Options tax increase to go on November ballot

Sun Valley voters will decide on Nov. 3 whether to raise their city’s local-option tax rate from 2 percent to 3 percent.

The Sun Valley City Council voted Tuesday to put the question on the ballot, following a lengthy discussion about who--tourists or residents--should pay for what in a resort town.

The city’s current local-option tax expires Dec. 31, 1999. Two-thirds of voting residents will need to favor the tax increase for it to go into effect.

The proposed tax hike would be in effect for five years. It would exclude building materials and the sale of Sun Valley Company lift tickets.

The elimination of the lift ticket sales came at the request of Sun Valley Company general manager Wally Huffman, who said the majority of his company’s lift tickets are sold at River Run, just outside Ketchum city limits, where there is no local-option tax imposed.

"The people who check into Sun Valley or Elkhorn should be buying their tickets at the front desk," Huffman said.

Sun Valley receives about $1.05 million annually in option tax revenue, according to city administrator Bob Van Nort.

Twenty-five percent of that goes to the Sun Valley/Ketchum Chamber of Commerce for marketing, 25 percent to Ketchum Area Rapid Transid, KART, and the remaining 50 percent to a general fund, which is distributed mainly to the police and fire budgets, Van Nort said.

The council calculated that eliminating the option tax revenues from Sun Valley lift tickets--about $52,000--and from building materials--another $75,000--would reduce revenue by about $125,000. But with an estimated $400,000 increase gained from raising the tax by 1 percent, the city would have an approximately $275,000 surplus.

Before making their decision, council members entered into a philosophical debate on the question of which city expenses should be borne by tourists and which should be borne by residents.

Huffman and Elkhorn Resort manager John Korpi expressed concerns about the use of option-tax revenue rather than property tax revenue to fund capital projects.

"There is always a tug-of-war for visitors to pay for a city’s improvements," Korpi said. "The original intent of the local option tax was to promote tourism, but when you get into using it for bricks and mortar, it becomes more difficult. It would set a very dangerous precedent to further ease the passing of taxation onto tourists."

Huffman said things such as roads are primarily residential capital expenses.

"What does the local-option tax have to do with fixing roads?" he asked. "If you let them go for five years, you wouldn’t affect me, but you’d hear from every property owner in town once a week until you got them fixed."

Councilman David Wilson countered that the city’s police and fire budget might not be as high were Sun Valley not a tourist town. He said those expenses take money that could go to capital projects, and so should be shared by the city’s visitors.

"It is my contention that if we were not a resort town, we wouldn’t need a nine-person police force for 1,000 people," Wilson said. "If we increase the local-option tax and collect $1.2 million now, then we can free up other money to put away.

"It’s all one pocket," he added. "I was dead set against raising the tax two months ago, but we need to raise money to balance for capital improvements so we don’t have to go to bond."

The city of Sun Valley is trying to raise $300,000 for a capital improvements project. But raising the option tax in Sun Valley to 3 percent would make it higher than option tax percentages in Ketchum. Bed and liquor option tax is 2 percent in Ketchum, and retail option tax there is 1 percent.

Huffman said he was concerned that that disparity might affect retail sales in Sun Valley.

"It’s an issue if people pay 1 percent on an expensive ski suit in Ketchum and 3 percent in Sun Valley," Huffman said.

Wilson said that this is one of the reasons the tax increase would be revisited in five years, in the event that a backlash against tourism and sales occurred, though he added that he didn’t think that would be likely.