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AEDC Backs Public Investment via Sales Tax

by | Jan 25, 2024 | Featured, Government, News, Nonprofits

Jenna Wright hosts her first annual Economic Forecast Luncheon since becoming president and CEO of the Anchorage Economic Development Corporation last fall.

Alaska Business

The Anchorage Economic Development Corporation (AEDC) is continuing a campaign launched last year to lure a workforce to the city. The next piece of “Choose Anchorage” would be community investment paid for by sales taxes.

Public Investment Strategy

AEDC Board Chair Ryan Strong announced the forthcoming initiative during his opening remarks at the 2024 Economic Forecast Luncheon. “AEDC, along with a coalition of business leaders and partner organizations, will be pursuing one of Choose Anchorage’s goals of a public investment strategy through a sales tax mechanism,” Strong said.

Strong, a senior executive at First National Bank Alaska, listed three main reasons for the strategy: “revenue diversification, property tax relief that increases housing affordability, and community investment projects that increase our quality of life in Anchorage.”

Currently, the municipality is funded largely by property tax revenue, with sales taxes limited to excises on hotels, rental cars, motor fuel, alcohol, tobacco, and cannabis. With no statewide sales tax either, Alaska’s largest city has a relatively low tax burden; the Tax Foundation ranks Alaska overall as having the lowest effective state and local tax rate at 4.6 percent, based on 2022 data, much lower than second-ranked Wyoming’s 7.5 percent.

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The tenth lowest tax burden is in Oklahoma, yet Strong points to that state’s capital as an example of levying taxes for community investment. In 1993, Oklahoma City enacted an additional 1 percent sales tax for projects like a downtown park, sidewalk connectivity, wellness centers, and a professional basketball arena. A former mayor of Oklahoma City, Mick Cornett, was the keynote speaker at AEDC’s 3-Year Outlook luncheon last August.

“We’ve long been inspired by Oklahoma City’s decision to boldly invest in itself,” Strong said, “and we hope you’ll join us in doing the same for Anchorage.”

AEDC President and CEO Jenna Wright made a similar appeal to public involvement in her address to a sold-out crowd of about 1,500 at the Dena’ina Civic and Convention Center. Specifically, Wright asked for help to increase the city’s residential stock. “I really implore this room to support new housing development in Anchorage whenever you get the chance. That could be the opportunity to weigh in on reduced zoning restrictions, modernizing regulations, and different innovative housing solutions,” she said.

A drastic drop in home construction is one of the indicators Wright noted in the AEDC forecast. In 2023, just 211 units were built compared to 402 the previous year, which was more typical. Although the construction industry is expected to grow slightly in 2024, completions are slower because of the worker shortage.

AEDC also forecasts a continuing drop in Anchorage’s population, with a net loss of 200 people expected in 2024, or about 0.1 percent. The working-age population is shrinking faster.

AEDC’s Optimism Index, based on a survey conducted by McKinley Research Group, stands at 43.6, which is just below “indifferent” and into the “pessimistic” range.

Wright herself is more optimistic; she expects Anchorage to have a “great year.” She points to accomplishments since Choose Anchorage was launched, such as new sorting facilities for Amazon and FedEx. For workforce development, the Anchorage School District is preparing its “career academies” model at all high schools starting next fall.

Mayor Dave Bronson also cited positive steps in his State of the City speech to the AEDC luncheon. He noted that police foot patrols are returning to Downtown, and an agreement with Eklutna, Inc. enables 1,500 new homes to be built in Eagle River.

Conversations with the Community

Patience Fairbrother of Development Counsellors International tells Jenna Wright how Anchorage can stand out amid a nationwide struggle to attract talented workers.

Alaska Business

Bronson did not comment on the sales tax proposal. What AEDC has sketched out so far is a 3 percent tax, with certain items exempted, using two-thirds of the revenue to reduce property taxes by approximately 20 percent while investing the other one-third in public projects.

Wright says the discussion is just beginning. “Right now we’re just talking about it. We’re trying to see what structure makes the most sense. We’re starting to have conversations with the community to see if they would support it,” she says.

One difference between this discussion and past attempts that failed to muster enough political support is, as Strong said, a public investment strategy. The sales tax would go beyond shifting Anchorage’s revenue collections to non-residents and instead focus on investments to attract and retain workers.

“A lot of places say they have outdoor recreation, but not like this,” said keynote speaker Patience Fairbrother, a talent attraction consultant with Development Counsellors International. She noted that the worker shortage is nationwide, but Anchorage can leverage its “tourist-to-talent pipeline,” where visitors who come to play might return to live and work. She also suggested that former residents who’ve moved away might be enticed by family or friends to “boomerang” back.

“Anchorage is well on its way,” Fairbrother said.

Alaska Business Magazine July 2024 cover
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Best of Alaska Business 2024
July 2024
Welcome to the 2024 Best of Alaska Business special section! For the ninth time we invited our readers to tell us which Alaska businesses they love the most, this year in forty-four categories. Throughout the month of March, you told us who should be featured in these pages, and we're thrilled to be able to publish the results.
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