A view of Downtown Ketchikan near the intersection of Dock and Front streets in 2017. (Leila Kheiry/KRBD)

Ketchikan’s City Council voted down a proposed property tax increase on Thursday. Council members said they were concerned about raising the cost of living for residents.

Council Member Riley Gass said he wasn’t sure the tax hike was necessary, given that the council made significant cuts during the budget process late last year.

Raising property tax on our citizens will add even more to the already very high cost of owning a home or renting a home as landlords will likely pass on the cost to their tenants,” Gass said.

City officials estimated the half-mill tax property tax increase would have raised roughly $450,000 in city revenue and cost the owner of a $250,000 home an extra $125 per year. It was first proposed to cover raises for city workers approved by the council in 2019, but was deferred in 2020 and 2021 as the city faced the pandemic.

Council Member Abby Bradberry questioned whether the increase was needed given higher-than-expected sales tax revenue from the fourth quarter of last year.

“The actual revenue or sales tax was $533,000 more than what we had anticipated and what we budgeted for, and so that kind of then canceled out the reason, the intention for increasing the mill rate,” Bradberry said.

But Acting City Manager Lacey Simpson said she was concerned that lower-than-expected visitor numbers could put a damper on sales tax revenue this summer.

“We do have concerns, like we expressed, that just based on the low passenger counts, spending trends, that our sales tax projections aren’t going to be what we thought they were and what the budget is structured around,” she said.

Simpson cautioned that rejecting the property tax increase could make hiring freezes, furloughs and layoffs necessary. She said the city’s general fund, which pays for police, firefighters, the library and museum, among other things, is expecting to run a $1.7 million deficit this year even with the tax increase.

Vice Mayor Mark Flora said council members should be prepared to deal with the consequences of holding taxes steady.

“The next budget cycle, if you’re laying a guy off, and tell him thanks, but you don’t have a job anymore, just understand the genesis, or the path between the decision and the outcome,” Flora said.

The property tax hike failed by a 1-6 vote with Council Member Lallette Kistler as the lone supporter. She said she was concerned that negotiations with city workers’ unions would bring unanticipated costs.