Voters to decide on increase in sales tax

By Diana Haecker |

In the upcoming Oct. 7 municipal elections, Nome voters will be asked on the ballot if they approve a one percent sales tax hike from the current five percent to six percent, or not.
The Nome Common Council had passed a budget in May based on the assumption that voters will give the green light to the sales tax increase.
Without the one percent increase, the city will face a $2 million budget shortfall. According to City Manager Lee Smith, the one percent increase would place the city on better financial footing, but it would not be sufficient to solve the city’ deficit entirely.
Smith is concerned that the city’s reserves had been depleted in the past to balance the budget and as wages, employee benefits and health care costs rise, the city’s revenue does not keep up. Smith said any city should have about 90 days of reserves on hand, but currently, Nome has not even half of that.
Sales tax is placed on anything sold within the city limits, from services to fuel to groceries. 
As the Nome Common Council grappled with the task to balance the budget, raising the property tax was not an option they wanted to pursue. Raising the sales tax seemed to spread “the pain” across the board more evenly and thus the decision was made to place the question on the ballot for voters to decide.
If the voters agree and pass the one percent hike, the increase would go into effect on January 1, 2026.
Looking at a spreadsheet before him, during an interview with the Nugget this week at city hall, Smith said that at 2025 actual numbers, a one percent increase in sales tax would add $1.302 million in revenue, to bring the total sales tax revenue (including remote sellers) to $7.8 million.
A projection for 2026 would increase the revenue by $1.304 million. Prioritizing Public Works, Smith said that the city needs money to keep the heavy machinery fleet in good repair. He aims to bring before the council a proposal to buy a compactor for the landfill so that heavy machinery does not get “destroyed” pushing trash at the landfill. More often than is the heavy equipment in the shop, so the city ends up renting trucks or all kind of equipment at top dollar. In addition, he said, it’s hard to keep good employees at the pay the city can afford and he can’t blame them when they move over to private companies offering better hourly wages. “That’s a hit to the city,” he said.
The city would like to extend opening hours to the Rec Center, but can’t afford to hire more help or pay overtime for those working there.
He said, what if the state does not come through with the money they promised the schools? The city may be asked to step in and fill the gap.
So what happens if voters won’t ok the one percent increase?
“We are going to have to cut back on recreation hours, cut back on how often we fix potholes,” he said. He added that it is not often enough to begin with, but the public works department is doing the best they can. However, going into austerity mode won’t allow the city to fix things. “We’re not going to be able to buy new equipment to fix things properly,”
Smith said the council tasked him to find a menu of options beyond sales tax increase. He said the city leaves thousands of dollars on the table by granting sales tax exemptions.
“I will be coming to the board to look at these exemptions and doing away with some of these exemptions for private businesses, that alone is hundreds of thousands of dollars,” he said.
Given the current federal reduction in grants and agency efficiency cuts, Smith is concerned that next year, the full effect could be felt. Especially repairs to infrastructure that were promised FEMA reimbursements may not materialize. State funds for the Department of Transportation also come mostly from the federal government, but if those funds dry up or are disrupted, the city cannot take up the slack. Smith said, the DOT here in Nome is already understaffed and can’t keep up with the needs.
The one percent sales tax increase, he said, would move the city in the direction to allow for beautification of Front Street, better roads, better parks, better services.
“And if it does not pass,” he said, “we’re going to have to cut existing services. I won’t have a choice.”