A 2005 ordinance enacted by the Kenai Peninsula Borough Assembly to increase the borough’s local Alaska sales tax rate from 2% to 3% was valid without subsequent ratification by the voters because the voters had previously authorized the assembly to levy a sales tax not to exceed 3% in 1964. (The borough’s original 3% tax rate was reduced to 2% in 1975.)
The 3% rate in the 2005 ordinance was not subject to a state statute that requires voter ratification of any sales tax rate increase approved by ordinance because the 3% rate was not an increase from the rate previously approved by ordinance. Thus, no additional voter ratification was required.
Affirming a summary judgment by the trial court, the Alaska Supreme Court concluded that the 1964 voter authorization of a 3% sales tax preserved the borough’s right to raise the rate to 3%. Moreover, the voters’ subsequent defeat of a 2006 referendum to repeal the 2005 rate increase constituted a ratification of the increase.
The court also affirmed the trial court’s invalidation of a 2005 voter initiative (Proposition 4) that required voter approval for all borough capital projects with a total cost of more than $1 million. This initiative was an impermissible appropriation because it interfered with the borough’s exclusive power to allocate funds among competing uses. It thus violated the underlying purposes of the constitutional restrictions on municipal citizens’ initiative power.
Alliance of Concerned Taxpayers, Inc. v. Kenai Peninsula Borough, Alaska Supreme Court, No. 6659 (Supreme Court No. S-13596/13883), April 6, 2012
Explanations at ¶73-001