tax, or tariff, on landed and departing products at the Don Young Port of Alaska.

That would be easier to administer than a sales tax, in part because goods at the port can be easily accounted for since it’s a single point of entry, he said.

The sales tax is regressive and “inherently inflationary,” so it would add to the cost of goods, he said.

“The sales tax is just an old tired dog,” he said.

“Other options should have been part of the conversation,” he said. “The idea that we’re stuck between a sales and a property tax is a false dichotomy.”

Several dozen Alaska cities and boroughs already have a sales tax, according to a 2023 state report on municipal taxation.

Anchorage also has various forms of taxes that bring in relatively small amounts of income compared to the property tax revenue that pays for more than half the city’s budget. Among those taxes, Anchorage voters approved a 5% alcohol sales tax in 2020, after several years of failed attempts.

Randy Sulte, who represents South Anchorage on the Assembly and is an ex-officio member of the Anchorage Economic Development Corp., said he’s committed to creating an Assembly resolution for the sales tax.

He said he doesn’t know where his Assembly colleagues stand on the idea.

“I personally like it,” he said. “One thing I’ve heard from people is they want property tax relief.”

Personally, he’d like to see the creation of a community project like the Gathering Place in Tulsa, Oklahoma, a riverside recreational area that features playgrounds, a restaurant, urban gardens, a skate park and other public areas.

He could see a similar attraction being built in the Ship Creek area near the Alaska Railroad headquarters.

“But ultimately, the ideas will come from the community,” he said.