City and Borough of Juneau
Assembly Finance Committee Meeting
Wednesday, November 19, 2008 at 5:00 p.m.
Assembly Chambers

Note: The Committee will not be taking public testimony.

I. Call to Order

II. Roll Call

III. Approval of Minutes
- September 10, 2008

IV. Local Bidder Preference - Code Definition of a “Juneau Bidder”
The CBJ allows, under the Purchasing Code, for local bidder preference for non-capital construction projects. A qualified –

o “Juneau proposer” is awarded 5% of the total points possible for the RFP;
o “Juneau bidder” is awarded the bid if their bid is not more than 5% higher than the lowest responsive nonresident bidder’s; and a qualified “bidder with disabilities” is awarded the bid if their bid is not more than 10% higher than the lowest responsive non-disabled bidder’s.

Staff is recommending updating this section to match current operating practices. Enclosed in your packet is a memorandum from Barbara Ritchie, Deputy City Attorney, discussing amendment recommendations and a draft ordinance. Ms. Ritchie will be present at the meeting to answer questions and to address this code section as desired by the Committee.

V. Sales Tax Exemption - Related Party Rental of Tangible Business Personal Property
On March 14, 2007, the Committee reviewed a request to modify the sales tax code to exclude from taxation the rental of tangible business personal property from related parties. The CBJ Code currently includes an exemption for related party rental of real property. The exemption does not include a provision for the leasing of personal property.

Enclosed in your packet is a memorandum from Joan Roomsburg, CBJ’s Sales Tax Administrator, discussing this proposed exemption. Staff will be present at the meeting to answer questions and to address this code section as desired by the Committee.

VI. Investment Update
In response to the decline in the world’s economic and market conditions, staff have been asked to provide a report to the Finance Committee on the status of the CBJ’s investment portfolios. Staff will provide an overview and status report on the CBJ’s codes, policies, portfolio structures and market risks.

VII. General Governmental Revenue Update
In response to the decline in the world’s economic and market conditions, staff have been asked to provide a report to the Finance Committee on the status of the CBJ’s sales tax revenues. Staff will provide an overview and status report on the CBJ’s 3rd quarter and general outlook for sales tax collections.

VIII. PRISM Update
Kim Kiefer, Deputy City Manager, will provide an update on the status of the PRISM project.

IX. Central Treasury Loan to Airport
An ordinance that would allow the Airport to borrow up to $8,183,000 from the Central Treasury for the Airport Terminal Expansion and Renovation Project was introduced on November 17, 2008 and referred to the Assembly Finance Committee for review. This ordinance serves two purposes. First, it provides the budget authorization (Charter provisions) to proceed with awarding the project contract (scheduled to be awarded in December 2008) and second, to provide project cash flow funding. The project scheduled to run for approximately 30 months. Project cash disbursements will occur over time, the actual loan amount will be determined based on the cash flow needs of the project.

The Airport has projected that the actual amount of the loan will likely not exceed $5.7 million. These loans will occur in FY10 ($4.7 million) and FY11 ($1 million). The loans would include interest estimated by the finance director at the average rate the City and Borough earned or would earn on Central Treasury investments over the applicable loan period. The principal and interest on the balance would be repaid to the Central Treasury from future 1% temporary sales taxes, approved by the voters for this purpose, and Airport Passenger Facility Charge revenues allocated to the project. These loans would be provided under code section 57.05.045, Central Treasury loans. This code section provides for the following.

(a) The finance director may invest temporary idle money in the central treasury in short-term loans to specified funds of the City and Borough for the purpose of capital acquisitions upon approval of the assembly by ordinance. Such loans shall be included in the central treasury investment portfolio.

(b) Except as otherwise specifically provided in the ordinance establishing the loan, the balance of the loan shall bear interest at the rate estimated by the finance director to be the average rate the City and Borough earned or will earn on its certificates of deposit over the applicable period with interest computed on an annual basis; principal and interest on the balance shall be repaid to the central treasury from future revenues appropriated by the assembly for the purpose of repayment. The term of the loan shall not exceed five years.

Staff will provide during the meeting additional information on the cash flow and risk issues associated with this proposed loan.

X. Sales Tax Exemption - Federally Recognized Indian Tribes
The Central Council Tlingit Haida Indian CCTHITA is requesting to be exempted from paying sales tax due to their status as a federally recognized Indian tribe. The IRS has ruled, “Under Section 7871 of the Internal Revenue Code, Congress determined that federally recognized Indian tribes and their subdivision would be treated like states for certain specified purposes, because tribal governments, like state governments, serve the public within their jurisdictional boundaries, and accordingly should be permitted to devote their limited resources to that end.” (From letter dated March 13, 2003 and signed by Judy Pearson, Indian Tribal Government Specialist of the Office of Indian Tribal Governments, Internal Revenue Service).

The CBJ code does not clearly identify this type of organization as exempt from sales tax. Enclosed in your packet is a memorandum from Barbara Ritchie, Deputy City Attorney, discussing the issues of CCTHITA request and a draft ordinance. Ms. Ritchie will be present at the meeting to answer questions and to address this taxation issue further.

XI. Aircraft Flat Tax
The CBJ taxes commercial aircraft, less than 12,500 pounds, based on aircraft weight. This tax was put into place a few years ago (after 911) to provide tax relief to the commercial aircraft operators (both fixed wing and rotary wing aircraft). At the time, the flat tax was set to be equivalent (on average) to 40% of full value times the then existing mill levy rate.

We have several potential equitability issues with the flat tax.

o The flat tax was set to average 40% of the full-assessed value times the existing mill levy several years. The 40% targeted value may no longer be accurate.

o No distinction is made between piston and turboprop aircraft, where there are obvious value differences.

o The business personal property assessment exemption (currently at $60,000) does not apply to the flat tax rate schedule. We have identified one individual with two small commercial aircraft that would be fully exempted if assessed and not flat taxed.

The Finance Committee may wish to move forward with modifying the aircraft flat rate tax schedules. If it wishes to do so, staff recommends the flat tax schedules be evaluated for consistency and equity to the original intent of being equivalent to 40% of the ad valorem tax rate.

XII. Mayor’s Salary
It has been requested that the Finance Committee review the Mayor’s compensation. The position of Mayor in Juneau is intended to be a half-time position and it has been compensated at $30,000 per year since 1995. To faithfully carryout the duties and representations of the Mayor’s Office requires a significant time commitment. The current compensation, level requires that the Mayor either be financially independent or balance mayoral duties with a regular job.

XIII. Executive Session
MEBA Contract Negotiations Update. Staff will provide an overview of the status of the negotiations and outstanding issues.

XIV. Adjournment